UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 29, 2022
American
Virtual Cloud Technologies, Inc.
(Exact Name of registrant as Specified in Charter)
Delaware |
001-38167 | 81-2402421 | ||
| (State
or other jurisdiction of incorporation) |
(Commission File Number) | (IRS
Employer Identification No.) |
30309 | ||
| (Address of principal executive offices) | (Zip code) |
(404)
239-2863
Not
Applicable |
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class |
Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Ribbon Agreements
On August 29, 2022, American Virtual Cloud Technologies, Inc. (the “Company”) and its subsidiary, AVCtechnologies USA, Inc. (“AVCT USA”), entered into a Settlement Agreement (the “Settlement Agreement”) with Ribbon Communications, Inc. (“Ribbon”), Ribbon Communications Canada, ULC (“Ribbon Canada”) and Ribbon Communications Operating Company, Inc. (“RCOCI” and, together with Ribbon and Ribbon Canada, the “Ribbon Parties”). Pursuant to the Settlement Agreement, the Company and the Ribbon Parties modified and/or terminated certain agreements that had been entered into between them in connection with the consummation of the transactions contemplated by the Amended and Restated Purchase Agreement, dated as of December 1, 2020 (the “A&R Purchase Agreement”), entered into among the Company, Ribbon, RCOCI and Ribbon Communications International Limited, as described in the Current Report on Form 8-K filed by the Company on December 7, 2020, and settled certain disputes that had arisen between them under certain of such agreements.
In particular, pursuant to the Settlement Agreement, AVCT USA and RCOCI entered into a Wind Down Agreement (the “Wind Down Agreement”), pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and the Company granted RCOCI certain non-exclusive perpetual rights to use certain intellectual property owned by the Company comprising certain WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers (the “Licensed Technology Rights”). In consideration of the resolution of the disputes between the parties encompassed within the Settlement Agreement, among other things, (i) RCOCI paid the Company $2.5 million in cash, (ii) pursuant to a Stock Redemption Agreement (the “Redemption Agreement”), the 13,700,421 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), issued to Ribbon pursuant to the A&R Purchase Agreement were redeemed by the Company for no further consideration and were canceled, and (iii) pursuant to a Warrant Termination Agreement (the “Warrant Termination Agreement”), the Warrants exercisable to purchase 4,377,800 shares of Common Stock issued to Ribbon pursuant to the A&R Purchase Agreement were terminated and canceled. In addition, the Company and certain of the Ribbon Parties entered into amendments to agreements pursuant to which the Company (i) subleases and/or licenses certain premises from the Ribbon Parties, in order to, among other things, reduce the portion of the premises used by the Company (and the corresponding rent or other fees payable), and (ii) purchases and/or licenses certain hardware, software, products and related services from the Ribbon Parties, in order to, among other things, amend the license fee structure from a bulked fixed pricing schedule to a variable rate pricing structure so as to reduce the fees payable by the Company.
The foregoing summary provides only a brief description of the Settlement Agreement, the Wind Down Agreement, the Redemption Agreement and the Warrant Termination Agreement. The summary does not purport to be complete and is qualified in its entirety by the full text of the Settlement Agreement, the Wind Down Agreement, the Redemption Agreement and the Warrant Termination Agreement, copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and incorporated herein by reference.
1
Amended and Restated Waiver Agreement
As previously reported in the Quarterly Report on Form 10-Q filed by the Company on August 16, 2022, on August 15, 2022, the Company and the holders (collectively, the “Holders”) of the Company’s (i) Series A warrants issued in November 2021 (the “Series A Warrants”), (ii) Series D Warrant issued in December 2021 (the “Series D Warrant”), (iii) warrants issued pursuant to a Securities Purchase Agreement dated as of February 28, 2022 (the “February 2022 Warrants”), (iv) the Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and (v) senior secured convertible notes issued in April 2022 (the “Convertible Notes”) entered into a Waiver Agreement (the “Original Waiver Agreement”). The effectiveness of the operative provisions of the Original Waiver Agreement were subject to certain conditions, which conditions were not satisfied.
On August 31, 2022, the Company and the Holders entered into an Amended and Restated Waiver Agreement (the “Waiver Agreement”), which amends and restates the Original Waiver Agreement in its entirety. Pursuant to the Waiver Agreement, the parties thereto agreed that, among other things, from the date of the Waiver Agreement through December 30, 2022, (i) up to $15 million of equity securities (excluding an equity line of credit) sold by the Company shall be deemed to be “Excluded Securities” for all purposes under the terms of the Series A Warrants, the Series D Warrant, the February 2022 Warrants, the Series B Preferred Stock, the Convertible Notes and the securities purchase agreements pursuant to which such securities were sold (a “New Permitted Offering”); (ii) any cash payments otherwise required to be made to the Holders pursuant to the terms of the Series B Preferred Stock or the Convertible Notes as a result of installment conversions under the Series B Preferred Stock or the Convertible Notes at a conversion price less than the applicable “Floor Price” under such instruments would be deferred until December 31, 2022, provided that if the Company consummates a New Permitted Offering, the lesser of (a) 25% of the gross proceeds of the New Permitted Offering and (b) the outstanding cash payments then payable would be immediately payable to the applicable Holders (up to an amount not to exceed $2.8 million in the aggregate); and (iii) the definition of the term “Equity Conditions” in the certificate of designations of the Series B Preferred Stock (the “Series B Certificate”) and in the Convertible Notes is waived in part, such that no “Price Failure” will be deemed to have occurred thereunder and no “Volume Failure” will be deemed to have occurred thereunder if the Company satisfies the definition of Volume Failure with the reference to “$1,000,000” therein replaced with “$250,000.” In addition, the Company waived, in part, the prohibition of accelerations of installment conversions under the Series B Preferred Stock and the Convertible Notes, such that the Holders of the Series B Preferred Stock and the Convertible Notes may effect accelerations of up to 400% of the installment amount under each of the Series B Preferred Stock and Convertible Notes during two periods in each calendar month. The conversion price applicable to any such accelerations of the Series B Preferred Stock or the Convertible Notes would be adjusted to an amount calculated in a manner consistent with the existing terms of the Series B Preferred Stock and Convertible Notes, based on 88% of the lowest daily volume weighted average price of the Common Stock during the eight trading day period immediately prior to the applicable payment date. The Holders also agreed to defer, until the earlier of the Company’s receipt of gross proceeds of $15 million from the New Permitted Offering or December 31, 2022, any reduction to the exercise price of the Company’s warrants held by them, as well as to the conversion price of the Series B Preferred Stock and the Convertible Notes, that would otherwise arise pursuant to the terms of those instruments that provides for adjustment due to a “Stock Combination Event,” as a result of any reverse stock split effected by the Company as approved by the Company’s stockholders pursuant to the definitive proxy statement filed by the Company on May 2, 2022; provided that if the holder of any such warrant were to exercise prior to the Company receiving $15 million in gross proceeds from the New Permitted Offering, such waiver would not apply with respect to the portion of the warrants so exercised (and the warrants could be exercised at the reduced exercise price resulting from the Stock Combination Event).
2
The foregoing summary provides only a brief description of the Waiver Agreement. The summary does not purport to be complete and is qualified in its entirety by the full text of the Waiver Agreement, a copy of which is attached hereto as Exhibit 10.5 and incorporated herein by reference.
Item 1.02. Termination of a Material Definitive Agreement.
The information in Item 1.01 of this Current Report on Form 8-K with respect to the Wind Down Agreement, the Warrant Termination Agreement and the restatement of the Original Waiver Agreement is incorporated by reference in this Item 1.02 to the extent required.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
|
AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC. | |
| By: | /s/ Kevin Keough | |
| Name:
Kevin Keough Title: Chief Executive Officer | ||
Date: September 1, 2022
4
Exhibit 10.1
Execution Version
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (“Settlement Agreement”) is made as of August 29, 2022 (the “Effective Date”) by and among Ribbon Communications Canada, ULC (“Ribbon Canada”), Ribbon Communications, Inc. (“Ribbon Parent”), Ribbon Communications Operating Company, Inc. (“RCOCI”), American Virtual Cloud Technologies, Inc. (“AVCT”) and AVCtechnologies USA, Inc. (“AVCT USA”). RCOCI, Ribbon Parent and Ribbon Canada are each referred to herein as a “Ribbon Party,” and collectively as the “Ribbon Parties”. AVCT and AVCT USA are each referred to herein as an AVCT Party and collectively as the “AVCT Parties”. Each Ribbon Party and each AVCT Party is referred to herein as a “Party” and all of them collectively, the “Parties.”
WHEREAS, the Parties are parties to the following agreements (herein, collectively, the “Existing Agreements”):
| ● | Sublease (“Sublease”) made as of December 1, 2020 between Ribbon Canada as Sublandlord and AVCT as Subtenant pursuant to which Ribbon Canada leased to AVCT 17,751 square feet within Ribbon Canada’s Leased Premises in the building located at 500 Palladium Drive, Ottawa, Ontario for a term of 5 years commencing December 1, 2020, and expiring November 30, 2025, and further pursuant to which, by amendment thereto on December 2, 2021 (“Corporate Services Agreement”), Ribbon Canada agreed to provide certain Corporate Services to AVCT; and |
| ● | License Agreement (“Lab Sharing Agreement”) made as of December 1, 2020 between Ribbon Canada as Licensor and AVCT as Licensee pursuant to which Ribbon Canada agreed to provide AVCT with a license to use, in common with Ribbon Canada, a certain Licensed Area for general laboratory and research uses in the ordinary course of AVCT’s business; and |
| ● | Standard Purchase and License Agreement (“PLA”) made as of June 2, 2021 between Ribbon Parent and Ribbon Affiliates on the one hand, and AVCT USA on the other, for AVCT USA to purchase from RCOCI certain hardware and software (“PLA Products”), hardware maintenance and software support services (“PLA Maintenance Services”), installation, configuration and other professional services (“PLA Professional Services”), and education training services (“PLA Education Services”) (individually and together, the “PLA Services”), as amended on October 22, 2021 (“PLA Pricing Addendum”); and |
| ● | Reseller Agreement (“Reseller Agreement”) made as of August 6, 2021 between RCOCI as Reseller and AVCT USA as Supplier with an effective date of August 6, 2021 for RCOCI to resell certain products described on Exhibit B thereto (the “Resale Products”), as amended pursuant to Amendment No. 1 effective September 27, 2021, and Amendment No. 2 effective December 3, 2021; and |
WHEREAS, disputes have arisen between the Parties under the Existing Agreements which the Parties desire to fully and finally resolve and settle, without admission of liability, pursuant to the terms of this Settlement Agreement, including each Exhibit hereto (which Exhibits are referred to collectively as the “Existing and Modified Agreements”); and
WHEREAS, RCOCI and AVCT entered into a Transition Services Agreement with an effective date of December 1, 2020 (“2020 TSA”) pursuant to which RCOCI has provided AVCT certain business operation services that the Parties desire to reconcile and resolve their disputes regarding same through this Settlement Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals and the exhibits hereto which are all incorporated as material terms of this Settlement Agreement, and in consideration of the mutual covenants, promises, and representations hereinafter made, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:
| 1. | Modification of Existing Agreements. Concurrently with execution of this Settlement Agreement, the Existing Agreements shall each be modified as follows: |
| 1.1. | The Sublease shall be amended to reduce the leased space and reduce the fee being charged for same to correspond to a reduced number of AVCT employees, and modify the term and termination provisions, as more particularly set forth in Exhibit 1 hereto; |
| 1.2. | The Corporate Services Agreement shall be amended to reduce the fee being charged for same to correspond to a reduced number of AVCT employees, and modify the term and termination provisions, as more particularly set forth in Exhibit 2 hereto; |
| 1.3. | The Lab Sharing Agreement shall be amended to reduce the fee being charged for same to correspond to a reduced number of AVCT employees, and modify the term and termination provisions, as more particularly set forth in Exhibit 3 hereto; |
| 1.4. | The PLA and PLA Pricing Addendum shall be amended to modify the fees applicable to certain PLA Maintenance Services and PLA Products, as more particularly set forth in Exhibit 4 hereto; and |
| 1.5. | The Reseller Agreement and Amendments thereto shall be modified as set forth in Exhibit 5 (Wind Down Agreement), and further in consideration of Exhibit 6 (Warrant Termination Agreement) and Exhibit 7 (Stock Redemption Agreement) hereto. |
| 2. | Modification of Business Arrangements. The Parties agree to the following: |
| 2.1. | With respect to the space AVCT leases from Ribbon in Mexico, which is reflected the amount paid by AVCT for the leased space shall be reduced proportionally in the same manner as the amendment to the Sublease hereunder; |
| 2.2. | With respect to reconciliation and resolution of disputes under the 2020 TSA, the Parties agree to the below, as further detailed in Exhibit 8 hereto: |
| 2.2.1. | AVCT and RCOCI agree that RCOCI has a net unsecured trade claim due from AVCT in the amount of $1,518,063 (the “Reconciled Amount”) as of July 31, 2022 (the “Cutoff Date”), as shown on Exhibit 8, which is due and payable on December 31, 2022; |
2
| 2.2.2. | RCOCI shall pay AVCT the AVCT A/R collections held by RCOCI in the amount of $860,910.00 via wire transfer simultaneous with execution hereof. All subsequent collections on behalf of AVCT shall be timely remitted to AVCT on a weekly basis, without delay and without offset, and RCOCI expressly waives any legal or contractual right of offset against AVCT that might otherwise exist. |
| 2.2.3. | RCOCI shall pay AVCT the August 2022 portion of the Q3 2022 Payment pursuant to paragraph 8 of the Amendment No. 2 to the Reseller Agreement in the amount of $188,366.67 via wire transfer simultaneous with execution hereof. |
| 2.2.4. | Following the Effective Date, the Parties shall continue to reconcile amounts that may be due to the other Party, including for obligations incurred prior to the Cutoff Date, but not yet billed. In connection, therewith the Parties shall utilize the following methodology: |
| 2.2.4.1. | The Reconciled Amount shall be reduced by any amount due with respect to charges required to be reimbursed by the Ribbon Parties to AVCT pursuant to the Reseller Agreement for the period prior to Cutoff Date and not included within the Reconciled Amount; |
| 2.2.4.2. | The Ribbon Parties shall pay to AVCT, in cash, any amounts due with respect to the Reseller Agreement relating to the month of August 2022 (e.g., the payment being made pursuant to Section 2.2.3 of this Agreement), plus any additional out of pocket expense incurred by AVCT for the August 2022 period that are not otherwise included in those expenses covered by the Licensing Fee and AVCT would otherwise be entitled to pursuant to the terms of the Reseller Agreement. |
| 2.2.4.3. | From and after the Effective Date, any third-party charges or maintenance obligations in support of Kandy Link with respect to Ribbon Parties’ clients, shall be borne by the Ribbon Parties or, alternatively, if maintained by AVCT for such purposes, shall be reimbursed by the Ribbon Parties, in cash, to AVCT, on a monthly basis, until the orderly transition of such obligation has occurred or the expiration of such third-party contract term (e.g., Oracle and RedHat). |
| 2.2.4.4. | From and after the Effective Date, any third-party charges relating to Kandy Link with respect to AVCT’s unique clients shall be borne by AVCT. |
| 2.2.5. | Nothing herein is intended to modify AVCT’s right to compensation for maintenance and support services provided by AVCT after August 1, 2022. The Ribbon Parties will timely pay AVCT’s invoice(s) for same upon receipt. Nothing herein is intended to modify RCOCI’s right to compensation right under the Amendment to Standard Purchase and License Terms after August 1, 2022. The AVCT Parties will timely pay RCOCI’s fees and expenses as required pursuant thereto. |
3
| 3. | Releases. |
| 3.1.1. | Ribbon Release. In consideration of and contingent upon the full execution of this Settlement Agreement and all Exhibits hereto, each of the Ribbon Parties, for themselves and each of their respective successors and assigns, parent companies, subsidiaries, divisions, predecessors, affiliates, other related companies, members, managers, shareholders, directors, officers, employees and agents (the “Ribbon Releasors”), releases each of the AVCT Parties, and their respective successors and assigns, parent companies, subsidiaries, divisions, predecessors, affiliates, other related companies, members, managers, shareholders, directors, officers, employees and agents (the “AVCT Releasees”), from any and all claims, demands, compensatory, punitive, exemplary or other damages, actions, causes of action or suits of any kind or of any nature whatsoever, whether legal, equitable, administrative or otherwise, which the Ribbon Releasors, individually or collectively, had or currently may have against any, some or all of the AVCT Releasees arising under the Existing Agreements prior to the date of the execution of this Settlement Agreement regardless of whether such claims, demands, damages, actions, causes of action or suits are known or unknown, contingent, or unmatured. For the avoidance of doubt, the foregoing release does not apply to any obligation of the AVCT Releasees incurred under any of the Existing Agreements or agreements entered into after the date hereof, and does not apply to the Settlement Agreement, Warrant Termination Agreement, Stock Redemption Agreement or Termination and Wind Down Agreement. |
| 3.1.2. | AVCT Release. In consideration of and contingent upon the full execution of this Settlement Agreement and all Exhibits hereto, each of the AVCT Parties, for themselves and each of their respective successors and assigns, parent companies, subsidiaries, divisions, predecessors, affiliates, other related companies, members, managers, shareholders, directors, officers, employees and agents (the “AVCT Releasors”), releases each of the Ribbon Parties, and their respective successors and assigns, parent companies, subsidiaries, divisions, predecessors, affiliates, other related companies, members, managers, shareholders, directors, officers, employees and agents (the “Ribbon Releasees”), from any and all claims, demands, compensatory, punitive, exemplary or other damages, actions, causes of action or suits of any kind or of any nature whatsoever, whether legal, equitable, administrative or otherwise, which the AVCT Releasors, individually or collectively, had or currently may have against any, some or all of the Ribbon Releasees arising under the Existing Agreements prior to the date of the execution of this Settlement Agreement regardless of whether such claims, demands, damages, actions, causes of action or suits are known or unknown, contingent, or unmatured. For the avoidance of doubt, the foregoing release does not apply to any obligation of the Ribbon Releasees incurred under any of the Existing Agreements or agreements entered into after the date hereof, and does not apply to the Settlement Agreement, Warrant Termination Agreement, Stock Redemption Agreement or Termination and Wind Down Agreement. |
4
| 4. | Representations. Each Party represents and warrants as follows: (a) it has the requisite entity power and authority to enter into this Settlement Agreement and to perform its obligations hereunder; and (b) the execution and delivery of this Settlement Agreement and the performance by it of its obligations hereunder will not violate any other agreement to which it is a party. |
| 5. | Confidentiality. Each of the Parties shall treat this Settlement Agreement and its contents as confidential. No Party shall disclose the terms of this Settlement Agreement to any other person or entity except as may be necessary to enforce a Party’s rights under this Settlement Agreement, or to the extent that such disclosure is required by applicable law (including judicial process), provided that before making any such disclosure, such Party shall, to the extent practicable, first provide written notice to the other Parties of the disclosure intended and the law or process requiring such disclosure, to afford the other Parties a reasonable opportunity to seek protection against such disclosure to the extent legally available. |
| 6. | Notices. All notices given hereunder shall be in writing directed to the respective Parties at the addresses set forth below (or at such other address for a Party as shall be specified in a notice given in accordance with this Section), and shall be deemed to have been given (a) when delivered by hand; (b) when delivered by a nationally recognized overnight courier; or (c) on the date sent by e-mail (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient: |
| 6.1. | If to any one or more of the Ribbon Parties: |
Ribbon Communications Inc.
6500 Chase Oaks Blvd., Suite 100
Plano, TX 75023
Attention: Patrick Macken, EVP and Chief Legal Officer
E-Mail: pmacken@rbbn.com
| 6.2. | If to any one or more of the AVCT Parties: |
American Virtual Cloud Technologies, Inc.
1720 Peachtree Street, Suite 629
Atlanta, Georgia 30309
Attention: Thomas King, Chief Financial Officer
E-Mail: tking@avctechnologies.com
| 7. | Miscellaneous. |
| 7.1. | Definitions. Capitalized terms in this Settlement Agreement bear the meanings assigned to those terms in the respective Existing and Modified Agreements, unless otherwise specified herein. |
5
| 7.2. | Execution. This Settlement Agreement may be executed in counterparts and signature pages may be exchanged via email transmission, or may be executed with electronic signatures using a mutually agreed upon document execution software program. Each electronically signed document or executed counterpart shall be deemed to be an original and together shall constitute the original Agreement. |
| 7.3. | Enforcement. This Settlement Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to its conflicts of law principles thereof. In the event of a dispute hereunder, the parties agree that the same shall be submitted to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware. The prevailing party in any such proceedings shall be entitled to reasonable attorneys’ fees. THE PARTIES HEREBY WAIVE TRIAL BY JURY. |
| 7.4. | Entire Agreement. This Settlement Agreement embodies the entire understanding of the Parties with respect to the subject matter hereof and merges all prior discussions conducted and term sheets exchanged between them with respect to the settlement of disputes between them as of the Effective Date hereof. No oral explanation or oral information by or from any Party shall alter the meaning or interpretation of this Agreement. In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of any prior agreement between them, the terms of this Agreement shall control. |
| 7.5. | Waiver. Any provision of this Settlement Agreement may be waived only in a writing signed by the Party charged with having granted such waiver. |
| 7.6. | Further Assurances. |
| 7.6.1. | Each Party shall take, and shall cause its Affiliates to take, all further actions reasonably requested by the other Party as are necessary or appropriate to carry out the interest and purposes of this Settlement Agreement, including entering into new or supplemental transition services or other agreements to the extent required in connection with the foregoing. |
| 7.6.2. | From and after the Effective Date for a period of three (3) years following the Effective Date, each Party shall provide to the other Party reasonable access, during normal business hours, and upon reasonable advance notice, to the books and records, including work papers, schedules, memoranda, Tax Returns, Tax schedules, Tax rulings, and other documents (for the purpose of examining and copying) relating to the Existing and Modified Agreements with respect to periods or occurrences prior to the Effective Date. Unless otherwise consented to in writing by the other Party, neither Party will, for a period of three (3) years following the Effective Date, destroy, alter or otherwise dispose of any of the books and records without first offering to surrender to the other Party such books and records or any portion thereof that such Party may intend to destroy, alter or dispose of. |
[Balance of Page Intentionally Blank]
6
IN WITNESS WHEREOF, the authorized representatives of the Parties evidence each Party’s agreement to the terms of this Settlement Agreement with their signatures below.
| Ribbon Communications Inc. | American Virtual Cloud Technologies, Inc. | |||
| By: | /s/ Patrick Macken | By: | /s/ Kevin Keough | |
| Name: | Patrick Macken | Name: | Kevin Keough | |
| Its: | CLO & EVP | Its: | Chief Executive Officer | |
| Date: | 8/29/2022 | Date: | 8/29/2022 | |
| Ribbon Communications Canada, ULC | AVCtechnologies USA, Inc. | |||
| By: | /s/ Patrick Macken | By: | /s/ Kevin Keough | |
| Name: | Patrick Macken | Name: | Kevin Keough | |
| Its: | CLO | Its: | Chief Executive Officer | |
| Date: | 8/29/20 | Date: | 8/29/2022 | |
7
Exhibit 10.2
WIND DOWN AGREEMENT
WIND DOWN AGREEMENT (“Agreement”), dated August 29, 2022, by and between RIBBON COMMUNICATIONS OPERATING COMPANY, INC. (“RCOCI”) and AVCTECHNOLOGIES USA, INC. (“AVCT USA”). Each of RCOCI and AVCT USA a Party, and collectively, the Parties.
BACKGROUND
WHEREAS, that certain Reseller Agreement was entered into by RCOCI as Reseller and AVCT USA as Supplier with an effective date of August 6, 2021, and amended pursuant to Amendment No. 1 effective September 27, 2021, and Amendment No. 2 effective December 3, 2021 (the “Reseller Agreement”); and
WHEREAS, disputes have arisen between the Parties regarding the Reseller Agreement and the Parties desire to fully and finally resolve such disputes without admission of liability; and
WHEREAS, the Parties desire to unwind their arrangements under the Reseller Agreement to maximize the benefit to each of them respectively.
NOW THEREFORE, in consideration of the foregoing recitals and the attachments hereto which are incorporated as material terms of this Agreement, and in consideration of the mutual covenants, promises, and representations hereinafter made, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties hereby agree as follows:
| 1. | Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Reseller Agreement. |
| 2. | The Reseller Agreement is terminated effective as of August 29, 2022 (the “Termination Date”). No provision of the Reseller Agreement shall continue or be enforceable following the Termination Date, regardless of how such provision is characterized in the Reseller Agreement, except to the extent expressly provided for herein. |
| 3. | Concurrently herewith, and contingent upon receipt of the consideration specified in Section 4 herein: |
| 3.1. | AVCT USA grants to RCOCI a non-exclusive, worldwide, irrevocable, perpetual, transferrable, fully paid-up license (a) to U.S. Patent Application No. 14/800,453 (Media Playback Synchronization Across Multiple Clients) (the “Patent”) and (b) the source code (the “Code”) and resulting runtime code for the software setforth in Section 4 of JPMC Project Schedule No. 1 “Description of Deliverables” in Amendment No. 2 to the Reseller Agreement (the “Kandy Link Software” and, collectively with the Patent, the “Products”), to make, use, sell, export products using the Products, to use, deploy and modify the Code, and to sublicense third parties to do, without limitation, any of the foregoing. The Parties shall take such other actions as are necessary or appropriate to carry out the interest and purposes of this License, including execution of other agreements in connection with same, and AVCT USA shall deliver: (1) on the Effective Date, a copy of the current source code (root directory) for the “Products, and (2) within a timeframe jointly established by the Parties, such existing material relating thereto and in AVCT USA’s possession that would enable RCOCI engineers or subcontractors to develop, manufacture and support the Products and the lab equipment and tools associated with testing and supporting the Products (the “Lab Environment”, and with the Patent and the Products hereinafter referred to as the “Conveyed Technology”). RCOCI shall provide reasonable access to AVCT or its designee to the Lab Environment to the extent necessary to allow AVCT or its designee to satisfy AVCT’s obligations to customers of the Products for which AVCT is directly billing such customers (the “AVCT Customers”). |
| 3.2. | For the avoidance of doubt, AVCT USA retains all ownership rights in the Conveyed Technology, including the ability to exercise all of the rights being granted to Ribbon. |
| 4. | In consideration of AVCT USA’s assignment of the Assigned Technology, RCOCI shall: |
| 4.1. | Pay AVCT USA two million five hundred thousand dollars ($2,500,000.00) via wire transfer into escrow held by counsel for AVCT USA which funds will be released to AVCT USA upon confirmation that RCOCI has been provided with access to the root directory source code for the Products; |
| 4.2. | Deliver executed copies of the Warrant Termination Agreement and Stock Redemption Agreement annexed to the Settlement Agreement being entered into by the Parties concurrently with this Agreement; and |
| 4.3. | Pay the prorated Q3 2022 Milestone Payment as described in paragraph 8 of the Amendment No. 2 to the Reseller Agreement as follows: |
| 4.3.1. | July 2022 prorated payment of $188,366.67 shall be credited against the Net Payable Due RCOCI as described in 2.2.1 of the Settlement Agreement; |
| 4.3.2. | August 2022 prorated payment of $188,366.67 shall be due and payable on upon execution of the Settlement Agreement; |
| 4.3.3. | September payment $188,366.67 shall be cancelled; and |
| 4.4. | Assume responsibility and costs of going forward maintenance and support for the Conveyed Technology, including the cost of the workforce necessary for the same as it applies to premise-based solutions deployed by customers of RCOCI, and to provide the Support Services specified in Attachment 1 hereto (the “Support Services”) to AVCT and the AVCT Customers. Notwithstanding the foregoing, except as expressly set forth in Attachment 1 and below, RCOCI is not assuming the obligations AVCT may owe to any third party with respect to the Conveyed Technology including obligations to AVCT Customers. Provided that, in the event RCOCI makes any system-wide upgrades or modifications to the Conveyed Technology to address known issues in the Products that would be applicable to the AVCT Customers, RCOCI will make such upgrades or modifications available to AVCT and the AVCT Customers. |
| 5. | In the event of a sale transaction involving AVCT, AVCT may assign its rights under this Agreement to its successor. |
| 6. | This Agreement may be executed in any number of counterparts. All such counterparts may be exchanged via facsimile or e-mail, and counterparts taken together will be deemed to constitute one and the same instrument. Delivery of an executed counterpart by facsimile or email shall be equally as effective as delivery of an original executed counterpart. |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the authorized representatives of the Parties evidence each Party’s agreement to the terms of this Agreement with their signatures below.
| Ribbon Communications Operating Company, Inc. | AVCtechnologies USA, Inc. | |||
| By: | /s/ Patrick Macken | By: | /s/ Kevin Keough | |
| Name: | Patrick Macken | Name: | Kevin Keough | |
| Its: | President | Its: | Chief Executive Officer | |
| Date: | 8/29/2022 | Date: | 8/29/2022 | |
3
Exhibit 10.3
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT (“Agreement”) is made and effective as of August 29, 2022, by and between RIBBON COMMUNICATIONS INC., a Delaware corporation (“Seller”), and AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC., a Delaware corporation (the “Corporation”). The Seller and the Corporation shall each individually at times be referred to herein as a “Party” or together as the “Parties”.
W I T N E S S E T H
WHEREAS, Seller is the owner of 13,700,421 shares of the common stock of the Corporation (the “Shares”); and
WHEREAS, the Seller and the Corporation, among other parties, are parties to that certain Settlement Agreement, of even date herewith (the “Settlement Agreement”), pursuant to which the Parties have agreed that the Corporation will redeem the Shares for the consideration and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants and undertakings of the Parties, the Parties do hereby agree as follows:
1. Incorporation of Recitals. Each of the Recitals hereto are hereby incorporated by reference herein and made a part hereof.
2. Redemption of the Shares.
(a) For good and valuable consideration as set forth in the Settlement Agreement, the Seller hereby agrees to sell, assign, transfer and deliver all of his right, title and interest in and to the Shares to the Corporation, and the Corporation desires to acquire and redeem such Shares.
(b) Closing. The closing of the redemption of the Shares under this Agreement (the “Closing”) shall take place on the date hereof (the “Closing Date”), at the offices of the Corporation, or at such other place and manner as is agreed upon by the Seller and the Corporation, including by exchange of ‘pdf’ or electronic signatures.
(c) Closing Deliveries. At Closing of the redemption of the Shares contemplated by this Agreement, the Seller shall deliver or cause to be delivered to the Corporation: (A) a duly executed Stock Power for the Shares in the form attached hereto as Exhibit A; and (B) such other documents as may be specified in this Agreement or any exhibit hereto, or which may otherwise be reasonably required by the Corporation to effectuate the transactions contemplated by this Agreement.
3. Sellers’ Representations and Warranties. The Seller hereby represents and warrants to the Corporation as follows:
(a) Title. The Seller has good, marketable and unencumbered title to the Shares to be sold by the Seller pursuant to the terms of this Agreement, free and clear of all claims, liens, charges and encumbrances of any nature whatsoever.
(b) Ownership of the Shares. The Seller is the sole legal and beneficial owner and holder of the Shares. The Seller has the absolute right and power to sell the Shares to the Corporation. The Shares represent all of the shares of common stock of the Corporation owned by the Seller, except that the Seller is the holder of a Warrant to Purchase Common Stock issued by the Corporation (the “Warrant”), which Warrant is being terminated by the Seller and the Corporation as of the date hereof pursuant to a separate agreement.
(c) Valid and Binding Obligations. This Agreement constitutes the valid and legally binding obligations of the Seller, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and other general laws affecting the rights and remedies of creditors.
(d) Power and Authority Relative to Transaction. The Seller has full power and authority and has taken all required corporate action necessary to permit the Seller to execute, deliver and perform its obligations under this Agreement, and none of such actions conflicts with or to the best of its knowledge violates any provision of law known to the Seller or violates or constitutes a default under or will result in any breach of (with notice or lapse of time or both) any agreement, indenture, deed of trust, mortgage, instrument, lease, order, judgment, right, injunction, decree, license or permit of any court or governmental or regulatory body applicable to the Seller or to the Shares.
(e) Pending Litigation. There are no causes of action, litigation, arbitration, government proceedings or investigations pending against the Seller affecting the Shares.
(f) Consents. No consent, order, approval, authorization, declaration or filing including, without limitation, any consent, approval or authorization of or declaration or filing with any governmental authority, is required on the part of the Seller for or in connection with the execution and delivery of this Agreement and the sale and transfer of the Shares.
4. The Corporation’s Representations and Warranties. The Corporation hereby represents and warrants to the Sellers as follows:
(a) Power and Authority Relative to Transaction. The Corporation has full power and authority and has taken all required corporate action necessary to permit the Corporation to execute, deliver and perform its obligations under this Agreement, and none of such actions conflicts with or to the best of its knowledge violates any provision of law known to the Corporation or violates or constitutes a default under or will result in any breach of (with notice or lapse of time or both) any agreement, indenture, deed of trust, mortgage, instrument, lease, order, judgment, right, injunction, decree, license or permit of any court or governmental or regulatory body applicable to the Corporation.
(b) Valid and Binding Obligations. This Agreement constitutes the valid and legally binding obligations of the Corporation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and other general laws affecting the rights and remedies of creditors.
(c) Required Consents. No consent, order, approval, authorization, declaration or filing including, without limitation, any consent, approval or authorization of or declaration or filing with any governmental authority, is required on the part of the Corporation for or in connection with the execution and delivery of this Agreement.
5. Indemnification.
(a) Indemnification by the Seller. The Seller shall indemnify, defend and hold the Corporation harmless from and against any and all losses, claims, liabilities, damages, costs and expenses, including reasonable attorneys’ fees suffered or incurred by the Corporation resulting from, relating to or incident to (i) a breach, misrepresentation or nonfulfillment by the Seller of any representation, covenant, or warranty of the Seller contained in this Agreement, (ii) a failure by the Seller to perform any covenant or agreement contained in this Agreement, or (iii) the enforcement of this indemnity.
(b) Indemnification by the Corporation. The Corporation shall indemnify, defend and hold the Seller harmless from and against any and all losses, claims, liabilities, damages, costs and expenses, including reasonable attorneys’ fees suffered or incurred by the Seller resulting from, relating to or incident to (i) a breach, misrepresentation or nonfulfillment by the Corporation of any representation, covenant, or warranty of the Corporation contained in this Agreement, (ii) a failure by the Corporation to perform any covenant or agreement contained in this Agreement, or (iii) the enforcement of this indemnity.
6. Release.
(a) Release by Seller. The Seller, on behalf of itself and its shareholders, officers, directors, agents, employees, affiliates, successors and assigns, hereby forever waives and releases any and all claims, causes of action (at law or equity), liabilities, damages or losses of any kind, anticipated or unanticipated, known or unknown (collectively, “Claims”), which the Seller now has, may have in the future, or could have asserted against the Corporation and each of its past and present principals, shareholders, owners, directors, officers, employees, agents, representatives, predecessors, successors and/or assigns (collectively, the “Corporation Releasees”), arising out of, or any way in connection with, the Shares or Seller’s status as a shareholder of the Corporation; provided, however, that the within release does not and shall not include a release of any Claims that the Seller may have against the Corporation Releasees under this Agreement or any other document, agreement or instrument executed and delivered by the Seller in connection with the consummation of the transactions contemplated under this Agreement.
2
(b) Release by the Corporation. The Corporation hereby forever waives and releases any and all Claims which the Corporation now has, may have in the future, or could have asserted against the Seller and its shareholders, officers, directors, agents, employees, affiliates, successors and assigns (collectively, the “Seller Releasees”), arising out of, or any way in connection with, the Shares or the Seller’s status as a shareholder of the Corporation; provided, however, that the within release does not and shall not include a release of any Claims that the Corporation may have against the Seller Releasees under this Agreement or any other document, agreement or instrument executed and delivered in connection with the consummation of the transactions contemplated by this Agreement.
(c) Scope. Notwithstanding the foregoing, nothing in this Section 6 is intended to expand or otherwise modify the releases set forth in the Settlement Agreement, except with respect to the release of the claims specifically referenced herein.
7. Nominee and Observer Rights of the Seller. The Parties acknowledge that pursuant to that certain Investor Rights Agreement, dated as of December 1, 2020, by and among the Corporation, the Seller and the other parties thereto (the “Investor Rights Agreement”), the Seller has certain rights to appoint a nominee to the Board of Directors of the Company and to designate an observer to attend all meetings of the Board of Director of the Company. Notwithstanding anything contained in the Investor Rights Agreement, the Seller acknowledges and agrees that from and after the Closing Date hereunder and the date on which the Warrant is terminated, the Seller shall have no further right to appoint a nominee or director to the Board of Directors of the Corporation or to have an observer present at any meetings of the Board of Director. To the extent the Seller has any such designee serving as a director of the Corporation or as an observer of the Board of Directors, the Seller agrees to take such action as may be necessary to cause such designee to resign from the Board of Directors and/or to seek acting as an observer of any meetings of the Board of Directors of the Corporation.
8. Prior Agreements. All prior agreements, understandings or arrangements, written or oral, heretofore made or existing among the Parties respecting any of the subject matter herein contained, other than the Settlement Agreement, shall be deemed merged in and superseded by this Agreement.
9. Modifications. No modifications, amendments or termination of this Agreement, or of any of the provisions hereof, shall be binding upon any Party hereto unless the same shall be in writing and executed by all Parties hereto.
10. Successors and Assigns. This Agreement and all of the provisions contained herein shall be binding and obligatory upon and shall inure to the benefit of the Parties hereto and their respective heirs, distributees, executors, administrators, legal representatives and assigns.
11. Further Documents. The Sellers and the Corporation agree to execute and deliver such documents and to take such steps as are reasonably necessary and proper in order to effectuate the redemption of the Shares by the Corporation upon the Closing Date.
12. Notice. All demands and notices given hereunder shall be sent by regular mail in a postage pre-paid envelope or by fax to the last known address and facsimile number for the recipient set forth in the books and records of the Corporation or such other address as the Parties may provide in writing.
13. Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
14. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each Party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.
15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same legal instrument. Facsimile or ‘pdf’ signatures shall be sufficient for execution of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the Parties have executed this Stock Redemption Agreement as of the day and year first above written.
| SELLER: | CORPORATION: | |||
| RIBBON COMMUNICATIONS INC. | AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC. | |||
| By: | /s/ Patrick Macken | By: | /s/ Kevin Keough | |
| Name: | Patrick Macken | Name: | Kevin Keough | |
| Title: | EVP, CLO | Title: | Chief Executive Officer | |
4
Exhibit 10.4
WARRANT TERMINATION agreement
THIS WARRANT TERMINATION AGREEMENT (this “Agreement”) is made as of August 29, 2022, by and between AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and RIBBON COMMUNICATIONS INC., a Delaware corporation (the “Holder”). The Company and the Holder may collectively be referred to herein as the “Parties,” and each, individually, may be referred to herein as a “Party.”
RECITALS
WHEREAS, the Company, the Holder, Ribbon Communications Operating Company, Inc., and Ribbon Communications International Limited are parties to that certain Amended and Restated Purchase Agreement, dated as of December 1, 2020 (the “Purchase Agreement”);
WHEREAS, pursuant to the terms of the Purchase Agreement , the Company issued to the Holder a Warrant to Purchase Common Stock, pursuant to which the Holder has the right to acquire 4,377,800 shares of common stock of the Company, pursuant to the terms set forth therein (the “Warrant”);
WHEREAS, the Company and the Holder, pursuant to the terms of a Settlement Agreement of even date herewith by and between the Company and the Holder, among other parties a party thereto (the “Settlement Agreement”), have agreed to irrevocably terminate the Warrant, effective as of the date hereof (the “Effective Date”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, and intending to be legally bound, the Parties hereby agree as follows:
1. Recitals. The Parties agree that the above Recitals are true and correct in all respects.
2. Termination of Warrant. The Company and the Holder agree and acknowledge that the Warrant, and any and all rights thereunder and with respect thereto are, in each case, hereby terminated, cancelled and declared null and void with no further force or effect as of the Effective Date, and all past, current, or future obligations of the Parties under the Warrant are hereby extinguished, except as otherwise expressly set forth in this Agreement. The Holder and the Company each acknowledges and agrees that, as of the Effective Date, the Holder shall have no surviving right, title or interest in or to the Warrant, any Common Units purchasable thereunder or any other option, warrant, right or interest to acquire any equity of the Company. The Holder hereby acknowledges and agrees that it shall have no claims of any nature whatsoever against the Company, or any of its affiliates, equity holders, members, managers, directors or officers, arising out of or related to the Warrant (including as a result of the termination and cancellation thereof), and the Holder hereby waives, and releases the Company and its affiliates, equity holders, members, managers, directors and officers from, any and all past, present and future claims arising out of or related to the Warrant (including the termination and cancellation thereof). The Company hereby acknowledges and agrees that it shall have no claims of any nature whatsoever against the Holder, or any of its affiliates, equity holders, members, managers, directors or officers, arising out of or related to the Warrant (including as a result of the termination and cancellation thereof), and the Company hereby waives, and releases the Holder and its affiliates, equity holders, members, managers, directors and officers from, any and all past, present and future claims arising out of or related to the Warrant (including the termination and cancellation thereof).
3. Return of Warrant. The Holder shall, simultaneously with the execution of this Agreement, return the originals of the Warrant for cancellation by the Company as of the Effective Date.
4. Representations and Warranties.
a. By Holder. The Holder hereby warrants and represents to the Company that (i) the Holder has full corporate power and authority to execute and deliver this Agreement; (ii) the execution, delivery and performance of this Agreement by the Holder has been duly and validly authorized by all necessary corporate action on the part of the Holder, and no other corporate action on the part of the Holder, its governing body or its equity holders is necessary to authorize the execution, delivery and performance by the Holder of this Agreement; (iii) this Agreement has been duly executed and delivered by the Holder and, assuming the due execution and delivery by the Company, constitutes the legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms; and (iv) the Holder is the sole owner and beneficiary of the Warrant and the Holder has not transferred, sold or otherwise assigned Warrant or any of the rights of the Holder under the Warrant.
b. By Company. The Company hereby warrants and represents to the Holder that (a) the Company has full corporate power and authority to execute and deliver this Agreement; (b) the execution, delivery and performance of this Agreement by the Company has been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate action on the part of Company, its governing body or its equity holders is necessary to authorize the execution, delivery and performance by the Company of this Agreement; and (c) this Agreement has been duly executed and delivered by the Company and, assuming the due execution and delivery by the Holder, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.
5. Successors and Assigns. This Agreement shall be binding upon the Parties and their respective successors and assigns.
6. Parties’ Acknowledgment. The Parties agree that this Agreement is fully and adequately supported by consideration, is fair and reasonable, and that each Party has had the opportunity to discuss this matter with counsel of their choice.
7. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED ACCORDING TO, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS PROVISIONS THEREOF. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF DELAWARE OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE.
8. WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE TRIAL BY JURY.
9. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
10. Further Assurance. Each Party agrees, at any time and from time to time, to make, execute and deliver any and all such other and further instruments or documents and do any and all such acts and/or things as the other party shall reasonably require for the purpose of giving full force and effect to this Agreement.
11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to constitute one agreement. It is understood and agreed that if electronic or facsimile copies of this Agreement bearing electronic or facsimile signatures are exchanged between the Parties, such copies shall in all respects have the same weight, force and legal effect and shall be fully as valid, binding, and enforceable as if such signed copies were original documents bearing original signature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
| RIBBON COMMUNICATIONS INC. | ||
| By: | /s/ Patrick Macken | |
| Name: | Patrick Macken | |
| Title: | EVP, CLO | |
| AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC. | ||
| By: | /s/ Kevin Keough | |
| Name: | Kevin Keough | |
| Title: | Chief Executive Officer | |
3
Exhibit 10.5
AMENDED AND RESTATED WAIVER AGREEMENT
This AMENDED AND RESTATED WAIVER AGREEMENT (this “Agreement”), dated as of August 31, 2022, is entered into by and among American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), and the undersigned holders of securities of the Company (each, a “Holder Entity”, and collectively, the “Holder”), on each Holder Entity’s own behalf and in its respective capacity as the Required Holder, as such term is defined in the Purchase Agreements, the Certificate of Designations and the Notes (all as defined below).
RECITALS
A. On August 15, 2022, the Company and each Holder Entity entered into that certain Waiver Agreement, which is being amended and restated herein as this Agreement.
B. The Company and a Holder Entity are parties to (i) a Securities Purchase Agreement, dated as of November 5, 2021 (as in effect as of the date hereof, the “November SPA”), pursuant to which such Holder Entity purchased from the Company, among other securities, Series A Warrants (as such term is defined in the November SPA), and (ii) a Securities Purchase Agreement, dated as of December 13, 2021 (as in effect as of the date hereof, the “December SPA”), pursuant to which such Holder Entity purchased from the Company, among other securities, Series D Warrants (as such term is defined in the December SPA).
C. The Company and a Holder Entity are parties to a Securities Purchase Agreement, dated as of February 28, 2022 (as in effect as of the date hereof, the “February SPA”), pursuant to which such Holder Entity purchased from the Company shares of Series B Preferred Stock (as such term is defined in the February SPA) (the “Preferred Shares”) issued pursuant to a certificate of designations with respect thereto, the “Certificate of Designations”) and Warrants (the “February Warrants” and, collectively with the Series A Warrants and the Series D Warrants, the “Warrants”);
D. The Company and HB Sub Fund II LLC, a Holder Entity, are parties to a Securities Purchase Agreement, dated as of April 14, 2022 (as in effect as of the date hereof, the “April SPA” and, collectively with the November SPA, the December SPA and the February SPA, the “Purchase Agreements”), pursuant to which such Holder Entity purchased from the Company the certain senior secured convertible notes (the “Notes”);
E. On August 25, 2022, pursuant to that certain Securities Transfer Agreement, by and between HB Sub Fund II LLC, a Holder Entity, and HB Fund LLC, a Holder Entity, HB Sub Fund II LLC transferred its entire interest in the Notes to HB Fund LLC, with HB Sub Fund II LLC agreeing to remain the collateral agent with respect thereto (collectively, the “Note Transfer”).
F. The Company and each Holder Entity desires to waive certain provisions of the Purchase Agreements, the Certificate of Designations, the Warrants, the Preferred Shares and/or the Notes, as applicable, all as set forth herein;
G. The Company has executed and delivered that certain Security and Pledge Agreement, dated April 19, 2022, made by the Company, AVCtechnologies USA Inc. (“AVCT USA”), and Kandy Communications LLC (“Kandy”, together with Company and AVCT USA, the “Grantors”), in favor of HB Sub Fund II LLC, in its capacity as collateral agent (the “Collateral Agent”) (as amended, modified, supplemented, renewed, restated or replaced from time to time, the “Security Agreement”);
H. Pursuant to the terms of the Security Agreement, each Grantor has granted to the Collateral Agent, for the ratable benefit of itself and the Noteholders (as defined in the Security Agreement), a valid, enforceable and perfected security interest in the Collateral (as defined in the Security Agreement), including certain Intellectual Property (as defined in the Security Agreement) of Company and AVCT USA. Each of Company and AVCT USA has executed and delivered to the Collateral Agent an Intellectual Property Security Agreement (as amended, modified, supplemented, renewed, restated or replaced from time to time, collectively, the “IP Security Agreements”);
I. The Company has negotiated (i) a settlement agreement (as in effect as of the date hereof and attached hereto as Exhibit A-1, the “Settlement Agreement”) with Ribbon Communications Operating Company, Inc. and certain of its affiliates (collectively, “Ribbon”) pursuant to which Grantors, as applicable, are granting certain non-exclusive rights to Ribbon to utilize WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers, as more particularly described on Exhibit B hereto (the “Licensed Technology Rights”), (ii) a Stock Redemption Agreement with Ribbon (as in effect as of the date hereof and attached hereto as Exhibit A-2, the “Stock Redemption Agreement”), pursuant to which the Company shall redeem 13,600,421 shares of Common Stock as additional consideration for the transactions contemplated by the Settlement Agreement (the “Redemption”), (iii) a Warrant Termination Agreement with Ribbon (as in effect as of the date hereof and attached hereto as Exhibit A-3, the “Warrant Termination Agreement”), pursuant to which the Company shall terminate a warrant to purchase 4,377,800 shares of Common Stock previously issued to Ribbon as additional consideration for the transactions contemplated by the Settlement Agreement (the “Warrant Termination”, and together with the Redemption, the “Redemption and Termination”) and (iv) the Wind Down Agreement with Ribbon (as in effect as of the date hereof and attached hereto as Exhibit A-4, the “Wind Down Agreement”, and together with the Settlement Agreement, the Stock Redemption Agreement and the Warrant Termination Agreement, the “Settlement Documents”); and
J. Each Grantor has requested that the Collateral Agent consent to the license of the Licensed Technology Rights and the Collateral Agent release any Lien relating thereto, and that the Holder agree to certain other consents and waivers in connection with the Settlement Agreement, all as set forth herein.
2
TERMS OF AGREEMENT
In consideration of the premises and further valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Ribbon Consents and Waivers. Capitalized terms used but not otherwise defined in this Section 1 shall have the same meanings ascribed to them in the Security Agreement.
| a. | The Collateral Agent and each Holder Entity hereby consent to the license to Ribbon of (x) the Licensed Technology Rights and (y) all of Grantors’ rights, title and interest in and to the Conveyed Technology (as defined in the Wind Down Agreement) (collectively, the “Permitted License and Assignment”) and, for the avoidance of doubt, waives, solely with respect to the Permitted License and Assignment, any covenant in the Transaction Documents prohibiting the Permitted License and Assignment. Upon execution of this Agreement, all Liens, security interests and/or other rights of every kind granted to the Collateral Agent in the Licensed Technology Rights shall automatically and immediately be terminated and released without further action by any party. The Licensed Technology Rights shall be released from the effect of the Notes, the Security Agreement and the IP Security Agreements and any other document executed in connection therewith without further action by any party. The Grantors and the Collateral Agent each acknowledge and agree that (i) the Collateral Agent is not consenting to the transfer of any other assets of the Grantors to the extent such asset constitutes Collateral or the release of any other Lien with respect to Collateral, and (ii) any such further transfers or release of any Lien, as applicable, shall require the prior written consent of Collateral Agent, which may not be unreasonably withheld. |
| b. | Upon execution of this Agreement, the Collateral Agent hereby authorizes the Company to file the appropriate UCC-3 amendment (subject to the Collateral Agent’s prior review) and such other release filings in the United States Patent and Trademark Office, the United States Copyright Office and other governmental authorities, solely with respect to the release of the Licensed Technology Rights from the Collateral Agent’s Lien and security interest related thereto as contemplated by subsection (a) above (but not with respect to any other Lien on any other Collateral). |
| c. | The Holder hereby consents to the Redemption and Termination. The Holder hereby waives any prohibition of the Redemption and Termination set forth in Section 15 of the Certificate of Designations, Section 13 of the Notes or any similar covenants contained in any Purchase Agreement (in each case, solely with respect to the Redemption and Termination and not with respect to any other transaction). For the avoidance of doubt, the Company shall be entitled to retain 100% of the proceeds paid to the Company or any of its subsidiaries pursuant to the Settlement Documents, which proceeds shall be deposited to the Company’s operating account. |
3
2. Other Waivers; Acknowledgement.
| a. | From the Effective Time through and including December 30, 2022 (the “Waiver Period”), clause (ix) of the definition of Equity Conditions in the Certificate of Designations and clause (x) of the definition of Equity Conditions in the Note, in each case, shall be waived, in part, such that (i) no Price Failure (as defined in the Notes) nor Price Failure (as defined in the Certificate of Designations) shall be deemed to have occurred and (ii) if the Company satisfies the definition of Volume Failure (as defined in the Notes) and Volume Failure (as defined in the Certificate of Designations), assuming for such purpose that “$1,000,000” of each such definition was replaced with “$250,000, no Volume Failure (as defined in the Notes) nor Volume Failure (as defined in the Certificate of Designations) shall be deemed to have occurred. |
| b. | (i) the Notes, the Warrants and the Certificate of Designations, as applicable, shall each be waived, in part, such that securities issued pursuant to a Subsequent Placement of up to an aggregate of $15 million (the “New Permitted Offering Size Limitation”) in gross proceeds (excluding any issuances of securities pursuant to an equity line of credit) shall be deemed to be an “Excluded Security” (as defined in each applicable Transaction Document) for all purposes thereunder (the “New Permitted Offering”), and (ii) the Transaction Documents (as defined in each of the Purchase Agreements), including, without limitation, the Notes, the Warrants and the Certificate of Designations, shall be waived in part, such that if such New Permitted Offering is an at-the-market offering, such agreement with respect thereto and any issuances of Common Stock thereunder, subject to the New Permitted Offering Size Limitation, shall not be deemed to be a variable rate transaction (and securities issued thereunder shall not be deemed to be variable rate securities) for any purpose thereunder. |
| c. | During the Waiver Period, the Holder hereby agrees to defer the time of each required payment by the Company to the applicable Holder Entity of any Acceleration Floor Amount or Conversion Installment Floor Amount (as such terms are defined in the Certificate of Designations) or Acceleration Floor Amount or Conversion Installment Floor Amount (as such terms are defined in the Notes) or Intermonth Installment Floor Amount (as defined below) due and payable under the Certificate of Designations or the Notes or this Agreement, as applicable, including without limitation any such Acceleration Floor Amount due and payable with respect to any Acceleration (as defined in the Certificate of Designations) or any Acceleration (as defined in the Notes), as applicable, that occurred on August 11, 2022 (collectively, the “Outstanding Floor Amounts”) until the first (1st) Trading Day immediately following the Waiver Period; provided, that, notwithstanding the foregoing, if the Company consummates a New Permitted Offering, the lesser of (x) 25% of the gross proceeds of the New Permitted Offering and (y) the aggregate Outstanding Floor Amounts as of the time of consummation of such New Permitted Offering, as applicable (with respect to any New Permitted Offering until $2.8 million in the aggregate has been distributed to the Holder), shall be paid to the applicable Holder Entity, pro rata, as of the time of consummation of such New Permitted Offering to reduce the Outstanding Floor Amounts then outstanding. |
4
| d. | The Company hereby waives, in part, the prohibition of Accelerations (as defined in the Certificate of Designations) and Accelerations (as defined in the Notes), such that the Holder may effect Accelerations (as defined in the Certificate of Designations) and Accelerations (as defined in the Notes), in each case, up to 400% of the Installment Amount (as defined in the Certificate of Designations) for such Current Installment Date (as defined in the Certificate of Designations) and up to 400% of the Installment Amount (as defined in the Notes) for such Current Installment Date (as defined in the Notes), in each case, in each of (x) the first fifteen (15) calendar days of such applicable calendar month and (y) the remaining calendar days of such calendar month, as applicable (in any calendar month, in the aggregate, any Accelerations (as defined in the Certificate of Designations) in excess of 300% of the Installment Amount (as defined in the Certificate of Designations) for such Current Installment Date (as defined in the Certificate of Designations) and Accelerations (as defined in the Notes) in excess of 300% of the Installment Amount (as defined in the Notes) for such Current Installment Date (as defined in the Notes), collectively shall be referred to herein as the “Additional Accelerations”). For the avoidance of doubt, for the purpose of this Section 2(d), any given Installment Amount shall include any Deferral Amount that has been previously deferred to such applicable Installment Date and shall also include any amount deferred from such Installment Amount to a later Installment Date. |
| e. | Pursuant to Section 8(g) of the Certificate of Designations and Section 7(g) of the Note, respectively, on the fifteenth calendar day of each calendar month (or, if such date is not a Trading Day, the next Trading Day, each, an “Intermonth Installment Date”), the Company shall reduce the Conversion Price (as defined in the Certificate of Designations) and the Conversion Price (as defined in the Note), respectively, solely with respect to (x) such aggregate number of Preferred Shares equal to the Installment Amount (as defined in the Certificate of Designations) of such Current Installment Date (as defined in the Certificate of Designations) (each, an “Intermonth Preferred Installment Amount”) and (y) such aggregate Conversion Amount (as defined in the Note) of the Note equal to the Installment Amount (as defined in the Note) of such Current Installment Date (as defined in the Note) occurring in such applicable Installment Period (as defined in the Note) (each, an “Intermonth Note Installment Amount”, and together with each Intermonth Preferred Installment Amount, each an “Intermonth Installment Amount”) to (x) with respect to such applicable Intermonth Preferred Installment Amount, the Installment Conversion Price (as defined in the Certificate of Designations assuming an Installment Date (as defined in the Certificate of Designations) as of the applicable Intermonth Installment Date) (each, an “Intermonth Installment Preferred Conversion Price”) and (y) with respect to such applicable Intermonth Note Installment Amount, the Installment Conversion Price (as defined in the Notes assuming an Installment Date (as defined in the Notes) as of the applicable Intermonth Installment Date) (each, an “Intermonth Installment Note Conversion Price”, and together with each Intermonth Installment Preferred Conversion Price, each an “Intermonth Conversion Price”); provided, that in the event of the Conversion Floor Price Condition (as defined in the Certificate of Designations) or a Conversion Floor Price Condition (as defined in the Notes), respectively, exists with respect to any conversion of any Intermonth Installment Amount (excluding any Intermonth Installment Amount or any Additional Accelerations), the Company herby agrees to pay to the Holder on the first (1st) Trading Day after the Waiver Period (or, if earlier, as required in accordance with Section 2(c) above) with respect thereto an additional amount in cash equal to the applicable Intermonth Installment Floor Amount (as defined below) with respect thereto. |
5
“Intermonth Installment Floor Amount” means an amount in cash, to be delivered by wire transfer of immediately available funds pursuant to wire instructions delivered to the Company by the Holder in writing, equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Intermonth Installment Date and (II) the applicable Intermonth Installment Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to the Holder on the applicable Intermonth Installment Date with respect to such applicable conversion from (II) the quotient obtain by dividing (x) the applicable Intermonth Installment Amount subject to such applicable conversion, by (y) the applicable Intermonth Installment Conversion Price without giving effect to clause (x) of such definition.
| f. | The Holder hereby defers, from the Effective Time through and including the earlier of (i) the Company’s receipt of gross proceeds of $15 million from the New Permitted Offering and (ii) December 31, 2022, the application of (A) any adjustment to the Conversion Price that would otherwise result from any Stock Combination Event (as such terms are defined in the Certificate of Designations), (B) any adjustment to the Conversion Price that would otherwise result from any Stock Combination Event (as such terms are defined in the Notes) and (C) any adjustment to the Exercise Price that would otherwise result from any Stock Combination Event (as such terms are defined in certain of the Warrants), in each case if such Stock Combination Event is a reverse stock split approved by the Company’s stockholders pursuant to the definitive proxy statement filed by the Company on May 2, 2022 (each, a “Deferred Adjustment Right”); provided that if the Holder exercises, at any time prior to the Company’s receipt of gross proceeds of $15 million from the New Permitted Offering, any such Warrants as to which a Deferred Adjustment Right is applicable, (I) the deferral of the Deferred Adjustment Right with respect to such portion of such Warrant exercised shall be deemed to have ended immediately prior to such exercise, and (II) any such exercise shall reflect any adjustments in the Warrant as a result of the Deferred Adjustment Right; provided further, and notwithstanding the foregoing, the application of such Deferred Adjustment Right shall not occur to such portion of the Warrant that is not exercised for cash, if any, unless the Company is not then in compliance with its obligations to register the underlying shares of Common Stock under any applicable registration rights agreement. |
| g. | The Company acknowledges and agrees that the Note Transfer occurred on August 25, 2022, such Note Transfer has been recorded on the Register (as defined in the Notes) and the books and records of the Company, and the Company shall use its reasonable best efforts to promptly effect the transfer of the certificate evidencing the Note from HB Sub Fund II LLC to HB Fund LLC. |
6
3. Disclosure of Transaction. The Company shall, on or before 9:30 a.m., New York City Time, on the first Business Day following the date of this Agreement, file a Current Report on Form 8-K, or a Quarterly Report on Form 10-Q, describing the terms of the transactions contemplated hereby in the form required by the 1934 Act and attaching this Agreement and the form of the New Notes as an exhibit to such filing (excluding schedules, the “SEC Filing”). From and after the filing of the SEC Filing, the Company shall have disclosed all material, non-public information (if any) provided up to such time to the Holders by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents. In addition, upon the filing of the SEC Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement with respect to the transactions contemplated hereby or as otherwise disclosed in the SEC Filing, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, on the other hand, shall terminate. Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holders, to issue a press release or make such other public disclosure with respect to such transactions (i) in substantial conformity with the SEC Filing and contemporaneously therewith or (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Holders shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.
4. Fees. The Company shall reimburse Kelley Drye & Warren, LLP (counsel to the Holder) in an aggregate non-accountable amount of $45,000 (the “Legal Fee Amount”) for costs and expenses incurred by it in connection with drafting and negotiation of this Agreement. Each party to this Agreement shall bear its own expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated hereby, except as provided in the previous sentence and except that the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, Depository Trust Company fees relating to or arising out of the transactions contemplated hereby.
5. Most Favored Nation. The Company hereby represents and warrants as of the date hereof and covenants and agrees that none of the terms offered to any Person with respect to any amendment, modification, waiver or exchange of any warrant to purchase Common Stock (or other similar instrument), including, without limitation with respect to any consent, release, amendment, settlement, or waiver relating thereto (each an “Settlement Document”), is or will be more favorable to such Person (other than any reimbursement of legal fees) than those of the Holder and this Agreement. If, and whenever on or after the date hereof, the Company enters into a Settlement Document while any Warrant remains outstanding, then (i) the Company shall provide notice thereof to the applicable Holder promptly following the occurrence thereof and (ii) the terms and conditions of this Agreement shall be, without any further action by the applicable Holder or the Company, automatically amended and modified in an economically and legally equivalent manner such that the applicable Holder shall receive the benefit of the more favorable terms and/or conditions (as the case may be) set forth in such Settlement Document, provided that upon written notice to the Company at any time such Holder may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Agreement shall apply to such Holder as it was in effect immediately prior to such amendment or modification as if such amendment or modification never occurred with respect to such Holder. The provisions of this Section 7 shall apply similarly and equally to each Settlement Document.
6. Effective Time. This Agreement shall be effective (the “Effective Time”) upon the time of due execution and delivery by the Company and the Holders of this Agreement.
7. Ratification. Except as otherwise expressly provided herein, the Transaction Documents (as defined in each Purchase Agreement), are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects.
8. Miscellaneous. Section 9 of the April SPA is hereby incorporated by reference herein, mutatis mutandis.
[Signature Page Follows]
7