STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars, or otherwise noted)
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|
|
|
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Nine Months
Ended
September 30,
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2019
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2018
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Cash flows from operating activities:
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|
|
|
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Net loss
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|
$
|
(2,151
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)
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$
|
(3,021
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)
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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Depreciation
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2,835
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3,052
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Amortization of Other Intangible Assets
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741
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|
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679
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Amortization of Deferred Financial Costs
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|
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34
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34
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(Increase) Decrease in Assets:
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Accounts Receivable
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30,097
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6,329
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Inventory
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(45
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)
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(716
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)
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Other Current Assets
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|
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293
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|
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(403
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)
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Deferred Contract Costs
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|
|
7
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|
|
6
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Increase (Decrease) in Liabilities:
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|
|
|
|
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Accounts Payable
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|
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(23,929
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)
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(5,111
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)
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Unearned Revenue
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|
|
(3,250
|
)
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|
(3,791
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)
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Accrued Expenses
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|
|
(2,183
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)
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|
(917
|
)
|
Deferred Rent
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|
|
(95
|
)
|
|
(39
|
)
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|
|
|
|
|
|
|
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Net cash provided by (used in) operating activities
|
|
|
2,354
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|
|
(3,898
|
)
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|
|
|
|
|
|
|
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Cash flows from investing activities:
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|
|
|
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Acquisition of Business, Net of Cash Acquired
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|
|
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500
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|
Acquisition of Property and Equipment
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(518
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)
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(558
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)
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|
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|
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Net cash used in investing activities
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|
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(518
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)
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|
(58
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)
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|
|
|
|
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Cash flows from financing activities:
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|
|
|
|
|
|
|
Net Change in Line of Credit
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|
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623
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|
|
4,871
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Payments on Notes Payable
|
|
|
(1,942
|
)
|
|
(1,072
|
)
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Payments on Capital Lease Obligations
|
|
|
(234
|
)
|
|
(418
|
)
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(1,553
|
)
|
|
3,381
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|
|
|
|
|
|
|
|
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Net increase (decrease) in cash
|
|
|
283
|
|
|
(575
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)
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Cash, beginning of period
|
|
|
260
|
|
|
677
|
|
|
|
|
|
|
|
|
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Cash, end of period
|
|
$
|
543
|
|
$
|
102
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|
|
|
|
|
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|
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Supplemental schedule of noncash investing and financing activities
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|
|
|
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|
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Reconciliation of Net Assets Acquired in Acquistion of Synetra, Inc.:
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|
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|
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Fair Value of Net Assets Acquired:
|
|
|
|
|
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|
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Cash
|
|
$
|
|
|
$
|
500
|
|
Fixed Assets
|
|
|
|
|
|
304
|
|
Intangible Assets
|
|
|
|
|
|
675
|
|
Goodwill
|
|
|
|
|
|
921
|
|
|
|
|
|
|
|
|
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Notes Payable Issued for Acquistion of Synetra
|
|
$
|
|
|
$
|
2,400
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|
|
|
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|
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|
|
|
|
|
|
|
|
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Acquisition of Property and Equipment through Capital Lease
|
|
$
|
300
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash Paid for Interest Expense
|
|
$
|
972
|
|
$
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash Paid for Income Taxes
|
|
$
|
4
|
|
$
|
143
|
|
|
|
|
|
|
|
|
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|
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-83
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars, except share and per share data, or otherwise noted)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Stratos Management Systems, Inc. dba: Computex Technology Solutions (Stratos) incorporated on February 8, 2012, as a management company with the majority of its assets
consisting of its ownership in First Byte Computers, Inc. dba: Computex Technology Solutions (Computex North); Computex, Inc. dba: Computex Technology Solutions (Computex South);
eNETsolutions, LLC dba: Computex Technology Solutions (eNET); and Stratos MS Ireland Limited (Stratos Ireland) (collectively, the companies are referred to in the consolidated financial
statements as "the Company")
On
August 1, 2018, the Company acquired certain assets of Synetra, Inc. (Synetra) with operations in Amarillo, Dallas, El Paso, Lubbock, and Odessa Texas.
Synetra, Inc. is engaged in IT consulting and communication solutions.
The
acquired assets of Synetra were recorded at their fair value as of the acquisition date and the accompanying consolidated financial statements include the operations of Synetra from
the acquisition date to September 30, 2019 (see Note 3).
On
July 24, 2019, the Company signed an Agreement and Plan of Merger ("Merger") with Pensare Acquisition Corporation ("Pensare"), whereby a subsidiary of Pensare and the Company
shall consummate a merger, pursuant to which the subsidiary shall be merged with and into the Company, following which the separate corporate existence of the subsidiary shall cease and the Company
shall continue as the surviving publicly traded corporation (the "Business Combination").
The
Company sells computer equipment, network infrastructure, cloud and hosting solutions, and support. The Company has locations in Minnesota, Michigan, Florida and Texas. Stratos
Ireland is a sourcing company for European sales activity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the
Security and Exchange Commission (SEC) and accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial reporting. Certain information and footnote
disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these statements
should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2018.
In
the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair
presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited
condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company's consolidated financial statements for the year ended
December 31, 2018. The results of operations for the nine-month periods ended September 30, 2019 and 2018 are not necessarily indicative of the results for the full years.
F-84
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The
financial information as of December 31, 2018 presented in the unaudited condensed consolidated financial statements is derived from the audited consolidated financial
statements for the year ended December 31, 2018.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Stratos Management Systems, Inc. dba: Computex Technology
Solutions (the Parent) and its wholly owned subsidiaries: Computex North, Computex South, eNET, and Stratos Ireland Limited (the Subsidiaries). All material intercompany transactions and balances have
been eliminated in the preparation of the consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the
reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company's consolidated
financial statements include, but are not limited to, revenue recognition, allowance for doubtful accounts, deferred tax asset valuation allowance, income taxes, equity instruments, and the purchase
price allocation associated with business combinations.
Revenue Recognition
Products, installation and maintenance services are typically sold as a bundled arrangement containing multiple deliverables of new and/or
refurbished hardware, software and professional services associated with installing, maintaining and managing the business communications systems. Revenue from multiple-element arrangements is
allocated to the various elements based on the relative selling price of the elements, and each element is considered a separate accounting unit, with recognition of revenue based on the criteria met
for the individual element of the multiple-element arrangement. When available, the Company uses vendor-specific objective evidence,
or VSOE, to determine the selling price of a unit of accounting. If VSOE does not exist, the Company uses third-party evidence of the selling price for similar products and services. For units of
accounting in which there is no VSOE or third-party evidence of selling price, the best estimate of selling price is used. The Company determines best estimate of selling price using a cost plus
margin approach.
Product Sales
Revenue for hardware and software: The Company sells IT and communication products, which consist of hardware and essential software. The
software and hardware are necessary to deliver the essential functionality of the communication products. Revenue from the sale of hardware and software products is generally recognized on a gross
basis with the sales price to the customer recorded as revenue and the acquisition cost of the product recorded as cost of revenue. Revenue is recognized when the title and risk of loss are passed to
the customer, there is persuasive evidence of an
F-85
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
arrangement
for sale, the sales price is fixed and determinable, and collectability is reasonably assured. Hardware and software items can be delivered to customers in a variety of ways including
physical products shipped from our warehouses, via drop-shipment by the vendor or distributor or via electronic delivery for software licenses. The Company's vendor partners provide limited warranties
to our customers on equipment sold.
In
some instances, our customers may request that the Company bill them for a product but retain physical possession of the product until later delivery, commonly known as
"bill-and-hold" arrangements. In these transactions, the Company recognizes revenue when the customer has signed a bill-and-hold agreement with us, the product is identified separately as belonging to
the customer and, when orders include configuration, such configuration is complete, and the product is ready for delivery to the customer.
Managed Services
Revenue for managed services, which are for agreements of one year or greater for more than one service offering, is recognized on a
straight-line basis over the term of the arrangement, which is consistent with the timing of services rendered. Payments received and billings in advance for these services are initially recorded as
deferred revenue and recognized over the period services are provided. The Company capitalizes costs that are incremental to obtaining customer contracts, predominately sales commissions, and expenses
them in proportion to each completed contract performance obligation. The costs are amortized to expense as a cost of revenueservices on a straight-line basis over the period during which
the Company fulfills its performance obligation.
Costs
associated with maintenance contracts where the Company has an obligation to perform services, are incurred specifically to assist the Company in rendering services to its
customers and are recorded as deferred customer support contract costs at the time the costs are incurred. The costs are amortized to expense as a cost of revenueservices on a
straight-line basis over the period during which the Company fulfills its performance obligation.
The
Company considers the principal versus agent accounting guidance to determine if the Company is the primary obligor in the arrangement and if revenue should be recognized gross or
net of the associated costs. Applying the principal versus agent accounting guidance is a matter of judgment based on consideration of several factors and indicators.
Revenue
from the sale of third-party service and maintenance contracts is recognized on a gross basis at the time of sale with the selling price to the customer recorded as revenue and
the acquisition cost recorded as cost of revenue. Based upon the evaluation of indicators for net and gross reporting, the Company has concluded that it is acting as a principal in these contracts.
Professional services
Revenue from professional services, which includes the design, configuration, installation and integration of business communication and data
systems, is recognized as the services are performed or as all obligations have been substantially met.
F-86
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales Taxes
The Company records sales and use taxes collected from customers for remittance to governmental authorities on a net basis within the Company's
consolidated statements of operations.
Shipping and Freight
Shipping and freight costs billed to customers are recognized within revenue with the related shipping and freight costs incurred by the Company
recorded as a cost of sales.
Cash
The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any
losses in such accounts. The Company does not have any compensating balance requirements.
Accounts Receivable
The Company grants credit to customers in the normal course of business. Accounts receivable are unsecured and are presented net of an allowance
for doubtful accounts. The allowance is based upon a number of factors, including the length of time trade accounts receivable are
past due, the Company's previous loss history, the customer's current ability to pay its obligations to the Company, and the condition of the general economy and the industry as a whole. Payment is
required 30 days after receipt of the invoice. Accounts more than 45 days past due are individually analyzed for collectability. When all collection efforts have been exhausted the
accounts are written off. Historically, the Company has not suffered significant losses with respect to trade accounts receivable. The allowance for doubtful accounts was approximately $70 at
September 30, 2019 and December 31, 2018.
Inventory
Inventories are valued at lower of average cost (which approximates first-in, first-out method) or net realizable value. Inventory consists of
purchased components for resale. Management evaluates the need for an inventory obsolescence reserve by identifying slow-moving or obsolete inventory. Management determined a reserve for slow-moving
or obsolete inventory was not necessary at September 30, 2019 and December 31, 2018.
Property and Equipment
Property and equipment are carried at cost. Major additions and betterments are charged to the property accounts while maintenance and repairs
which do not improve or extend the life of the respective assets are expensed currently. Depreciation is computed based on the cost of the asset, using straight-line methods over the estimated useful
lives of the assets.
F-87
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Definite Lived Intangible Assets
Definite-lived intangible assets arising from business combinations include customer relationships, trademarks and noncompetition agreements.
These intangible assets are
amortized over the estimated period during which the asset is expected to contribute directly or indirectly to future cash flows.
Impairment of Long-lived Assets
The Company reviews its long-lived assets for impairment whenever events or circumstances exist that indicate the carrying amount of an asset or
asset group may not be recoverable. The recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows
expected to be generated by that asset group. If the asset or asset group is considered to be impaired, an impairment loss would be recorded to adjust the carrying amounts to the estimated fair value.
Management has determined that no impairment of long-lived assets exists, and accordingly, no adjustments to the carrying amounts of the Company's long-lived assets have been made for the nine months
ended September 30, 2019 and 2018.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination.
Goodwill is reviewed for impairment at least annually, in December, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment
and as a single reporting unit for the purpose of evaluating goodwill impairment. The Company's impairment assessment begins with a qualitative assessment to determine whether it is more like than not
that fair value of the reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the Company against the planned results used
in the last quantitative goodwill impairment test. Additionally, the Company's fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and
market considerations, cost factors, and other relevant entity and Company specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not
that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If it is determined under the qualitative assessment that it is more likely than not
that the fair value of a reporting unit is less than its carrying value, then a two-step quantitative impairment test is performed. Under the first step, the estimated fair value of the Company would
be compared with its carrying value (including goodwill). If the fair value of the Company exceeds its carrying value, step two does not need to be performed. If the estimated fair value of the
Company is less than its carrying value, an indication of goodwill impairment exists for the Company and it would need to perform step two of the impairment test. Under step two, an impairment loss
would be recognized for any excess of the carrying amount of the Company's goodwill over the implied fair value of that goodwill. Fair value of the Company under the two-step assessment is determined
using a combination of both income and market-based approaches. There were no goodwill impairments identified for the nine months ended September 30, 2019 and 2018.
F-88
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Debt Issuance Costs
Debt issuance costs represent costs that qualify for deferral associated with the issuance of new debt or the modification of existing debt
facilities. The unamortized balance of debt issuance costs is presented as a reduction to the carrying value of long-term debt. Debt issuance costs are amortized and recognized on the consolidated
statements of operations as interest expense.
Income Taxes
Income taxes are accounted for under the asset and liability method pursuant to GAAP. Under this method, deferred tax assets and liabilities are
recognized for the expected future consequences attributable to the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in the period of the change. Further, deferred tax assets are recognized for the expected realization of available net operating loss and
tax credit carryforwards. A valuation allowance is recorded on gross deferred tax assets when it is "more likely than not" that such asset will not be realized. When evaluating the realizability of
deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax
planning strategies, and expectations of future earnings. The Company reviews its deferred tax assets on a quarterly basis to determine if a valuation allowance is required based upon these factors.
Changes in the Company's assessment of the need for a valuation allowance could give rise to a change in such allowance, potentially resulting in additional expense or benefit in the period of change.
The
Company's income tax provision includes U.S. federal, state and local income taxes and is based on pre-tax income or loss. In determining the annual effective income tax rate, the
Company analyzed various factors, including its annual earnings and taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes, and its ability to use tax
credits and net operating loss carryforwards.
Under
GAAP, the amount of tax benefit to be recognized is the amount of benefit that is "more likely than not" to be sustained upon examination. The Company analyzes its tax filing
positions in all of the U.S. federal, state, local, and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based
on this analysis, the Company determines that uncertainties in tax positions exist, a liability is established in the consolidated financial statements. The Company recognizes accrued interest and
penalties related to unrecognized tax positions in the provision for income taxes.
The
Company's income tax returns are subject to examination by federal and state authorities in accordance with prescribed statutes.
Deferred Rent
The Company leases real estate which calls for escalating rent payments. In accordance with accounting standards, the Company recognizes lease
expense on a straight-line basis over the lease term. The differences between the cash payments called for under the lease arrangements and the rent
F-89
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
expense
recognized on a straight-line basis are recorded as deferred rent. The deferred rent will be reduced when the cash payments exceed the straight-line rent expense. Cumulative straight-line rent
expense exceeded cash payments for rent by approximately $170 and $265 at September 30, 2019 and December 31, 2018, respectively.
Fair value
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or
most advantageous market in which it
would transact, and it considers assumptions that market participants would use when pricing the asset or liability.
Authoritative
literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the
hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
-
-
Level 1inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active
markets.
-
-
Level 2inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
-
-
Level 3inputs are generally unobservable and typically reflect management's estimates of assumptions that
market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models,
and similar techniques.
Fair Value on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets. Such assets are reviewed
annually for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The
fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include trade accounts receivable, inventory, deposits, accounts payable and
accrued expenses, unearned revenue and debt at floating interest rates, approximate their fair values at September 30, 2019 and December 31, 2018,
F-90
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
respectively,
principally due to the short-term nature, maturities or nature of interest rates of the above listed items.
Advertising
The Company expenses advertising costs as they are incurred. Advertising costs charged to operations for the nine months ended
September 30, 2019 and 2018 totaled approximately $160 and $538, respectively.
Vendor Considerations
The Company receives payments and credits from vendors and distributors on a quarterly basis. Consideration received includes volume-based
incentives and reimbursement for marketing expenses. Volume-based incentive payments are recorded as a reduction of cost of goods sold. Marketing-based incentive payments are recorded as a reduction
to advertising expense in the period the program takes place.
Equity-Based Compensation
The parent of the Company, Stratos Management Systems Holdings, LLC (the Parent), has issued Class A and B incentive common units
of ownership of the Parent to certain management members of the Company. The incentive common units granted consist of time-based units and performance-based units. Time-based units vest based on the
amount of time a management member serves at the Company, and performance-based units vest upon the sale of the Company or if certain common ownership valuation metrics are met. The Company performed
an analysis and determined the units had a fair value that was immaterial at each respective date of grant and, accordingly, has not recorded any compensation expense.
Net Earnings (Loss) Per Common Share
Basic net earnings or loss per common share is computed by dividing net earnings or loss by the weighted average number of shares of common
stock outstanding at the end of the reporting period. Diluted net earnings or loss per share is computed by dividing net earnings or loss by the fully dilutive common stock equivalent. The Company has
no potentially dilutive shares for the nine months ended September 30, 2019 and 2018.
Business Concentrations
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and trade accounts
receivable. The Company maintains its cash in bank accounts with balances regularly exceeding the federally insured limit. Cash deposits exceeding federally insured limits totaled approximately $293
at September 30, 2019.
No
one customer accounted for more than 10% of sales for the nine months ended September 30, 2019 and for the nine months ended September 30, 2018.
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Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
One
customer accounted for approximately 19% of accounts receivable at September 30, 2019. Three customers accounted for approximately 34% of accounts receivable at
December 31, 2018.
Segment Reporting
The Company reports operating results and financial data in one operating and reportable segment. The Company's Chief Executive Officer is the
chief operating decision maker and manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across its entire customer base, and provide
incentives to employees based on the success of the organization as a whole. Although certain information regarding selected products or services is discussed for purposes of promoting an
understanding of the Company's complex business, the chief operating decision maker manages the Company and allocates resources at the consolidated level.
Foreign Operations
Operations outside the United States include a subsidiary in Ireland. Foreign operations are subject to risks inherent in operating under
different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation,
government price or foreign exchange controls, and restrictions on currency exchange. Net assets of foreign operations are less than 10% of the Company's total net assets.
Recently Issued Accounting Standards
In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU
will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates guidance for when revenue should be recognized from the exchange
of goods or services. ASU No. 2016-08 was issued in March 2016 to clarify the principal versus agent guidance in this new revenue recognition standard. ASU 2016-10 was issued in April 2016 to
clarify the guidance on accounting for licenses of intellectual property and identifying performance obligations in the new revenue recognition standard. ASU 2016-12 was issued in May 2016 to
clarify the guidance on transition, collectability, non-cash consideration and the presentation of sales and other similar taxes in the new revenue recognition standard. ASU 2016-20 was issued in
December 2016 to make technical corrections and improvements on narrow aspects of this guidance. ASU No. 2015-14 was issued in August 2015 to defer the effective date of ASU 2014-09 for one
year.
In
May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The object is to address certain issues
identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts
with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements
for Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the
effective date of Update 2014-09 by one year.
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STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The
new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective
approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. The new standard is effective for
private companies' annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
To
determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the
contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or
as) the entity satisfies a performance obligation. Topic 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure
of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The
Company does not intend to early adopt the new revenue recognition guidance and therefore all of the ASUs noted above will be effective for the Company for the year ending
December 31, 2019. The Company expects to begin evaluating the effect of the revenue recognition ASUs during the fourth quarter of 2019. The evaluation will include selecting a transition
method for these revenue recognition ASUs and determining the effect that the updated standards will have on the historical and future consolidated financial statements.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and
2) A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the
accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet
financing. The amendments in this ASU are effective for private companies for fiscal years beginning after December 15, 2020, including interim periods within those years. The Company is
evaluating this ASU and has not determined the effect of this standard on its ongoing financial reporting.
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business. The amendments in this ASU is to clarify the
definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments were effective for private company entities for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. Management does not believe the adoption of this ASU had a material effect on the Company's
consolidated financial statements.
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STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815). The amendments in
Part I of the Update change the reclassification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. The amendments in Part II of
this Update re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. The amendments in
Part I of this Update was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 for private companies. The amendments in
Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. The Company does not believe the adoption of this ASU had a material
effect on the Company's consolidated financial statements.
In
February 2018, the FASB issued ASU 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income StatementReporting Comprehensive Income, and has items
of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update was effective for all entities for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments in this Update should be applied either in the period of adoption or retrospectively to
each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this
ASU had a material effect on the Company's consolidated financial statements.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company's consolidated balance
sheets, statements of changes in equity, statements of operations and statements of cash flows.
3. ACQUISITION
Synetra, Inc.
Prior to its acquisition by the Company on August 1, 2018, Synetra was a private company engaged in providing vital applications and
devices with communications using user's network as a platform, such as VoIP telephone service, audio and video conferencing, and voice mail. It also offers hosted voice and video solutions, data
center, and cloud solutions. Additionally, Synetra provides network infrastructure and security services. With the acquisition, the Company acquired certain customer contracts and expanded its
presence in the Texas market.
The
acquisition price totaled $2,400 consisting of seller-financed notes of $1,450 and $950. Both of these notes are nonnegotiable unsecured subordinate promissory notes with due dates
of August 1, 2020. The Company evaluated the intangible assets associated with the acquisition and goodwill of approximately $921 was recognized as part of the acquisition resulting from the
purchase price exceeding the fair value of the net assets acquired.
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STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
3. ACQUISITION (Continued)
The
Company incurred approximately $330 in transaction costs in 2018 related to the Synetra acquisition which are recorded in selling, general and administrative expenses on the
consolidated statement of operations.
The
following table summarizes the fair values of the assets acquired and at the date of acquisition of Synetra, Inc.
|
|
|
|
|
Cash
|
|
$
|
500
|
|
Property and Equipment
|
|
|
304
|
|
Customer Relationships
|
|
|
675
|
|
Goodwill
|
|
|
921
|
|
|
|
|
|
|
Total Assets Acquired
|
|
$
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following unaudited proforma financial information presents the consolidated results of operations of the Company with Synetra Inc. for the nine months ended
September 30, 2018, as if the above discussed acquisition had occurred on January 1, 2018. The proforma information does not necessarily reflect the results of operations that would have
occurred had the entities been a single company during those periods.
|
|
|
|
|
|
|
Nine months
ended
September 30,
2018
|
|
Sales
|
|
$
|
107,484
|
|
Net Loss
|
|
|
(2,093
|
)
|
4. PROPERTY AND EQUIPMENT
Property and equipment were comprised of the following as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful Lives
(Years)
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Furniture and Equipment
|
|
3 to 7
|
|
$
|
24,758
|
|
$
|
23,942
|
|
Vehicles
|
|
4
|
|
|
22
|
|
|
89
|
|
Leasehold Improvements
|
|
5 to 15
|
|
|
2,309
|
|
|
2,298
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment
|
|
|
|
|
27,089
|
|
|
26,329
|
|
Less: Accumulated Depreciation
|
|
|
|
|
(16,866
|
)
|
|
(14,088
|
)
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, net
|
|
|
|
$
|
10,223
|
|
$
|
12,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense amounted to $2,835 and $3,052 for the nine months ended September 30, 2019 and 2018, respectively.
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STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
5. INTANGIBLE ASSETS AND GOODWILL
The Company's definite lived intangible assets as of September 30, 2019 and December 31, 2018 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Lives
(Years)
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Noncompete Agreements
|
|
5
|
|
$
|
6,380
|
|
$
|
6,380
|
|
Trademark
|
|
2 to 3
|
|
|
2,110
|
|
|
2,110
|
|
Customer Relationships
|
|
9 to 10
|
|
|
9,355
|
|
|
9,355
|
|
Less: Accumulated Amortization
|
|
|
|
|
(15,195
|
)
|
|
(14,454
|
)
|
|
|
|
|
|
|
|
|
|
|
Definite Lived Intangible Assets, Net of Amortization
|
|
|
|
$
|
2,650
|
|
$
|
3,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
expense for definite lived intangible assets was $741 and $679 for the nine months ended September 30, 2019 and 2018, respectively.
Expected
amortization expense for definite-lived intangibles for the next five years is as follows:
|
|
|
|
|
Amortization by year
|
|
Amount
|
|
September 2019 to December 2019
|
|
$
|
245
|
|
2020
|
|
|
984
|
|
2021
|
|
|
978
|
|
2022
|
|
|
91
|
|
2023
|
|
|
68
|
|
Thereafter
|
|
|
284
|
|
|
|
|
|
|
Total
|
|
$
|
2,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2019, the weighted average remaining useful life of the Company's definitely lived intangible assets is 2.7 years.
The
following is a summary of goodwill as of September 30, 2019 and for the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amount
|
|
Accumulated
Impairment
|
|
Net
Carrying
Amount
|
|
BalanceJanuary 1, 2019
|
|
$
|
21,215
|
|
$
|
|
|
$
|
21,215
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceSeptember 30, 2019
|
|
$
|
21,215
|
|
$
|
|
|
$
|
21,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-96
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
6. ACCRUED EXPENSES
The following is a summary of accrued expenses as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Accrued Bonuses
|
|
$
|
|
|
$
|
550
|
|
Accrued Wages and Commissions
|
|
|
432
|
|
|
1,816
|
|
Accrued Sales Tax
|
|
|
397
|
|
|
601
|
|
Accrued Interest
|
|
|
74
|
|
|
101
|
|
Other Accrued Expenses
|
|
|
359
|
|
|
377
|
|
|
|
|
|
|
|
|
|
Total Accrued Expenses
|
|
$
|
1,262
|
|
$
|
3,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. REVOLVING CREDIT AND LONG-TERM DEBT
The Original agreement with Comerica Bank (the Comerica credit agreement) provides for a maximum credit facility of $25,000, consisting of a $15,000 revolving note payable and a $10,000
term note. Both the revolving credit and term note mature December 18, 2022. The balance on the revolving note was $8,416 and $7,793 at September 30, 2019 and December 31, 2018,
respectively.
On
August 1, 2018, the Company entered into a First Amendment of the Comerica credit agreement (the First amendment agreement) with Comerica Bank. The First Amendment agreement
provided for an increase of the revolving credit note from $15,000 to $16,000. On June 27, 2019, the Company entered into a Second Amendment of the Comerica credit agreement (the Second
amendment agreement) with Comerica Bank. The Second Amendment agreement increased the revolving credit note from $16,000 to $20,000.
All
obligations outstanding under the credit agreement accrue interest at the one-month London Interbank Offered Rate (LIBOR) rate plus an additional margin. The additional margin is
based upon the Company's total leverage ratio, as defined in the credit agreement, and ranges from 3.0% to 3.75%. At September 30, 2019, the effective rates were 5.76% and 5.78% for the
revolving credit and term note, respectively.
The
credit agreement requires the Company to meet certain financial covenants including, but not limited to, a maximum senior leverage ratio, a maximum fixed charge coverage ratio, and a
limit on the
amount of annual capital expenditures (the "cover ratios"). As of September 30, 2019, the Company is in compliance with all its covenants.
During
2018, the Company entered into an interest rate swap arrangement to partially mitigate the variability of cash flows due to changes in the Eurodollar rate, specifically related to
interest payments on the term loan under the Comerica credit agreement. The interest rate swap has a notional amount of $4,464 and a maturity date of August 2, 2021. The fixed interest rate is
3.04% with a corresponding floating interest rate of 1-month LIBOR. The interest rate swap does not qualify for hedge accounting and the Company determined that the fair value of the related
derivative liability was not material and accordingly, did not record the liability at September 30, 2019 or December 31, 2018.
F-97
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
7. REVOLVING CREDIT AND LONG-TERM DEBT (Continued)
Total
long-term debt as of September 30, 2019 and December 31, 2018 consists of the following:
|
|
|
|
|
|
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Senior DebtTerm note payable to Comerica Bank; quarterly principal payments of $357 plus interest through maturity date December 18, 2022;
interest rate variable with effective rate of 5.78% and 6.10% at September 30, 2019 and December 31, 2018, respectively
|
|
$
|
7,500
|
|
$
|
8,571
|
|
Subordinated DebtTerm note payable to Synetra Inc.; quarterly principal payments of $199 plus interest through maturity date August 1,
2020; interest rate variable with effective rate of 8.5% at September 30, 2019
|
|
|
755
|
|
|
1,282
|
|
Subordinated DebtTerm note payable to John Sorensen and Paul Sorenson; quarterly principal payments of $130 plus interest through maturity date
August 1, 2020; interest rate variable with effective rate of 8.5% at September 30, 2019
|
|
|
495
|
|
|
840
|
|
|
|
|
|
|
|
|
|
Total Long-Term Debt
|
|
|
8,750
|
|
|
10,693
|
|
Less: Unamortized Debt Issuance Costs
|
|
|
(147
|
)
|
|
(182
|
)
|
|
|
|
|
|
|
|
|
Total Notes Payable, Net of Unamortized Debt Issuance Costs
|
|
|
8,603
|
|
|
10,511
|
|
Less: Current Maturities
|
|
|
(2,679
|
)
|
|
(2,602
|
)
|
|
|
|
|
|
|
|
|
Long-Term Debt, Net of Current Maturities and Unamortized Debt Issuance Costs
|
|
$
|
5,924
|
|
$
|
7,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Comerica credit agreement above is subject to a security agreement including substantially all assets of the Company, an equity pledge agreement, and a guarantee by the Company's
sole shareholder.
Scheduled
principal payments for all long-term borrowings are as follows:
|
|
|
|
|
Scheduled payments by year
|
|
Amount
|
|
September 2019 to December 2019
|
|
$
|
658
|
|
2020
|
|
|
2,376
|
|
2021
|
|
|
1,429
|
|
2022
|
|
|
1,429
|
|
2023
|
|
|
1,429
|
|
Thereafter
|
|
|
1,429
|
|
|
|
|
|
|
Total
|
|
$
|
8,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-98
Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
7. REVOLVING CREDIT AND LONG-TERM DEBT (Continued)
Additional Prepayment Requirements under Comerica Credit Agreement
In addition to the above scheduled principal payments, the Company is required to prepay principal on the term note in an amount equal to 50% of
the excess cash flow, as defined by the credit agreement, within 45 days after the end of each fiscal year. No prepayment shall be required for any year in which the combined value of all
eligible accounts and all eligible inventory as evidenced by the borrowing base certificate is greater than the aggregate amount of the senior funded debt and the senior leverage ratio is less than
2.0 as of December 31 of such year. No excess cash flow payment was due for the nine months ended September 30, 2019 and 2018.
8. RELATED PARTY TRANSACTIONS
The Company paid a management fee of $225 to a member of their sole shareholder's ownership group for each of the nine months ended September 30, 2019 and 2018.
The
Company leases office space under operating leases with ERD Enterprises, LLC ("ERD") and PEBL Partnership LTD ("PEBL"). Both entities are related parties
that are either partially or 100% owned by employees of the Company. For the nine months ended September 30, 2019 and 2018, the Company paid $522 and $360, respectively, to the related parties
included in rent expense.
9. COMMITMENTS AND CONTINGENCIES
Operating Lease Obligations
The Company is party to operating leases under which they lease various facilities and equipment. The majority of the facility leases provide
that the Company pays, in addition to the minimum rent, certain operating expenses. The leases expire at various dates through July 2022. With the purchase of Synetra, the Company acquired three
additional operating leases which are located in Lubbock, Amarillo, and Odessa. The Company also has several month-to-month leases. Operating lease expense, noncontracted rent, and related common area
maintenance for the nine months ended September 30, 2019 and 2018 totaled approximately $1,101 and $1,024, respectively.
Contingencies
Legal Contingencies and Proceedings
From time to time, the Company may be involved in various legal proceedings and claims in the ordinary course of business. As of
September 30, 2019, and through the filing date of this report, the Company does not believe the ultimate resolution of such actions or potential actions of which the Company is currently aware
will have a material effect on its consolidated financial position or results of operations.
10. RESTRUCTURING
During 2018, the Company initiated and completed certain business restructuring initiatives aimed at reducing its fixed cost structure and realigning its business. These initiatives
included the reduction in hourly and salaried headcount of approximately 11 employees during 2018.
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Table of Contents
STRATOS MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of US dollars, except share and per share data, or otherwise noted)
10. RESTRUCTURING (Continued)
For
the nine months ended September 30, 2019 and 2018, restructuring-related costs included in selling, general and administrative expenses in the consolidated statements of
operations are as follows:
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
September 30,
2019
|
|
September 30,
2018
|
|
Severance and related costs
|
|
$
|
|
|
$
|
979
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity
related to accrued severance and related costs recorded in accrued expenses in the consolidated balance sheets is summarized as follows for the nine months ended
September 30, 2019:
|
|
|
|
|
Beginning balance
|
|
$
|
208
|
|
Cash payments and other
|
|
|
(208
|
)
|
|
|
|
|
|
Ending balance
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. SUBSEQUENT EVENTS
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated financial statements were issued.
Except
as described below, the Company did not identify subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements other than
the following.
In
connection with the proposed Business Combination (Note 1), Pensare filed a preliminary proxy statement with the SEC relating to the Business Combination on October 8,
2019.
F-100
Table of Contents
ANNEXES
|
|
|
ANNEX A:
|
|
Business Combination Agreement
|
ANNEX B:
|
|
Pensare Holdings, Inc. 2020 Incentive Compensation Plan
|
ANNEX C:
|
|
Amended and Restated Certificate of Incorporation
|
ANNEX D:
|
|
Opinion of Cassel Salpeter & Co., LLC
|
ANNEX E:
|
|
Proxy Card
|
ANNEX A
EXECUTION VERSION
BUSINESS COMBINATION AGREEMENT
by and among
PENSARE ACQUISITION CORP.,
TANGO MERGER SUB CORP.,
STRATOS MANAGEMENT SYSTEMS
HOLDINGS, LLC
and
STRATOS MANAGEMENT SYSTEMS, INC.
Dated as of July 24, 2019
and
as Amended on December 20, 2019
Table of Contents
i
ii
iii
BUSINESS
COMBINATION AGREEMENT, dated as of July 24, 2019 (this "Agreement"), by and among Pensare Acquisition Corp., a Delaware
corporation ("Pensare"), Tango Merger Sub Corp., a Delaware corporation ("Merger Sub"), Stratos
Management Systems Holdings, LLC, a Delaware limited liability company ("Holdings"), and Stratos Management Systems, Inc., a Delaware
corporation (the "Company").
WHEREAS,
the Company is a wholly-owned direct subsidiary of Holdings and Merger Sub is a wholly-owned direct subsidiary of Pensare;
WHEREAS,
upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Pensare and the Company will enter into a business combination transaction pursuant to which the Company will merge with and into Merger Sub
(the "Merger"), with Merger Sub surviving the Merger as a wholly owned subsidiary of Pensare;
WHEREAS,
Pensare may enter into subscription agreements (the "Subscription Agreements") with certain investors pursuant to which such
investors, upon the terms and subject to the conditions set forth therein, shall purchase PIPE Securities (as defined herein) in a private placement or placements to be consummated immediately prior
to the consummation of the transactions contemplated hereby (collectively, the "Private Placement");
WHEREAS,
the Board of Directors of the Company (the "Company Board") has unanimously (a) determined that the Merger is fair to, and
in the best interests of, the Company and its sole stockholder and has approved and adopted this Agreement and declared its advisability and approved the Merger and the other transactions contemplated
by this Agreement, and (b) has recommended the approval and adoption of this Agreement and the Merger by the sole stockholder of the Company;
WHEREAS,
the Board of Directors of Holdings (the "Holdings Board") has unanimously approved and adopted this Agreement and the
transactions contemplated by this Agreement;
WHEREAS,
the Board of Directors of Pensare (the "Pensare Board") has (a) approved and adopted this Agreement and declared its
advisability and approved the payment of the Merger Consideration to Holdings pursuant to this Agreement and the other Transactions contemplated by this Agreement and (b) has recommended the
approval and adoption of this Agreement and the Transactions (the "Pensare Recommendation") by the stockholders of Pensare;
WHEREAS,
the Board of Directors of Merger Sub (the "Merger Sub Board") has (a) determined that the Merger is fair to, and in the
best interests of, Merger Sub and its sole stockholder and has approved and adopted this Agreement and declared its advisability and approved the Merger and the other transactions contemplated by this
Agreement, and (b) has recommended the approval and adoption of this Agreement and the Merger by the sole stockholder of Merger Sub; and
WHEREAS,
for United States federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, that the
Company, Merger Sub and Pensare are parties to such reorganization within the meaning of Section 368(b) of the Code and that this Agreement constitutes a plan of reorganization.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Pensare, Merger Sub, Holdings and
the Company hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Certain Definitions. For purposes of this Agreement:
"Acquisition Proposal" means any proposal or offer from any person or group of persons (other than Pensare, Merger Sub or their respective
affiliates) relating to, in a single transaction or a series of related transactions, any direct or indirect acquisition or purchase of a business that constitutes 25% or
more
of the assets of the Company and the Company Subsidiaries, taken as a whole, or 25% or more of the total voting power of the equity securities of the Company, whether by way of merger, asset
purchase, equity purchase or otherwise.
"affiliate" of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified person.
"Ancillary Agreements" means the Lock-Up Agreement, the Pensare Closing Cash Certificate, the Company Certificate, and all other
agreements, certificates and instruments executed and delivered by Pensare, Merger Sub, Holdings or the Company in connection with the Transactions and specifically contemplated by this Agreement.
"Business Data" means all business information and data, including Company Product Data and Personal Information (whether of employees,
contractors, consultants, customers, consumers, or other persons and whether in electronic or any other form or medium) that is accessed, collected, used, processed, stored, shared, distributed,
transferred, disclosed, destroyed, or disposed of by any of the Business Systems.
"Business Day" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not required or authorized to close in New York, NY.
"Business Systems" means all Software (including Products), computer hardware (whether general or special purpose), electronic data
processing, information, record keeping, communications, telecommunications, networks, interfaces, platforms, servers, peripherals, and computer systems, including any outsourced systems and
processes, that are owned or used in the conduct of the business of the Company or any Company Subsidiaries.
"Cash Closing Calculation Amount" means an amount equal to the product of (a) the amount of cash raised by Pensare in the Private
Placement less $5 million multiplied by (b) 0.67, provided that the Cash Closing
Calculation Amount shall not be greater than $20.0 million.
"Cash Percentage" means Cash Closing Calculation Amount divided by Consideration Amount.
"Closing Company Net Debt" means, on a consolidated basis and calculated as of the open of business on the Closing Date, without
duplication and without giving effect to the Transactions to be effected on the Closing Date, (a) the aggregate consolidated amount of indebtedness for borrowed money (including the current
portion of any such indebtedness), book overdrafts and capital lease obligations (including the current portion of any such obligations) of the Company and the Company Subsidiaries plus (b) the
aggregate consolidated amount of accrued but unpaid interest for borrowed money and prepayment penalties, minus the aggregate consolidated amount of cash and cash equivalents, including marketable
securities, short-term investments and demand deposits, on
hand or in accounts of the Company and the Company Subsidiaries (net of outstanding checks) (not including (i) prepaid deposits or other similar restricted cash and (ii) cash subject to
any forbearance agreements).
"Closing Net Working Capital" means, on a consolidated basis as of the open of business on the Closing Date, the amount equal to
(i) the sum of all accrued accounts receivable, trade receivables, inventories, rebate receivables and prepaid expenses of the Company and the Company Subsidiaries, minus (ii) the sum of all
accounts payable, unearned revenues and other accrued expenses (including sales tax, payroll tax and interest payables)
of the Company and Company Subsidiaries, in each case, determined in accordance with GAAP.
"Closing Net Working Capital Target" means negative four million three hundred thousand dollars (-$4,300,000).
2
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Comerica Credit Agreement" means that certain Credit Agreement dated as of December 18, 2017 entered into by the Company and
Comerica Bank, as amended or otherwise modified.
"Company Common Stock" means the Company's common stock, par value $0.001 per share.
"Company Credit Agreements" means the Comerica Credit Agreement, that certain Non-Negotiable Unsecured Subordinated Promissory Note,
issued August 1, 2018 to Synetra, Inc. by Computex, Inc., and that certain Non-Negotiable Unsecured Subordinated Promissory Note, issued August 1, 2018 to John Sorensen and
Paul Sorensen by Computex, Inc.
"Company IP" means, collectively, all Company-Owned IP and Company-Licensed IP.
"Company-Licensed IP" means all Intellectual Property rights owned by a third party and licensed to the Company or any Company Subsidiary
or to which the Company or any Company Subsidiary otherwise has a right to use.
"Company Material Adverse Effect" means any event, circumstance, change or effect that, individually or in the aggregate with all other
events, circumstances, changes and effects, is or is reasonably likely to be materially adverse to the business, financial condition or results of operations of the Company and the Company
Subsidiaries taken as a whole; provided, however, that none of the following shall be taken into account
in the determination of whether a Company Material Adverse Effect has occurred: (a) any change or proposed change in any Law or GAAP; (b) events or conditions generally affecting the
industries in which the Company and the Company Subsidiaries operate; (c) any downturn in general economic conditions, including changes in the credit, debt, securities, financial or capital
markets; (d) acts of war, sabotage, civil unrest or terrorism, or any escalation or worsening of any such acts of war, sabotage, civil unrest or terrorism, or changes in global, national,
regional, state or local political or social conditions; (e) any hurricane, tornado, flood, earthquake, natural disaster, or other acts of God; (f) any change resulting from the
announcement or pendency of the Transactions or attributable to the fact that Pensare or any of its affiliates are the prospective owners of the Company or to Pensare's future plans for the business
of the Company and the Company Subsidiaries, taken as a whole; (g) any actions taken or not taken pursuant to or in accordance with this Agreement or any Ancillary Agreement at the request of
Pensare; or (h) any failure by the Company (including the Company Subsidiaries), in and of itself, to meet any internal or published projections, forecasts or revenue or earnings predictions
for any period ending on or after the date of this Agreement (it being understood that any change, event or circumstance causing such failure may be taken into consideration in determining whether a
Company Material Adverse Effect has occurred), except in the cases of clauses (a) through (e), to the extent that the Company and the Company Subsidiaries, taken as a whole, are
disproportionately affected thereby as compared with other participants in the industries in which the Company and the Company Subsidiaries operate.
"Company-Owned IP" means all Intellectual Property owned or purported to be owned by the Company or any of the Company Subsidiaries.
"Company Product Data" means all data and information, whether in electronic or any other form or medium, that is accessed, collected,
used, processed, stored, shared, distributed, transferred, disclosed, destroyed, or disposed of by any of the Products.
"Company Transaction Expenses "means, to the extent unpaid immediately prior to the Effective Time, (i) all fees and expenses of
counsel, accountants and other advisors (other than investment bankers and brokers) of Holdings and/or the Company incurred in connection with the negotiation, execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the Transactions, the audit of the Company's financial statements and the preparation of portions of the Proxy Statement and (ii) any
compensatory amounts payable to any officer, director, employee or
3
independent
contractor of the Company and the Company Subsidiaries (e.g., sale bonus, change in control bonus, retention payments, severance and similar payments) as a result of the
consummation of the transactions contemplated by this Agreement and the employer portion of any payroll Taxes associated therewith.
"Confidential Information" means any information, knowledge or data concerning the businesses and affairs of the Company, the Company
Subsidiaries, or any Suppliers or customers of the Company or any Company Subsidiaries or Pensare or its subsidiaries (as applicable) that is not already generally available to the public, including
any Intellectual Property rights.
"Consideration Amount" means $60,000,000 minus the Estimated Closing Company Net Debt minus the amount by which the
Estimated Closing Net Working Capital is less than the Closing Net Working Capital Target plus the amount by which the Estimated Closing Net Working Capital is greater than the Closing Net Working
Capital Target. By way of example, if the
Estimated Closing Company Net Debt is $20,000,000, and the Estimated Closing Net Working Capital is negative two million dollars (-$2,000,000), then Estimated Closing Net Working Capital would be
greater than the Closing Net Working Capital Target, and the Consideration Amount would be $42,300,000.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
"Disabling Devices" means undisclosed Software viruses, time bombs, logic bombs, trojan horses, trap doors, back doors, or other computer
instructions, intentional devices or techniques that are designed
to threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, maliciously encumber, hack into, incapacitate, infiltrate or slow or shut down a computer system or any component of such
computer system, including any such device affecting system security or compromising or disclosing user data in an unauthorized manner.
"Environmental Laws" means any United States federal, state or local or non-United States laws relating to: (a) releases or
threatened releases of Hazardous Substances or materials containing Hazardous Substances; (b) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances
or materials containing Hazardous Substances; or (c) pollution or protection of the environment or natural resources.
"Founder" means each holder of Pensare Common Stock issued prior to the initial public offering of Pensare.
"Hazardous Substances" means: (a) those substances defined in or regulated under the following United States federal statutes and
their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act
and the Clean Air Act; (b) petroleum and petroleum products, including crude oil and any fractions thereof; (c) natural gas, synthetic gas, and any mixtures thereof;
(d) polychlorinated biphenyls, asbestos and radon; and (e) any substance, material or waste regulated by any Governmental Authority pursuant to any Environmental Law.
"Intellectual Property" means (a) patents, patent applications and patent disclosures, together with all reissues, continuations,
continuations-in-part, divisionals, revisions, extensions or reexaminations thereof; (b) trademarks and service marks, trade dress, logos, trade names, corporate names, brands, slogans, and
other source identifiers together with all translations, adaptations, derivations, combinations and other variants of the foregoing, and all applications, registrations, and renewals in connection
therewith, together with all of the goodwill associated with the foregoing; (c) copyrights,
4
and
other works of authorship (whether or not copyrightable), and moral rights, and registrations and applications for registration thereof; (d) trade secrets and know-how (including ideas,
formulas, compositions, inventions (whether or not patentable or reduced to practice)), customer and supplier lists, improvements, protocols, processes, methods and techniques, research and
development information, industry analyses, algorithms, architectures, layouts, drawings, specifications, designs, plans, methodologies, proposals, industrial models, technical data, financial and
accounting and all other data, databases, database rights, including rights to use any Personal Information, pricing and cost
information, business and marketing plans and proposals, and customer and supplier lists (including lists of prospects) and related information; (e) Internet domain names; (f) all other
intellectual property or proprietary rights of any kind or description; (g) copies and tangible embodiments of any of the foregoing, in whatever form or medium; and (h) all legal rights
arising from items (a) through (e), including the right to prosecute and perfect such interests and rights to sue, oppose, cancel, interfere, and enjoin based upon such interests.
"Inventories" means all inventories, merchandise, goods, raw materials, packaging, labels, supplies and other personal property that are
maintained, held or stored by or for the Company or any Company Subsidiary, and any prepaid deposits for any of the same.
"knowledge" or "to the knowledge" of a person shall mean in the case of Holdings and/or
the Company, the actual knowledge of the persons listed on Schedule A after reasonable investigation, and in the case of Pensare, the actual
knowledge of Dr. Robert Willis, Darrell J. Mays, John Foley and David Panton after reasonable investigation.
"Lien" means any lien, security interest, mortgage, pledge, adverse claim or other encumbrance of any kind that secures the payment or
performance of an obligation (other than those created under applicable securities laws, and not including any license of Intellectual Property).
"Lock-Up Agreement" means that certain Lock-Up Agreement substantially in the form attached hereto as Exhibit C.
"Merger Sub Organizational Documents" means the certificate of incorporation and by-laws of Merger Sub, as amended, modified or
supplemented from time to time.
"Open Source Software" means any Software that is licensed pursuant to: (a) any license that is a license now or in the future
approved by the open source initiative and listed at http://www.opensource.org/licenses, which licenses include all versions of the GNU General Public License (GPL), the GNU Lesser General Public
License (LGPL), the GNU Affero GPL, the MIT license, the Eclipse Public License, the Common Public License, the CDDL, the Mozilla Public License (MPL), the Artistic License, the Netscape Public
License, the Sun Community Source License (SCSL), and the Sun Industry Standards License (SISL); or (b) any license to Software that is considered "free" or "open source software" by the open
source foundation or the free software foundation.
"Payment Spreadsheet" means a spreadsheet that will be delivered by Holdings to Pensare at least three (3) Business Days prior to
the Closing, which shall set forth the aggregate amount of Company Transaction Expenses and the payments to be made by Pensare at Closing, on behalf of the Company, to the recipients of such Company
Transaction Expenses.
"PCAOB" means the Public Company Accounting Oversight Board and any division or subdivision thereof.
"Pensare Certificate of Incorporation" means the Pensare Certificate of Incorporation, as amended and restated on July 27, 2017 and
as subsequently amended.
"Pensare Common Stock" means Pensare's common stock, par value $0.001 per share.
5
"Pensare Material Adverse Effect" means any event, circumstance, change or effect that, individually or in the aggregate with all other
events, circumstances, changes and effects, (a) is or is reasonably likely to be materially adverse to the business, financial condition or results of operations of Pensare and its subsidiaries
taken as a whole; provided, however, that the following shall not be taken into account in the
determination of whether a Pensare Material Adverse Effect has occurred: any change or effect resulting from changes in general business, financial, political, capital market or economic conditions
(including any change resulting from any natural disaster, hostilities, war or military or terrorist attack), but only to the extent that such change does not have a disproportionately adverse effect
on Pensare or its subsidiaries, taken as a whole, as compared to other businesses in the same industry; or (b) would prevent, materially delay or materially impede the performance by Pensare or
Merger Sub of their respective obligations under this Agreement or the consummation of the Merger or any of the other Transactions.
"Pensare Organizational Documents" means the Pensare Certificate of Incorporation, by-laws, Trust Agreement and Stock Escrow Agreement of
Pensare, in each case as amended, modified or supplemented from time to time.
"Pensare Securities" means any shares of Pensare Common Stock or, if applicable, any other debt or equity securities of Pensare issued as
Merger Consideration to Holdings hereunder, including preferred or common equity securities, units, rights, debt securities, warrants, options, convertible securities or any other securities
convertible into, or exchangeable or exercisable for, debt or equity securities.
"Pensare Stockholder Redemptions" means the number of shares of Pensare Common Stock that the stockholders of Pensare elect to redeem at
the Pensare Stockholders' Meeting pursuant to the Redemption Rights.
"Pensare Units" means one share of Pensare Common Stock, one Pensare Right and one-half of one Pensare Warrant.
"Pensare Warrant Agreement" means that certain warrant agreement dated July 27, 2017 by and between Pensare and Continental Stock
Transfer & Trust Co.
"Pensare Warrants" means warrants to purchase shares of Pensare Common Stock as contemplated under the Pensare Warrant Agreement,
exercisable for one share of Pensare Common Stock at an exercise price of $11.50.
"Per Share Price" means the lower of (a) the average closing price of the Pensare Common Stock on the Nasdaq Capital Market during
the ten (10) consecutive trading day period ending on the third (3rd) Business Day prior to the Closing Date or (b) if Pensare shall issue or sell any shares of Pensare
Common Stock (or any other securities convertible into shares of Pensare Common Stock) prior to, or in connection with, the Closing (including pursuant to the Private Placement), the lowest price per
share of Pensare Common Stock (or such other security on an as converted basis to shares of Pensare Common Stock) sold or issued by Pensare.
"Permitted Liens" means: (a) such imperfections of title, easements, encumbrances, Liens or restrictions that do not materially
impair the current use of the Company's or any Company Subsidiary's assets that are subject thereto; (b) materialmen's, mechanics', carriers', workmen's, warehousemen's, repairmen's, landlord's
and other similar Liens arising in the ordinary course of business, or deposits to obtain the release of such Liens; (c) Liens for Taxes not yet due and payable, or being contested in good
faith; (d) purchase money Liens incurred in the ordinary course of business; (e) any Liens created as a result of any act taken by or through Pensare or any of its affiliates;
(f) zoning, entitlement, conservation restriction and other land use and environmental regulations promulgated by Governmental Authorities; (g) non-exclusive licenses, sublicenses or
other rights to Intellectual Property owned by or licensed to the Company or the Company Subsidiaries granted to any licensee in the ordinary course of business; (h) non-exclusive licenses in
the ordinary course of business and (i) any Lien arising pursuant to the Company Credit Agreements.
6
"person" means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.
"Personal Information" means (a) information related to an identified or identifiable individual (e.g., name, address
telephone number, email address, financial account number, government-issued identifier) or any other data used or intended to be used or which allows one to identify, contact, or precisely locate an
individual and (b) internet protocol address or other persistent identifier.
"PIPE Securities" means any equity securities of Pensare issued in connection with the Private Placement, including preferred or common
equity securities, units, rights, warrants, options, convertible securities or any other securities convertible into, or exchangeable or exercisable for equity securities.
"Privacy/Data Security Laws" means all laws governing the receipt, collection, use, storage, processing, sharing, security, disclosure, or
transfer of Personal Information or the security of Company's Business Systems or Business Data.
"Products" mean any products or services, computer software (in object code or source code format), data and databases, and related
documentation and materials and other products, including any of the foregoing currently in development, from which the Company or any Company Subsidiary has derived within the one (1) year
preceding the date hereof, is currently deriving or is scheduled to derive, revenue from the sale, license, maintenance or provision thereof.
"Prospectus" means the final prospectus of Pensare, dated as of July 27, 2017.
"Redemption Rights" means the redemption rights provided for in Section 9.2 of Article IX of the Pensare Certificate of
Incorporation.
"Related Parties" shall mean, with respect to a person, such person's former, current and future direct or indirect equityholders,
controlling persons, shareholders, optionholders, members, general or limited partners, affiliates, Representatives, and each of their respective successors and assigns.
"Software" means all computer software (in object code or source code format), data and databases, and related documentation and
materials.
"Stock Closing Calculation Amount" the Consideration Amount minus the Cash Closing Calculation Amount.
"Stock Escrow Agreement" means that certain Stock Escrow Agreement, dated July 27, 2017 by and among Pensare, Continental Stock
Transfer& Trust Company and the other parties thereto (as it may be amended, modified or supplemented from time to time).
"Stock Percentage" means Stock Closing Calculation Amount divided by Consideration Amount.
"subsidiary" or "subsidiaries" of Holdings, the Company, the Surviving Corporation,
Pensare or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries.
"Supplier" means any person that supplies Inventory or other materials or personal property, components, or other goods or services that
are utilized in or comprise the Products of the Company or any of the Company Subsidiaries.
"Telecommunications Contract" means that certain Master Resale Agreement, dated July 22, 2019, by and between Pensare and AT&T
Corp.
"Transaction Documents" means this Agreement, including all Schedules and Exhibits hereto, the Company Disclosure Schedule, the Ancillary
Agreements, and all other agreements, certificates and
7
instruments
executed and delivered by Pensare, Merger Sub, Holdings or the Company in connection with the Transaction and specifically contemplated by this Agreement.
"Treasury Regulations" means the United States Treasury regulations issued pursuant to the Code.
SECTION 1.02 Further Definitions. The following terms have the meaning
set forth in the Sections set forth below:
|
|
|
Defined Term
|
|
Location of
Definition
|
2019 Balance Sheet
|
|
§4.07(b)
|
Accountant
|
|
§3.03(c)(i)
|
Action
|
|
§4.09
|
Agreement
|
|
Preamble
|
Audited Financial Statements
|
|
§4.07(a)
|
Blue Sky Laws
|
|
§4.05(b)
|
Business Combination
|
|
§6.03(a)
|
Cash Consideration
|
|
§3.02(a)
|
Certificate of Merger
|
|
§2.02(a)
|
Claims
|
|
§7.03
|
Closing
|
|
§2.02(b)
|
Closing Date
|
|
§2.02(b)
|
Closing Statement
|
|
§3.03(a)
|
Company
|
|
Preamble
|
Company Acquisition Agreement
|
|
§8.04
|
Company Board
|
|
Recitals
|
Company Certificate
|
|
§3.02(e)
|
Company Disclosure Schedule
|
|
§4.01(b)
|
Company Permits
|
|
§4.06
|
Company Subsidiary
|
|
§4.01(a)
|
Confidentiality Agreement
|
|
§8.03(b)
|
Continuing Employees
|
|
§8.05(a)
|
Customers
|
|
§4.19
|
Data Security Requirements
|
|
§4.13(i)
|
DGCL
|
|
Recitals
|
D&O Indemnified Liabilities
|
|
§8.06(c)
|
D&O Indemnified Parties
|
|
§8.06(c)
|
D&O Tail
|
|
§8.06(b)
|
Dispute Notice
|
|
§3.03(c)(i)
|
Effective Time
|
|
§2.02(a)
|
Effectiveness Deadline
|
|
§8.12
|
Environmental Permits
|
|
§4.15
|
Equity Plan
|
|
§8.05(a)
|
ERISA
|
|
§4.10(a)
|
ERISA Affiliate
|
|
§4.10(c)
|
Estimated Closing Company Net Debt
|
|
§3.02(e)
|
Exchange Act
|
|
§4.25
|
Expenses
|
|
§10.03
|
Extension
|
|
§8.17
|
First Expiration Date
|
|
§8.17
|
GAAP
|
|
§ 4.07(a)
|
Guarantees
|
|
§ 8.19
|
Governmental Authority
|
|
§4.05(b)
|
H&B
|
|
§11.11
|
8
|
|
|
Defined Term
|
|
Location of
Definition
|
Health Plan
|
|
§4.10(k)
|
Holdings
|
|
Preamble
|
Holdings Board
|
|
Recitals
|
IRS
|
|
§4.10(b)
|
Law
|
|
§4.05(a)
|
Lease Documents
|
|
§4.12(b)
|
Management Team
|
|
§8.16
|
Material Contracts
|
|
§4.16(a)
|
Merger
|
|
Recitals
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Merger Consideration
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§3.02(a)
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Merger Sub
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Preamble
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Merger Sub Board
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Recitals
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Merger Sub Common Stock
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§6.03(c)
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PCAOB Audited Financials
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§8.14
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Pensare
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Preamble
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Pensare Board
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Recitals
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Pensare Closing Cash Certificate
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§3.02(d)
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Pensare Material Contracts
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§6.12(a)
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Pensare Preferred Stock
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§6.03(a)
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Pensare Proposals
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§8.01(a)
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Pensare Recommendation
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Recitals
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Pensare Rights
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§6.03(a)
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Pensare SEC Reports
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§6.07(a)
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Pensare Stockholders' Meeting
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§8.01(a)
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Plans
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§4.10(a)
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PPACA
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§4.10(k)
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Proxy Statement
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§8.01(a)
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Registrable Securities
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§8.12
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Registration Statement
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§8.12
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Remedies Exceptions
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§4.04
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Representatives
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§8.03(a)
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Resolution Period
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§3.04(c)(i)
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Review Period
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§3.04(c)(i)
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SEC
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§6.07(a)
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Securities Act
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§6.07(a)
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Stock Consideration
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§3.02(a)
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Stockholder Released Parties
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§8.18
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Subscription Agreement
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Recitals
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Suppliers
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§4.19
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Surviving Corporation
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§2.01
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Tax
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§4.14(p)
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Tax Return
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§4.14(p)
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Terminating Company Breach
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§10.01(e)
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Terminating Pensare Breach
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§10.01(f)
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Transactions
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§4.01(a)
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Trust Account
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§6.17
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Trust Agreement
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§6.17
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Trust Fund
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§6.17
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Trustee
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§6.17
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9
SECTION 1.03 Construction.
(a) Unless
the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number
also include the plural or singular number, respectively, (iii) the terms "hereof," "herein," "hereby," "hereto" and derivative or similar words refer to this entire Agreement, (iv) the
terms "Article," "Section," "Schedule" and "Exhibit" refer to the specified Article, Section, Schedule or Exhibit of or to this Agreement, (v) the word "including" means "including without
limitation," (vi) the word "or" shall be disjunctive but not exclusive, (vii) references to agreements and other documents shall be deemed to include all subsequent amendments and other
modifications thereto and (viii) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all
statutory and regulatory provisions consolidating, amending or replacing the statute or regulation.
(b) The
language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction shall be
applied against any party.
(c) Whenever
this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on
or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.
(d) All
accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.
ARTICLE II.
AGREEMENT AND PLAN OF MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in Article IX, and in accordance with the DGCL, at
the Effective Time, the Company shall be merged with and into Merger Sub. As a result of the Merger, the separate corporate existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
SECTION 2.02 Effective Time; Closing.
(a) As
promptly as practicable, but in no event later than five (5) Business Days, after the satisfaction or, if permissible, waiver of the conditions set forth in Article IX (other than those
conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the
Closing shall remain subject to the satisfaction or, if permissible, waiver of such conditions at the Closing), the parties hereto shall cause the Merger to be consummated by filing a certificate of
merger (a "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance
with, the relevant provisions of the DGCL and mutually agreed by the parties (the date and time of the filing of such Certificate of Merger (or such later time as may be agreed by each of the parties
hereto and specified in such Certificate of Merger) being the "Effective Time").
(b) Immediately
prior to such filing of a Certificate of Merger in accordance with Section 2.02(a), a closing (the
"Closing") shall be held at the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York 10166, or such other place as the parties
shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article IX. The date on
which the Closing shall occur is referred to herein as the "Closing Date."
10
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 2.04 Certificate of Incorporation; By-laws.
(a) At
the Effective Time, the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of
the Surviving Corporation until thereafter amended as provided by law and such certificate of incorporation; provided, that the parties shall cause
Merger Sub to change its name to such name as shall be agreed to by the parties.
(b) At
the Effective Time, the by-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, the certificate of incorporation of the Surviving Corporation and such by-laws, as applicable.
(c) At
the Closing, subject to receipt of approval by the stockholders of Pensare at the Pensare Stockholder's Meeting, Pensare shall amend and restate the Pensare
Certificate of Incorporation to be as set forth on Exhibit A.
SECTION 2.05 Directors and Officers.
(a) The
initial directors of the Surviving Corporation and the initial officers of the Surviving Corporation shall be the individuals set forth on Exhibit B hereto, each to hold office in accordance with
the certificate of incorporation and by-laws of the Surviving Corporation.
(b) Pensare
shall cause the Pensare Board and the officers of Pensare as of immediately following the Effective Time to be comprised of such individuals as shall be
determined by the Pensare Board and included in the Proxy Statement, each to hold office in accordance with the certificate of incorporation and by-laws of Pensare.
SECTION 2.06 Trust Disbursement. At the Effective Time, and upon the
terms and subject to the conditions of this Agreement and in accordance with Pensare Certificate of Incorporation and the
Trust Agreement, Pensare shall cause the Trustee to distribute the proceeds of the Trust Fund as contemplated herein in order to consummate the Transactions.
ARTICLE III.
CONVERSION OF SECURITIES; MERGER CONSIDERATION; POST CLOSING ADJUSTMENTS
SECTION 3.01 Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on the part of Pensare, Merger Sub, Holdings, the Company or the holders of any of the following securities:
(a) all
shares of Company Common Stock issued and outstanding immediately prior to the Effective Time shall be canceled and Holdings, as sole stockholder of the Company,
shall be entitled to receive
the Merger Consideration (as specified and calculated pursuant to Section 3.02 and adjusted pursuant to Section 3.03);
(b) all
shares of Company Common Stock held in the treasury of the Company shall be canceled without any conversion thereof and no payment or distribution shall be made with
respect thereto; and
11
(c) each
share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully
paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.
SECTION 3.02 Merger Consideration.
(a) At
the Closing, Pensare shall deliver or cause to be delivered to Holdings (i) such number of shares of Pensare Common Stock as shall be equal to the Stock
Closing Calculation Amount divided by the Per Share Price (the "Stock Consideration"), (ii) the Cash Closing Calculation Amount in cash (the
"Cash Consideration,") and (iii) such number of shares of PIPE Securities of the same type as the PIPE Securities issued to investors in the
Private Placement, other than Pensare Common Stock, as shall be equal to $5,000,000 divided by the applicable lowest price per unit paid by investors for the applicable PIPE Securities in the Private
Placement (with appropriate adjustments being made to the requirements under Section 3.02 to reflect such change) (the
"PIPE Consideration", and collectively with the Stock Consideration and Cash Consideration, the "Merger
Consideration").
(b) Furthermore,
on the Closing Date, Pensare shall, on behalf of the Company, pay in cash by wire transfer of immediately available funds, the Company Transaction Expenses
to the recipients identified on the Payment Spreadsheet (or, if amounts to be paid are compensatory in nature, then to the Company or any Company Subsidiary with further payment to the recipients
through the Company's payroll processing).
(c) To
the extent not already reflected in the Per Share Price or the applicable lowest price per unit paid by investors for the applicable PIPE Securities in the Private
Placement, the Stock Consideration and/or the PIPE Consideration, as applicable, shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend,
reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Pensare Common Stock or PIPE
Securities (or any other Pensare Securities) occurring on or after the date hereof and prior to the Effective Time.
(d) At
least two (2) Business Days prior to the Closing Date, Pensare shall deliver to the Company a certificate (the "Pensare Closing Cash
Certificate") reflecting: (A) (i) the amount of cash available in the Trust Account as of the Closing and (ii) the amount of cash necessary to pay income and
franchise taxes from any interest income earned in the Trust Account at the Closing, (iii) the amount of cash necessary to pay any costs and expenses owed by Pensare in accordance with Section 10.03 that are unpaid at the Closing; and (B) the aggregate amount of cash proceeds that will be required to satisfy the Pensare
Stockholder Redemptions.
(e) At
least two (2) Business Days prior to the Closing Date, Holdings shall deliver to Pensare a certificate (the "Company
Certificate") setting forth Holding's good faith estimate of the (i) Closing Company Net Debt (the "Estimated Closing Company Net
Debt") and (ii) Closing Net Working Capital ("Estimated Closing Net Working Capital").
SECTION 3.03 Post-Closing Adjustments. The Merger Consideration shall
be subject to adjustment after the Closing as specified in this Section 3.03:
(a) Closing Statement. As promptly as practicable, but in any event within ninety (90) days following the
Closing, Pensare shall prepare, or cause to be prepared, and deliver to Holdings a statement calculated in good faith (the "Closing Statement"), setting
forth a balance sheet of the Company (on a consolidated basis with the Company Subsidiaries) as of the close of business on the Closing Date and prepared in connection with the applicable defined
terms in this Agreement, and setting forth separately a calculation (including a summary of such calculation) of the Closing Net Working Capital and Closing Company Net Debt. The parties acknowledge
that Closing Net Working Capital and Closing Company Net Debt shall be calculated in accordance with the
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accounting
methodologies, principles and procedures applied historically by the Company in preparing its financial statements (in each case in accordance with GAAP) as set forth in Section 3.03(a) of the
Company Disclosure Schedule, which sets forth an illustrative calculation of Closing Net Working Capital and Closing
Company Net Debt at May 31, 2019.
(b) Cooperation. In connection with Holdings' review of the Closing Statement, Pensare shall, and shall cause
the Company to, (i) provide Holdings and its authorized Representatives with reasonable access to the relevant books and records, its and its accountants' work papers, schedules and other
unaudited financial statement reporting data as may be reasonably requested by Holdings; and (ii) otherwise cooperate in good faith with Holdings and its authorized Representatives, including
by providing on a timely basis all information necessary or useful in Holdings' review of the Closing Statement, including the calculations of Closing Net Working Capital and Closing Company Net Debt.
(c) Disputes.
(i) If
Holdings disagrees with Pensare's calculations or determinations set forth in the Closing Statement, Holdings shall promptly, but in no event later than forty-five
(45) days following its receipt of the Closing Statement (the "Review Period"), deliver to Pensare written notice describing in reasonable detail
its dispute by specifying those items or amounts as to which Holdings disagrees, together with Holdings' determination of such disputed items and amounts if determinable from the Closing Statement (a
"Dispute Notice"); provided, however, that the Review Period shall be tolled and extended by such days as it may take Pensare to provide any information
or access requested by Holdings pursuant to clause (b) above, except that the Review Period shall not be extended more than sixty (60) days following receipt of the Closing Statement.
Unless Holdings delivers a Dispute Notice to Pensare on or prior to the expiration of the Review Period, Holdings will be deemed to have accepted and agreed to the Closing Statement and such statement
(and the calculations contained therein) will be final, binding and conclusive. During the forty-five (45) days (the "Resolution Period") after
the delivery of the Dispute Notice, Pensare and Holdings shall reasonably cooperate in good faith to resolve any such dispute and finally determine the Closing Statement, the Closing Net Working
Capital, and Closing Company Net Debt. Any resolution by Pensare and Holdings during the Resolution Period as to any item identified in the Dispute Notice shall be set forth in writing and will be
final, binding and conclusive. If Pensare and Holdings are not able to resolve all disputed items identified in the Dispute Notice within the Resolution Period, then the items that remain in dispute
shall be submitted to a mutually agreed upon accounting firm of national or international reputation (such accounting firm being, the "Accountant").
(ii) If
any remaining issues in dispute are submitted to the Accountant for resolution, each of Pensare and Holdings will be afforded an opportunity to present to the
Accountant any material relating to the determination of the matters in dispute provided, however, a copy of all such material shall also be provided to the other party. The Accountant shall act as an
expert and not as an arbitrator to calculate, based solely on the written submissions of the Pensare, on the one hand, and Holdings, on the other, and not by independent investigation, the numbers in
dispute in the Closing Statement and shall be instructed that its calculations must be made in accordance with the standards and definitions in this Agreement, and with respect to each item in
dispute, must be within the range of values established for such amount as determined by reference to the value assigned to such amount by Holdings in the Dispute Notice and by Pensare in the Closing
Statement.
(iii) Pensare
and Holdings shall give the Accountant access to all documents, records, work papers and personnel of such party and its subsidiaries and affiliates as
reasonably necessary to perform its function. The Accountant shall deliver to Pensare and Holdings, as
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promptly
as practicable and in any event within thirty (30) days (subject to any extensions requested by the Accountant and approved by both Pensare and Holdings, which shall not be
unreasonably withheld, conditioned or delayed) after its, his or her appointment, a written statement setting forth its, his or her determination of the disputed items set forth in the Closing
Statement and Dispute Notice, each as determined in accordance with the terms of this Agreement. Such determination shall be final and binding upon Pensare and Holdings to the fullest extent permitted
by applicable Law and may be enforced in any court having jurisdiction. The fees, costs and expenses of the Accountant shall be allocated to and borne by Pensare and Holdings based on the inverse of
the percentage that the Accountant's determination (before such allocation) bears to the total amount of the total items in dispute as originally submitted to the Accountant. For example, should the
items in dispute total in amount to one thousand dollars ($1,000) and the Accountant awards six hundred dollars ($600) in favor of Holdings' position, 60% of the costs of its review would be borne by
the Pensare and 40% of the costs would be borne by Holdings.
(d) Final Adjustment. The final, binding and conclusive calculation of the Closing Net Working Capital and
Closing Company Net Debt, based either upon initial delivery of the Closing Statement pursuant to Section 3.03(a), agreement or deemed agreement
by Pensare and Holdings or the written determination delivered by the Accountant, in each case, in accordance with this Section 3.03, will be the
"Closing Net Working Capital" and "Closing Company Net Debt" for all purposes of this Agreement.
(i) On
or prior to the third (3rd) Business Day following the determination of the Closing Net Working Capital:
(A) If
the Closing Net Working Capital is greater than the Estimated Closing Net Working Capital, Pensare shall pay the difference (expressed as a positive number) between
the Closing Net Working Capital and the Estimated Closing Net Working Capital to Holdings in cash by wire transfer in immediately available funds to the account designated by Holdings. By way of
example, if the Closing Net Working Capital is negative two million dollars ($2,000,000) and the Estimated Closing Net Working Capital is negative five million dollars
($5,000,000), then the Closing Net Working Capital would be greater than the Estimated Closing Net Working Capital and therefore Pensare would pay the difference, which would be
$3,000,000.
(B) If
the Closing Net Working Capital is less than the Estimated Closing Net Working Capital, Holdings shall pay the difference (expressed as a positive number) between the
Closing Net Working Capital and the Estimated Closing Net Working Capital to Pensare as set forth in clause (iv) below. By way of example, if the Closing Net Working Capital is negative five
million dollars ($5,000,000) and the Estimated Closing Net Working Capital is negative two million dollars ($2,000,000), then the Closing Net Working Capital would be
less than the Estimated Closing Net Working Capital and therefore Holdings would pay the difference, which would be $3,000,000.
(ii) On
or prior to the third (3rd) Business Day following the determination of the Closing Company Net Debt:
(A) If
the Closing Company Net Debt exceeds the Estimated Closing Company Net Debt, Holdings shall pay the entire amount of such excess over the Estimated Closing Company
Net Debt to Pensare as set forth in clause (iv) below.
(B) If
the Estimated Closing Company Net Debt exceeds the Closing Company Net Debt, Pensare shall pay the entire amount of the difference between the Estimated
14
Closing
Company Net Debt and the Closing Company Net Debt to Holdings in cash by wire transfer of immediately available funds to an account designated by Holdings.
(iii) The
amounts payable pursuant to paragraphs (i) ands (ii) shall, if applicable, be netted against each other so as to require only one payment from one
party to the other. Notwithstanding anything to the contrary herein, if the total net payment due by either party hereunder would be less than $50,000, then no payment shall be due pursuant to this Section 3.03(d)
.
(iv) Holdings
shall pay back such owed amounts: (i) in cash, equal to the owed amount multiplied by the Cash Percentage, in immediately available funds (to an account
designated by Pensare) and (ii) in shares of Pensare Common Stock and/or PIPE Securities, equal to the owed amount multiplied by the Stock
Percentage, (by returning shares of Pensare Common Stock and/or PIPE Securities, issued to Holdings pursuant to Section 3.02(a) to Pensare). For
purposes of this Section 3.03(d)(iv): (i) each share of Pensare Common Stock shall have a value equal to the Per Share Price and
(ii) each share or unit of PIPE Securities shall have a value equal to applicable lowest price per unit paid by investors for the applicable PIPE Securities in the Private Placement.
(v) Any
payment by Pensare or Holdings pursuant to this Section 3.03(d) shall be treated for Tax purposes as an
adjustment to the Merger Consideration to the extent permitted by applicable Law.
SECTION 3.04 Optional Redemption of PIPE Securities. In the event that
PIPE Securities were issued as Stock Consideration pursuant to Section 3.02(a), if
Pensare consummates any private placement or placements for any equity securities of Pensare, including preferred or common equity securities, units, rights, warrants, options, convertible securities
or any other securities convertible into, or exchangeable or exercisable for equity securities, within 120 days after the Closing, then Holdings or any holder thereof shall have the right to
elect to have an aggregate number of PIPE Securities, other than Pensare Common Stock, redeemed by Pensare ("Redeemable Securities") equal to:
(i) half the amount of gross cash proceeds raised by Pensare in such private placement or placements, divided by (ii) the applicable
lowest price per unit paid by investors for the applicable PIPE Securities in the Private Placement, provided that the amount of Redeemable Securities
shall not be greater than the amount of PIPE Securities. Redeemable Securities shall be redeemed by Pensare for a price per Redeemable Security equal to the applicable lowest price per unit paid by
investors for the applicable PIPE Securities in the Private Placement (with appropriate adjustments being made to the requirements under Section 3.02 to reflect such change) (the "Redemption Amount"). Any such redemption under this Section 3.03 shall occur within ten (10) days after Pensare receives a notice from Holdings or any holder
thereof electing to have the
Redeemable Securities redeemed ("Redemption Notice"). If any Redeemable Securities are not redeemed by Pensare within ten (10) days after the
Redemption Notice by paying Holdings or any holder thereof the Redemption Amount, until such Redemption Securities are fully redeemed and the aggregate Redemption Amount is paid in full (a) all
of the unredeemed Redeemable Securities shall remain outstanding and continue to have the rights, preferences, and privileges entitled to such Redeemable Securities, and (b) Holdings or any
holder thereof of unredeemed Redemption Securities shall have the remedies entitled under any other contract or agreement and any other rights such holder may have pursuant to applicable law.
15
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company and Holdings, jointly and severally, hereby represent and warrant to Pensare
and Merger Sub as follows:
SECTION 4.01 Organization and Qualification; Subsidiaries.
(a) Each
of the Company and each subsidiary of the Company (each a "Company Subsidiary"), is a corporation or other
organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate or other organizational power
and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such
governmental approvals would not, individually or in the aggregate, prevent or materially delay consummation of the Merger or any of the transactions contemplated by this Agreement or the Transaction
Documents (collectively, the "Transactions") or otherwise prevent or materially delay the Company from performing its obligations under this Agreement.
The Company and each Company Subsidiary is duly qualified or licensed as a foreign corporation or other organization to do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good
standing that would not have a Company Material Adverse Effect.
(b) A
true and complete list of all the Company Subsidiaries, together with the jurisdiction of incorporation of each Company Subsidiary and the percentage of the
outstanding capital stock of each Company Subsidiary owned by the Company and each other Company Subsidiary, is set forth in Section 4.01(b) of
the Company Disclosure Schedule (the "Company Disclosure Schedule"), which has been prepared by the Company and delivered by the Company to Pensare and
Merger Sub prior to the execution and delivery of this Agreement. Except as disclosed in Section 4.01(b) of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or business association or other entity.
SECTION 4.02 Certificate of Incorporation and By-laws. The Company
has prior to the date of this Agreement made available a complete and correct copy of the certificate of incorporation and the by-laws or equivalent
organizational documents, each as amended to date, of the Company and each Company Subsidiary. Such certificates of incorporation, by-laws or equivalent organizational documents are in full force and
effect. Neither the Company nor any Company Subsidiary is in violation of any of the provisions of its certificate of incorporation, by-laws or equivalent organizational documents.
SECTION 4.03 Capitalization.
(a) The
authorized capital stock of the Company consists of 1,000 shares of Company Common Stock. As of the date of this Agreement 1,000 shares of Company Common Stock are
issued and outstanding, all of which are validly issued, fully paid and nonassessable and owned by Holdings (free and clear of all Liens, options or rights of first refusal on Holdings' voting
securities other than transfer restrictions under applicable securities laws and its organizational documents) and no shares of Company Common Stock are held in the treasury of the Company. Other than
the amended and restated limited liability company agreement of Holdings (as amended), there are no options, warrants, preemptive rights, calls, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Company Subsidiary or obligating the Company or any Company Subsidiary
16
to
issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is a party to, or otherwise bound
by, and neither the Company nor any Company Subsidiary has granted, any equity appreciation rights, participations, phantom equity or similar rights. Other than the amended and restated limited
liability company agreement of Holdings (as amended), there are no voting trusts, voting agreements, proxies, shareholder agreements or other agreements with respect to the voting or transfer of the
Company Common Stock or any of the equity interests or other securities of the Company or any of the Company Subsidiaries. The Company does not own any equity interests in any person, other than the
Company Subsidiaries.
(b) There
are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock
or any capital stock of any Company Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any person other than a Company Subsidiary.
(c) All
outstanding shares of Company Common Stock and all outstanding shares of capital stock or other equity securities (as applicable) of each Company Subsidiary have
been issued and granted in compliance with (A) applicable securities laws and other applicable laws and (B) any pre-emptive rights and other similar requirements set forth in applicable
contracts to which the Company or any Company Subsidiary is a party.
(d) Each
outstanding share of capital stock or other equity security (as applicable) of each Company Subsidiary is duly authorized, validly issued, fully paid and
nonassessable, and each such share or equity security is owned by the Company or another Company Subsidiary free and clear of all Liens, options, rights of first refusal and limitations on the
Company's or any Company Subsidiary's voting rights, other than transfer restrictions under applicable securities laws, their respective organizational documents and the amended and restated limited
liability company agreement of Holdings (as amended).
SECTION 4.04 Authority Relative to this Agreement. The Company has
all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions.
The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval of Holdings as
the Company's sole stockholder (as contemplated by Section 8.02(c)) and the filing and recordation of appropriate merger documents as required by
the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Pensare and Merger Sub, constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights generally, by general equitable principles (the "Remedies Exceptions"). The
Company Board has approved this Agreement and the Transactions and such approvals are sufficient so that the restrictions on business combinations set forth in Section 262 of the DGCL shall not
apply to the Merger or any of the other Transactions. To the knowledge of the Company, no other state takeover statute is applicable to the Merger or the other transactions contemplated by this
Agreement.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) Except
as set forth in Section 4.05(a) of the Company Disclosure Schedule, the execution and delivery of this
Agreement by the Company does not, and subject to receipt of the filing and recordation of appropriate merger documents as required by the DCGL and of the consents,
17
approvals,
authorizations or permits, filings and notifications contemplated by Section 4.05(b), the performance of this Agreement by the Company
will not (i) conflict with or violate the certificate of incorporation or by-laws or any equivalent organizational documents of the Company or any Company Subsidiary, (ii) conflict with
or violate any United States or non-United States statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order
("Law") applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or
affected, or (iii) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than any Permitted Lien) on any material property or asset of the Company or any Company Subsidiary
pursuant to, any Material Contract, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not have or
reasonably be expected to have a Company Material Adverse Effect.
(b) The
execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any United States federal, state, county or local or non-United States government, governmental, regulatory or administrative authority,
agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a "Governmental Authority"), except (i) for
applicable requirements, if any, of the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, and filing and
recordation of appropriate merger documents as required by the DGCL, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not have or would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.06 Permits; Compliance. Each of the Company and the Company
Subsidiaries is in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each of the Company or the Company Subsidiaries to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company Permits"), except where the failure to have such Company Permits would not reasonably
be expected to have a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened in writing. Neither the
Company nor any Company Subsidiary is in conflict with, or in default, breach or violation of, (a) any Law applicable to the Company or any Company Subsidiary or by which any property or asset
of the Company or any Company Subsidiary is bound or affected, or (b) any Material Contract or Company Permit, except, in each case, for any such conflicts, defaults, breaches or violations
that would not have or would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.07 Financial Statements.
(a) The
Company has made available to Pensare true and complete copies of the audited consolidated balance sheet of the Company and the Company Subsidiaries as of
December 31, 2016, December 31, 2017, and December 31, 2018, and the related audited consolidated statements of income and cash flows of the Company and the Company Subsidiaries
for each of the years then ended (collectively, the "Audited Financial Statements"), which are attached as Section 4.07(a) of the Company Disclosure
Schedule, and which contain an unqualified report of the Company's auditors. Each of the Audited
Financial Statements (including the notes thereto) (i) was prepared in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (ii) fairly
presents, in all material respects, the financial position, results of operations and cash flows of the Company and the Company Subsidiaries as at the date thereof and for the period indicated
therein, except as otherwise noted therein.
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(b) The
Company has made available to Pensare a true and complete copy of the consolidated unaudited balance sheet of the Company and the Company Subsidiaries as of
March 31, 2019 (the "2019 Balance Sheet"), and the related unaudited consolidated statements of income and cash flows of the Company and the
Company Subsidiaries for the three-month period then ended, which are attached as Section 4.07(b) of the Company Disclosure Schedule. Such
unaudited financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except for the omission of footnotes and subject to year-end
adjustments) and fairly present, in all material respects, the financial position, results of operations and cash flows of the Company and the Company Subsidiaries as at the date thereof and for the
period indicated therein, except as otherwise noted therein and subject to normal and recurring year-end adjustments and the absence of notes.
(c) Except
as and to the extent set forth on the Audited Financial Statements, the 2019 Balance Sheet or Section 4.07(c) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has
any liability or obligation of a nature
(whether accrued, absolute, contingent or otherwise) required to be reflected on a balance sheet prepared in accordance with GAAP, except for: (i) liabilities that were incurred in the ordinary
course of business since the date of such 2019 Balance Sheet, (ii) obligations for future performance under any contract to which the Company or any Company Subsidiary is a party or
(iii) liabilities and obligations which are not, individually or in the aggregate, material to the Company and the Company Subsidiaries taken as a whole.
(d) Section 4.07(d) of the Company Disclosure Schedule contains a description of all non-audit services performed by
the Company's auditors for the Company and the Company Subsidiaries since January 1, 2015 through the date of the Agreement and the fees paid for such services; further, all such non-audit
services were approved by the audit committee of the Company Board. The Company has no off-balance sheet arrangements.
(e) Except
as set forth on Section 4.07(e) of the Company Disclosure Schedule, since January 1, 2015
(i) neither the Company nor any Company Subsidiary nor, to the Company's knowledge, any director, officer, employee, auditor, accountant or Representative of the Company or any Company
Subsidiary, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or, to the knowledge of the Company, oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any such complaint, allegation, assertion
or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices and (ii) there have been no internal investigations regarding accounting or
revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Company Board or any committee thereof.
(f) To
the knowledge of the Company, no employee of the Company or any Company Subsidiary has provided or is providing information to any law enforcement agency regarding
the commission or possible commission of any crime or the violation or possible violation of any applicable Law. None of the Company, any Company Subsidiary or, to the knowledge of the Company any
officer, employee, contractor, subcontractor or agent of the Company or any such Company Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated
against an employee of the Company or any Company Subsidiary in the terms and conditions of employment because of any act of such employee described in
18 U.S.C. § 1514A(a).
(g) All
accounts receivable of the Company and its Company Subsidiaries reflected on the 2019 Balance Sheet or arising thereafter have arisen from bona fide transactions in
the ordinary
19
course
of business consistent with past practices and in accordance with GAAP and are collectible, subject to bad debts reserved in the Financial Statements. To the knowledge of the Company, such
accounts receivables are not subject to valid defenses, setoffs or counterclaims, other than routine credits granted for errors in ordering, shipping, pricing, discounts, rebates, returns in the
ordinary course of business and other similar matters. The Company's reserve for contractual allowances and doubtful accounts is adequate in all material respects and has been calculated in a manner
consistent with past practices. Since the date of the 2019 Balance Sheet, neither the Company nor any of its Company Subsidiaries has modified or changed in any material respect its sales practices or
methods including, without limitation, such practices or methods in accordance with which the Company or any of its Company Subsidiaries sell goods, fill orders or record sales.
(h) All
accounts payable of the Company and its Company Subsidiaries reflected on the 2019 Balance Sheet or arising thereafter are the result of bona fide transactions in
the ordinary course of business and have been paid or are not yet due or payable. Since the date of the 2019 Balance Sheet, the Company and its Company Subsidiaries have not altered in any material
respects their practices for the payment of such accounts payable, including the timing of such payment.
SECTION 4.08 Absence of Certain Changes or Events. Since the 2019
Balance Sheet and prior to the date of this Agreement, except as set forth in Section 4.08
of the Company Disclosure Schedule or otherwise reflected in the Audited Financial Statements, or as expressly contemplated by this Agreement, (a) the Company and the Company Subsidiaries have
conducted their respective businesses in the ordinary course and in a manner consistent with past practice, (b) the Company and the Company Subsidiaries have not sold, assigned or otherwise
transferred any right, title, or interest in or to any of their material assets (including Intellectual Property and Business Systems) other than non-exclusive licenses or assignments or transfers in
the ordinary course of business, (c) there has not been any Company Material Adverse Effect, and (d) none of the Company or any Company Subsidiary has taken any action that, if taken
after the date of this Agreement, would constitute a material breach of any of the covenants set forth in Section 7.01.
SECTION 4.09 Absence of Litigation. Except as set forth in
Section 4.09 of the Company Disclosure Schedule, there is no material litigation,
suit, claim, action, proceeding or investigation (an "Action") pending or, to the knowledge of the Company, threatened against the Company or any
Company Subsidiary, or any property or asset of the Company or any Company Subsidiary, before any Governmental Authority. Neither the Company nor any Company Subsidiary nor any material property or
asset of the Company or any Company Subsidiary is, subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority.
SECTION 4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Company Disclosure Schedule lists, as of the date of this Agreement, all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance, change in control or other material employee benefit plans,
programs or arrangements, and all employment and consulting contracts or agreements to which the Company or any Company Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company for the benefit of any current or former employee, officer, director and/or consultant of the Company
or any Company Subsidiary, or under which the Company
or any Company Subsidiary has or could incur any liability (contingent or otherwise) (collectively, the "Plans").
20
(b) With
respect to each Plan, the Company has made available to Pensare, if applicable (i) a true and complete copy of the plan document and all amendments thereto
and each trust or other funding arrangement, (ii) copies of the most recent summary plan descriptions and summary of material modifications, (iii) copies of the three (3) most
recently filed Internal Revenue Service ("IRS") Form 5500 annual report and accompanying schedules, (iv) copies of the most recently
received IRS determination letter for each such Plan, (v) copies of the non-discrimination testing results for the three (3) most recent Plan years and (vi) any material
non-routine correspondence from any Governmental Authority with respect to any Plan within the past three (3) years. Neither the Company nor any Company Subsidiary has any express commitment to
modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Code.
(c) None
of the Plans is or was within the past six (6) years, nor does the Company nor any ERISA Affiliate have or reasonably expect to have any liability or
obligation under (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA), (ii) a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) subject to Section 412 of the Code and/or Title IV of ERISA, (iii) a multiple employer plan subject to Section 413(c) of the Code, or
(iv) a multiple employer welfare arrangement under ERISA. For purposes of this Agreement, "ERISA Affiliate" shall mean any entity that together
with the Company would be deemed a "single employer" for purposes of Section 4001(b)(1) of ERISA and/or Sections 414(b), (c) and/or (m) of the Code.
(d) Except
as set forth in Section 4.10(d) of the Company Disclosure Schedule, the Company is not and will not be
obligated, whether under any Plan or otherwise, to pay separation, severance, termination or similar benefits to any person directly as a result of any Transaction contemplated by this Agreement, nor
will any such transaction accelerate the time of payment or vesting, or increase the amount, of any benefit or other compensation due to any individual. The Transactions contemplated by this Agreement
shall not be the direct or indirect cause of any amount paid or payable by the Company or any Company Subsidiary being classified as an "excess parachute payment" under Section 280G of the
Code.
(e) None
of the Plans provides, nor does the Company nor any Company Subsidiary have or reasonably expect to have any obligation to provide, retiree medical, disability or
life insurance benefits to any current or former employee, officer, director or consultant of the Company or any Company Subsidiary after termination of employment or service except as may be required
under Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA and the regulations thereunder. Each of the Plans is subject only to the laws of the United States or a political
subdivision thereof.
(f) Each
Plan is and has been within the past six (6) years in compliance, in all material respects in accordance with its terms and the requirements of all
applicable Laws including, without limitation, ERISA and the Code. The Company and the ERISA Affiliates have performed, in all material respects, all obligations required to be performed by them
under, are not in any respect in default under or in violation of, and have no knowledge of any default or violation by any party to, any Plan. No Action is pending or, to the knowledge of the
Company, threatened with respect to any Plan (other than claims for benefits in the ordinary course) and, to the knowledge of the Company, no fact or event exists that could reasonably be expected to
give rise to any such Action.
(g) Each
Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has (i) timely received a favorable
determination letter from the IRS covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established
in connection with such Plan is exempt from federal income taxation under Section 501(a) of the Code or (ii) is entitled to rely on
21
a
favorable opinion letter from the IRS, and to the knowledge of Company, no fact or event has occurred since the date of such determination or opinion letter or letters from the IRS to adversely
affect the qualified status of any such Plan or the exempt status of any such trust.
(h) There
has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) nor any reportable events (within
the meaning of Section 4043 of ERISA) with respect to any Plan that could reasonably be expected to result in material liability to the Company or any of the Company Subsidiaries. There have
been no acts or omissions by the Company or any ERISA Affiliate that have given or could reasonably be expected to give rise to any material fines, penalties, taxes or related charges under
Sections 502 or 4071 of ERISA or Section 511 or Chapter 43 of the Code for which the Company or any ERISA Affiliate may be liable.
(i) All
contributions, premiums or payments required to be made with respect to any Plan have been timely made to the extent due or properly accrued on the consolidated
financial statements of the Company and the Company Subsidiaries, except as would not result in material liability to the Company and the Company Subsidiaries. All such contributions have been fully
deductible for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and, to the knowledge of the Company, no fact or event exists which could
reasonably be expected to give rise to any such challenge or disallowance.
(j) The
Company and each ERISA Affiliate have each complied with the notice and continuation coverage requirements, and all other requirements, of Section 4980B of
the Code and Parts 6 and 7 of Title I of ERISA, and the regulations thereunder, with respect to each Plan that is, or was during any taxable year for which the statute of limitations on the
assessment of federal income taxes remains open, by consent or otherwise, a group health plan within the meaning of Section 5000(b)(1) of the Code.
(k) The
Company and each Plan that is a "group health plan" as defined in Section 733(a)(1) of ERISA (each, a "Health
Plan") is and has been in compliance, in all material respects, with the Patient Protection and Affordable Care Act of 2010
("PPACA"), and no event has occurred, and no condition or circumstance exists, that could reasonably be expected to subject the Company, any ERISA
Affiliate or any Health Plan to any material liability for penalties or excise taxes under Code Section 4980D or 4980H or any other provision of the PPACA.
(l) Each
Plan that constitutes a nonqualified deferred compensation plan subject to Section 409A of the Code has been administered and operated, in all material
respects, in compliance with the provisions of Section 409A of the Code and the Treasury Regulations thereunder, and no additional Tax under Section 409A(a)(1)(B) of the Code has been or
could reasonably be expected to be incurred by a participant in any such Plan.
SECTION 4.11 Labor and Employment Matters.
(a) Except
as set forth in Section 4.11(a) of the Company Disclosure Schedule: (i) there are no Actions pending
or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary by any of their respective employees, which Actions would have a Company Material Adverse Effect;
(ii) neither the Company nor any Company Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any Company
Subsidiary, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (iii) neither the Company nor any Company Subsidiary
has materially breached or otherwise failed to comply with any provision of any such agreement or contract, and there are no grievances outstanding against the Company or any Company Subsidiary under
any such agreement or contract; (iv) there are no unfair labor practice complaints pending against the Company or any Company Subsidiary before
22
the
National Labor Relations Board or any current union representation questions involving employees of the Company or any Company Subsidiary; and (v) there is no strike, slowdown, work
stoppage or lockout, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Company Subsidiary. Except as set forth in the contracts for
employment and consulting services set forth in Section 4.10(a), all employees of the Company and the Company Subsidiaries are employed on an
at-will basis.
(b) Except
as would not have a Company Material Adverse Effect, the Company and the Company Subsidiaries are in compliance in all respects with all applicable Laws relating
to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority
and since December 31, 2017 have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be
withheld from employees of the Company or any Company Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing. The
Company and the Company Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due
to or on behalf of Company or Company Subsidiary employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted in writing since December 31,
2017, or is now pending or, to the knowledge of the Company, threatened in writing before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any
Company Subsidiary. Neither the Company nor any Company Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or
employment practices. There is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted in writing since December 31, 2017, or
is now pending, or, to the knowledge of the Company. threatened in writing with respect to the Company. Except as set forth in Section 4.11(b) of
the Company Disclosure Schedule, there is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally
protected category, which has been asserted since December 31, 2017 or is now pending or, to the knowledge of the Company, threatened in writing before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Company Subsidiary has employed or employ any person.
(c) All
current officers, management employees, and technical and professional employees of the Company and the Company Subsidiaries are under written obligation to the
Company and the Company Subsidiaries to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment and to assign to the Company and the
Company Subsidiaries all inventions made by them within the scope of their employment during such employment.
SECTION 4.12 Real Property; Title to Assets.
(a) Section 4.12(a) of the Company Disclosure Schedule lists the street address of each parcel of real property owned
by the Company or any Company Subsidiary. The Company or one of the Company Subsidiaries has good and valid title in fee simple to each parcel of owned real property free and clear of all Liens other
than Permitted Liens.
(b) Section 4.12(b) of the Company Disclosure Schedule lists each parcel of real property currently leased or
subleased by the Company or any Company Subsidiary, with the name of the lessor and the date of the lease or sublease in connection therewith and each material amendment to any of the foregoing
(collectively, the "Lease Documents"). True, correct and complete copies of
23
all
Lease Documents have been made available to Pensare. All such current leases and subleases are in full force and effect, are valid and enforceable in accordance with their respective terms,
subject to the Remedies Exceptions, and there is not, under any of such leases or subleases, any existing material default or event of default (or event which, with notice or lapse of time, or both,
would constitute a default) by the Company or any Company Subsidiary or, to the Company's knowledge, by the other party to such lease or sublease, except as would not, individually or in the
aggregate, be material to the Company and the Company Subsidiaries, taken as a whole.
(c) There
are no contractual or legal restrictions that preclude or restrict the ability of the Company or Company Subsidiary to use any real property owned or leased by
such party for the purposes for which it is currently being used, except as would not, individually or in the aggregate, be material to the Company and the Company Subsidiaries, taken as a whole.
There are no latent defects or adverse physical conditions affecting the real property, and improvements thereon, owned or leased by the Company or any Company Subsidiary other than those that would
not have a Company Material Adverse Effect.
(d) Each
of the Company and the Company Subsidiaries has legal and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests
in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of
all Liens other than Permitted Liens, except as would not, individually or in the aggregate, be material to the Company and the Company Subsidiaries, taken as a whole.
SECTION 4.13 Intellectual Property.
(a) Section 4.13(a) of the Company Disclosure Schedule contains a true, correct and complete list of all of the
following that are owned or purported to be owned, used or held for use by the Company and/or the Company Subsidiaries: (i) registered Intellectual Property rights and applications for
registrations of other Intellectual Property rights (showing in each, as applicable, the filing date, date of issuance, expiration date and registration or application number, and registrar),
(ii) all contracts or agreements to use any Company-Licensed IP, including for the Software or Business Systems of any other person, that are material to the business of the Company and/or the
Company Subsidiaries as currently conducted (other than unmodified, commercially available, "off-the-shelf" Software with a replacement cost and/or aggregate annual license and maintenance fees of
less than $50,000); and (iii) any unregistered Software or Business Systems owned or purported to be owned by, and material to the business of, the Company or any Company Subsidiary as
currently conducted that would have a replacement cost of more than $50,000.
(b) The
Company or one of the Company Subsidiaries solely and exclusively owns and possesses, free and clear of all Liens (other than Permitted Liens), all right, title and
interest in and to, or has the right to use pursuant to a valid and enforceable written license, all Intellectual Property that is necessary for the operation of the business of the Company and the
Company Subsidiaries as currently conducted by the Company and/or the Company Subsidiaries or otherwise used in such business. All Company owned IP is subsisting and enforceable and, to the knowledge
of the Company, valid. No loss or expiration of any of the Company-Owned IP, or, to the Company's knowledge, any of the Company-Licensed IP, is threatened, pending or, other than upon the expiration
or termination of its statutory or contractual term in the ordinary course, reasonably foreseeable.
(c) The
Company and each of its applicable Company Subsidiaries have taken and take reasonable actions to maintain, protect and enforce Intellectual Property rights,
including the secrecy, confidentiality and value of its trade secrets and other Confidential Information. Neither the Company nor any Company Subsidiaries have disclosed any trade secrets or other
Confidential Information to any other person other than pursuant to a written confidentiality agreement under
24
which
such other person agrees to maintain the confidentiality and protect such Confidential Information.
(d) Except
as set forth in Section 4.13(d) of the Company Disclosure Schedule: (i) there have been no claims
properly filed and served, or threatened in writing (including email) to be filed, against the Company or any Company Subsidiary in any forum, by any person (A) contesting the validity, use,
ownership, enforceability, patentability or registrability of any of the Company IP, or (B) alleging any infringement or misappropriation of, or other conflict with, any Intellectual Property
rights of other persons (including any material demands or offers to license any Intellectual Property rights from any other person); (ii) the operation of its business of the Company and the
Company Subsidiaries (including the Company Products) has not and does not infringe, misappropriate or violate, any Intellectual Property rights of other persons; (iii) to the Company's
knowledge, no other person has infringed, misappropriated or violated any of the Company-Owned IP; and (iv) neither the Company nor any of the Company Subsidiaries has received any formal
written opinions of counsel regarding any of the foregoing.
(e) All
persons who have contributed, developed or conceived any Company IP have executed valid, written agreements with the Company or one of the Company Subsidiaries,
substantially in the form made available to Merger Sub or Pensare, and pursuant to which such persons agreed to assign to the Company or the applicable Company Subsidiary all of their entire right,
title, and interest in and to any Intellectual Property created, conceived or otherwise developed by such person in the course of and related to his, her or its relationship with the Company or the
applicable Company Subsidiary, without further consideration or any restrictions or obligations whatsoever, including on the use or other disposition or ownership of such Intellectual Property, except
as required by applicable Law.
(f) Neither
the Company nor any of the Company Subsidiaries or, to the Company's knowledge, any other person is in material breach or in material default of any agreement
specified in Section 4.13(a) of the Company Disclosure Schedule.
(g) Section 4.13(g) of the Company Disclosure Schedule lists all Open Source Software that has been used in,
incorporated into, integrated or bundled with any Products. The Company and Company Subsidiaries do not use and have not used any Open Source Software or any modification or derivative thereof
(i) in a manner that would grant or purport to grant to any other person any rights to or immunities under any of the Company IP, or (ii) under any license requiring the Company or any
Company Subsidiary to disclose or distribute the source code to any of the Products, to license or provide the source code to any of the Products for the purpose of making derivative works, or to make
available for redistribution to any person the source code to any of the Products at no or minimal charge.
(h) The
Company and/or one of the Company Subsidiaries owns, leases, licenses, or otherwise has the legal right to use all Business Systems, and such Business Systems are
sufficient for the immediate and anticipated future needs of the business of the Company or any of the Company Subsidiaries as currently conducted by the Company and/or the Company Subsidiaries. The
Company and each of the Company Subsidiaries maintain commercially reasonable disaster recovery and business continuity plans, procedures and facilities, and such plans and procedures have been
effective upon testing in all material respects, and since January 1, 2015, there has not been any material failure with respect to any of the Business Systems that has not been remedied or
replaced in all material respects. The Company and each of the Company Subsidiaries have purchased a sufficient number of seat licenses for their Business Systems.
(i) The
Company and each of the Company Subsidiaries, as their business is currently conducted, comply and have complied in all material respects with (i) all
applicable Privacy/Data Security Laws, (ii) any applicable privacy or other policies of the Company and/or the Company
25
Subsidiary,
respectively, concerning the collection, dissemination, storage or use of Personal Information or other Business Data, (iii) industry standards, and (iv) all contractual
commitments that the Company or any Company Subsidiary has entered into or is otherwise bound with respect to privacy and/or data security (collectively, the "Data Security
Requirements"). The Company and the Company Subsidiaries have each implemented data security safeguards designed to protect the security and integrity of its Business Systems
and any Business Data, including implementing industry standard procedures preventing unauthorized access and the introduction of Disabling Devices. Neither the Company nor any Company Subsidiaries
has inserted and, to the knowledge of the Company, no other person has inserted or alleged to have inserted any Disabling Device in any of the Products. Since January 1, 2015, neither the
Company nor any of the Company Subsidiaries has (x) experienced any data security breaches that were required to be reported under applicable Privacy/Data Security Laws or customer contracts;
or (y) been subject to or received written notice of any audits, proceedings or investigations by any Governmental Authority or any Customer, or received any claims or complaints regarding the
collection, dissemination, storage or use of Personal Information, or the violation of any applicable Data Security Requirements, and, to the Company's knowledge, there is no reasonable basis for the
same.
(j) The
Company and/or one of the Company Subsidiaries (i) exclusively owns and possesses all right, title and interest in and to the Business Data free and clear of
any restrictions of any nature and (ii) has all rights to use, exploit, publish, reproduce, distribute, license, sell, and create derivative works of the Business Data, in whole or in part,
anywhere in the world. The Company and the Company Subsidiaries are not subject to any contractual requirements, privacy policies, or other legal obligations, including based on the transactions
contemplated hereunder, that would prohibit Merger Sub or Pensare from receiving or using Personal Information or other Business Data, in the manner in which the Company and the Company Subsidiaries
receive and use such Personal Information and other Business Data prior to the Closing Date or result in liabilities in connection with Data Security Requirements, provided
that no employee, officer, director, or agent of Merger Sub or Pensare has been debarred or otherwise forbidden by any applicable Law or any Governmental Authority (including
judicial or agency order) from involvement in the operations of a business such as that of the Company and the Company Subsidiaries.
SECTION 4.14 Taxes. Except as set forth in Section 4.14 of the Company Disclosure Schedule:
(a) The
Company and each of its Company Subsidiaries: (i) have duly and timely filed (taking into account any extension of time within which to file) all material Tax
Returns required to be filed by any of them as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (ii) have timely paid all Taxes that are
shown as due on such filed Tax Returns and any other material Taxes that the Company or any of its Company Subsidiaries are otherwise obligated to pay, except with respect to Taxes that are being
contested in good faith, and no material penalties or charges are due with respect to the late filing of any Tax Return required to be filed by or with respect to any of them on or before the
Effective Time; (iii) with respect to all material Tax Returns filed by or with respect to any of them, have not waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency; and (iv) do not have any deficiency, audit, examination, investigation or other proceeding in respect of Taxes or Tax matters
pending or proposed or threatened in writing, for a Tax period which the statute of limitations for assessments remains open.
(b) Neither
the Company nor any Company Subsidiary is a party to, is bound by or has an obligation under any Tax sharing agreement, Tax indemnification agreement, Tax
allocation agreement or similar contract or arrangement (including any agreement, contract or arrangement providing for the sharing or ceding of credits or losses) or has a potential liability or
obligation to any person as a result of or pursuant to any such agreement, contract, arrangement or
26
commitment
other than an agreement, contract, arrangement or commitment the primary purpose of which does not relate to Taxes.
(c) None
of the Company and its Company Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing
Date under Code Section 481(c) (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Code Section 7121
(or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; or (iii) installment sale made on or prior to the Closing Date.
(d) Each
of the Company and its Company Subsidiaries has withheld and paid to the appropriate Tax authority all material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any current or former employee, independent contractor, creditor, shareholder or other third party and has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding of Taxes.
(e) Neither
the Company nor any of its Company Subsidiaries has been a member of an affiliated group filing a consolidated, combined or unitary U.S. federal, state, local or
foreign income Tax Return (other than a group of which the Company was the common parent).
(f) Neither
the Company nor any of its Company Subsidiaries has any material liability for the Taxes of any person (other than the Company and its Company Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise.
(g) Neither
the Company nor any of its Company Subsidiaries has any request for a material ruling in respect of Taxes pending between the Company or any Company Subsidiary
and any Tax authority.
(h) The
Company has made available to Pensare true, correct and complete copies of the U.S. federal income Tax Returns filed by the Company and its Company Subsidiaries for
tax years 2016, 2017, and 2018.
(i) There
is no contract or agreement, plan or arrangement by the Company or its Company Subsidiaries covering any person that, individually or collectively, would
constitute compensation in excess of the deduction limitation set forth in Section 162(m) of the Code, except as described in the Company reports or as may arise as a result of the Merger.
(j) Neither
the Company nor any of the Company Subsidiaries has in any year for which the applicable statute of limitations remains open distributed stock of another person,
or has had its stock distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
(k) Neither
the Company nor any of its Company Subsidiaries has engaged in or entered into a "listed transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b)(2).
(l) Neither
the IRS nor any other United States or non-United States taxing authority or agency has asserted in writing or, to the knowledge of the Company or any of its
Company Subsidiaries, has threatened to assert against the Company or any Company Subsidiary any deficiency or claim for any Taxes or interest thereon or penalties in connection therewith.
(m) There
are no Tax Liens upon any assets of the Company or any of the Company Subsidiaries except for Permitted Liens.
27
(n) None
of the Company and its Company Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. None of the Company and its Company Subsidiaries: (A) is a "controlled foreign corporation" as defined in
Section 957 of the Code, (B) is a "passive foreign investment company" within the meaning of Section 1297 of the Code, or (C) has received written notice from a non-United
States taxing authority that it has a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise has an office or fixed place of business in a country other than the country
in which it is organized.
(o) Other
than as a result of this Agreement, neither the Company nor any Company Subsidiary has suffered an ownership change within the meaning of Section 382 of the
Code.
(p) As
used in this Agreement, (i) the term "Tax" (including, with correlative meaning, the term
"Taxes,") includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, capital stock, severances, stamp,
payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term "Tax
Return" includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns, as well as attachments thereto and
amendments thereof) required to be supplied to a Tax authority relating to Taxes.
SECTION 4.15 Environmental Matters.
Except
as described in Section 4.15 of the Company Disclosure Schedule: (a) none of the Company nor any of the Company
Subsidiaries has materially violated since January 1, 2015 or is in material violation of applicable Environmental Law; (b) to the knowledge of the Company, none of the properties
currently or formerly owned, leased or operated by the Company or any Company Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous
Substance in violation of applicable Environmental Laws which requires reporting, investigation, remediation, monitoring or other response action by the Company or any Company Subsidiary pursuant to
applicable Environmental Laws; (c) to the knowledge of the Company, none of the Company or any of the Company Subsidiaries is, in any material respect, actually, potentially or allegedly liable
pursuant to applicable Environmental Laws for any off-site contamination by Hazardous Substances; (d) each of the Company and each Company Subsidiary has all material permits, licenses and
other authorizations required of each of the Company and each Company Subsidiary under applicable Environmental Law ("Environmental Permits"); and
(e) each of the Company and each Company Subsidiary is in material compliance with its Environmental Permits.
SECTION 4.16 Material Contracts.
(a) Section 4.16(a) of the Company Disclosure Schedule lists, as of the date of this Agreement, the following types of
contracts and agreements to which the Company or any Company Subsidiary is a party, excluding for this purpose, any purchase orders submitted by customers (such contracts and agreements as are
required to be set forth Section 4.16(a) of the Company Disclosure Schedule along with any Plan listed on Section 4.10(a) of the Company
Disclosure Schedule being the "Material Contracts"):
(i) each
contract and agreement with consideration paid or payable to the Company or any of the Company Subsidiaries of more than $3,000,000, in the aggregate, over the
12-month period ending May 31, 2019;
(ii) each
contract and agreement with Suppliers to the Company or any Company Subsidiary for expenditures paid or payable by the Company or any Company Subsidiary of more
than $2,000,000, in the aggregate, over the 12-month period ending May 31, 2019;
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(iii) all
broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts and
agreements to which the Company or any Company Subsidiary is a party;
(iv) all
management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other
amounts calculated based upon the revenues or income of the Company or any Company Subsidiary or income or revenues related to any Product of the Company or any Company Subsidiary to which the Company
or any Company Subsidiary is a party;
(v) all
contracts and agreements evidencing indebtedness for borrowed money;
(vi) all
partnership, joint venture or similar agreements;
(vii) all
contracts and agreements with any Governmental Authority to which the Company or any Company Subsidiary is a party, other than any Company Permits;
(viii) all
contracts and agreements that limit, or purport to limit, the ability of the Company or any Company Subsidiary to compete in any line of business or with any
person or entity or in any geographic area or during any period of time, excluding customary confidentiality agreements and agreements that contain customary confidentiality clauses;
(ix) all
contracts or arrangements that result in any person or entity holding a power of attorney from the Company or any Company Subsidiary that relates to the Company,
any Company Subsidiary or their respective businesses;
(x) all
leases or master leases of personal property reasonably likely to result in annual payments of $150,000 or more in a 12-month period;
(xi) all
contracts involving use of any Company-Licensed IP required to be listed in Section 4.13(a)(ii) of the
Company Disclosure Schedule;
(xii) contracts
which involve the license or grant of rights to Company-Owned IP by the Company and/or the Company Subsidiaries, but excluding any nonexclusive licenses (or
sublicenses) of Company-Owned IP granted to Customers in the ordinary course of business that are substantially in the same form as the Company's or a Company Subsidiary's standard form Customer
agreements as have been provided to Pensare; and
(xiii) all
contracts for employment and consulting services required to be listed in Section 4.10(a) of the Company
Disclosure Schedule;
(b) (i)
each Material Contract is a legal, valid and binding obligation of the Company or the Company Subsidiaries and, to the knowledge of the Company, the other parties
thereto, and neither the Company nor any Company Subsidiary is in material breach or violation of, or default under, any Material Contract nor has any Material Contract been canceled by the other
party; (ii) to the Company's knowledge, no other party is in material breach or violation of, or default under, any Material Contract; and (iii) the Company and the Company Subsidiaries
have not received any written, or to the knowledge of the Company, oral claim of default under any such Material Contract. The Company has furnished or made available to Pensare true and complete
copies of all Material Contracts, including amendments thereto that are material in nature.
SECTION 4.17 Insurance.
(a) Section 4.17(a) of the Company Disclosure Schedule sets forth, with respect to each insurance policy under which
the Company or any Company Subsidiary is an insured, a named insured or otherwise the principal beneficiary of coverage as of the date of this Agreement (i) the names of the insurer, the
principal insured and each named insured that is the Company or any
29
Company
Subsidiary, (ii) the policy number, (iii) the period, scope and amount of coverage and (iv) the premium most recently charged. To the knowledge of the Company, all
reasonably foreseeable material insurable risks of the Company and the Company Subsidiaries in respect of the businesses of each are covered by such insurance policies.
(b) With
respect to each such insurance policy: (i) the policy is legal, valid, binding and enforceable in accordance with its terms (subject to the Remedies
Exceptions) and, except for policies that have expired under their terms in the ordinary course, is in full force and effect; (ii) neither the Company nor any Company Subsidiary is in material
breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination or modification, under the policy; and (iii) to the knowledge of the Company, no insurer on the policy has been declared insolvent or
placed in receivership, conservatorship or liquidation.
(c) At
no time subsequent to January 1, 2015, has the Company or any Company Subsidiary (i) been denied any insurance or indemnity bond coverage which it has
requested, (ii) made any material reduction in the scope or amount of its insurance coverage, or (iii) received written notice from any of its insurance carriers that any insurance
premiums will be subject to increase in an amount materially disproportionate to the amount of the increases with respect thereto (or with respect to similar insurance) in prior years or that any
insurance coverage listed in Section 4.17(a) of the Company Disclosure Schedule will not be available in the future substantially on the same
terms as are now in effect.
SECTION 4.18 Board Approval; Vote Required. The Company Board, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in
any way, or by unanimous written consent, has duly (a) determined that this Agreement and the Merger are fair to and in the best interests of the Company and its sole stockholder,
(b) approved this Agreement and the Merger and declared their advisability, and (c) recommended that the sole stockholder of the Company approve and adopt this Agreement and approve the
Merger and directed that this Agreement and the transactions contemplated hereby be submitted for consideration by the Company's sole stockholder. The affirmative vote of Holdings (as the Company's
sole stockholder) is the only vote of the stockholders of the Company necessary to adopt this Agreement and approve the Transactions.
SECTION 4.19 Customers and Suppliers. Section 4.19 of the Company Disclosure Schedule sets forth a true and complete list of the top ten
(10) customers (the "Customers") of the Company and its Company Subsidiaries (based on the revenue from such customer during the 12-month period
ended December 31, 2018). Section 4.19 of the Company Disclosure Schedule sets forth a true and complete list of the top ten
(10) suppliers (the "Suppliers") of the Company and its Company Subsidiaries (based on the monies paid to such suppliers during the 12-month
period ended December 31, 2018). Except as set forth in Section 4.19 of the Company Disclosure Schedule, no customer of the Company or
Company Subsidiary that accounted for more than five percent (5%) of the Company's consolidated revenues during the 12-month period ended December 31, 2018 and no Supplier (a) has
cancelled or otherwise terminated any contract with the Company or any Company Subsidiary prior to the expiration of the contract term, (b) has returned, or threatened in writing to return, a
substantial amount of any of the Products, equipment, goods and services purchased from the Company or any Company Subsidiary, or (c) to the Company's knowledge, has threatened to cancel or
otherwise terminate its relationship with the Company or its Company Subsidiaries or to reduce substantially its purchase from or sale to the Company or any Company Subsidiary of any Products,
equipment, goods or services, as applicable. Neither the Company nor any Company Subsidiary has (i) breached, in any material respect, any Material Contract with or (ii) engaged in any
fraudulent conduct with respect to, any Customer or Supplier.
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SECTION 4.20 Inventories. Subject to amounts reserved therefor on the
2019 Balance Sheet, the values at which all Inventories are carried on the 2019 Balance Sheet reflect the historical
inventory valuation policy of the Company and the Company Subsidiaries. Except as set forth in Section 4.20 of the Company Disclosure Schedule,
the Company or a Company Subsidiary, as the case may be, has valid and legal title to the Inventories free and clear of all Liens other than Permitted Liens. Except for any inventory reserves included
or reflected on the 2019 Balance Sheet and except for any damage or obsolescence standards, the Inventories do not consist of, in any material amount, items that are obsolete or damaged. Except as set
forth in Section 4.20 of the Company Disclosure Schedule, the Inventories do not consist of any items held on consignment. Neither the Company
nor any Company Subsidiary is under any obligation or liability with respect to accepting returns of items of Inventories in the possession of their customers other than in the ordinary course of
business consistent with past practice. No clearance or extraordinary sale of the Inventories has been conducted since January 1, 2016. Since January 1, 2017, neither the Company nor any
Company Subsidiary has acquired or committed to acquire or manufacture Inventories for sale that, to the knowledge of the Company, is not of a quality and quantity usable in the ordinary course of
business within a reasonable period of time and consistent with past practice, nor has the Company or any Company Subsidiary changed the price of any Inventories except for (a) price reductions
to reflect any reduction in the cost thereof to the Company or the Company Subsidiaries, (b) reductions and increases responsive to normal competitive conditions, including discounts and
rebates offered in the ordinary course of business, and (c) increases to reflect any increase in the cost thereof to the Company or the Company Subsidiaries. Section 4.20 of the Company
Disclosure Schedule is a true and complete list of the addresses of all warehouses and other facilities in which the
Inventories are located. To the knowledge of the Company, the Inventories are in good condition in all material respects, are suitable and usable for the purposes for which they are intended and are
in a condition such that they could reasonably be expected to be sold in the ordinary course of the business of the Company and the Company Subsidiaries consistent with past practice.
SECTION 4.21 Product Warranty. Except for (i) warranties implied
or imposed by applicable Laws, (ii) express warranties contained in the Company's or any Company Subsidiary's
standard terms and conditions of sale, (iii) warranties set forth in customer purchase orders and in other agreements entered into with customers, including contracts with Customers,
(iv) manufacturer warranties related to Products sold or delivered by the Company or the Company Subsidiaries, and (v) warranties given in the ordinary course of business, since
January 1, 2016 neither the Company nor any Company Subsidiary has given a warranty in respect of any Products supplied, manufactured, sold or delivered by it. Each Product sold or delivered by
Company or the Company Subsidiaries since January 1, 2016 conforms in all material respects with the customer specifications for such Product, all applicable contractual commitments and all
applicable express and implied warranties. Neither the Company nor any Company Subsidiaries has any material liability or obligation (and to the Company's knowledge there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against the Company or any of the Company Subsidiaries giving rise to any material liability or
obligation) for replacement or repair thereof, indemnification with respect thereto or other damages in connection therewith that arose in each case after January 1, 2016, except liabilities or
obligations for replacement, return or repair incurred in the ordinary course of business consistent with past practice.
SECTION 4.22 Product Liability. Except as set forth in Section 4.22 of the Company Disclosure Schedule, there are no claims alleging bodily
injury or other damage in excess of one Hundred Fifty Thousand Dollars ($150,000) as a result of any Product or the breach of any duty to warn, test, inspect or instruct of dangers of any Product that
are currently pending or threatened in writing against the Company or any Company Subsidiary, or, to the knowledge of the Company, against any Supplier that contracts with the Company or any Company
Subsidiary as it relates to, or may reasonably affect, the Company's or any Company Subsidiary's Products.
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SECTION 4.23 Certain Business Practices. Since January 1, 2014,
none of the Company, any Company Subsidiary or, to the Company's knowledge, any directors or officers, agents or employees of the
Company or any Company Subsidiary, has: (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (b) made any
unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or (c) made any payment in the nature of criminal bribery.
SECTION 4.24 Interested Party Transactions. Except for employment
relationships and the payment of compensation, benefits and expense reimbursements and advances in the ordinary course of business, and
except as otherwise disclosed on Section 4.24 of the Company Disclosure Schedule; no director, officer or other affiliate of the Company or any
Company Subsidiary has or has had, directly or indirectly: (a) an economic interest in any person that has furnished or sold, or furnishes or sells, services or Products that the Company or any
Company Subsidiary furnishes or sells, or proposes to furnish or sell; (b) an economic interest in any person that purchases from or sells or furnishes to, the Company or any Company
Subsidiary, any goods or services; (c) a beneficial interest in any contract or agreement disclosed in Section 4.16(a) of the Company
Disclosure Schedule; or (d) any contractual or other arrangement with the Company or any Company Subsidiary, other than customary indemnity arrangements; provided, however, that ownership of no more than five percent (5%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "economic interest in any person" for purposes of this Section 4.24. The Company and the
Company Subsidiaries have not, since January 1, 2015, (i) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal
loan to or for any director or executive officer (or equivalent thereof) of the Company, or (ii) materially modified any term of any such extension or maintenance of credit.
SECTION 4.25 Exchange Act. Neither the Company nor any Company
Subsidiary is currently (or has previously been) subject to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
SECTION 4.26 Brokers. Except as set forth in Section 4.26 of the Company Disclosure Schedule, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any Company Subsidiary.
SECTION 4.27 Exclusivity of Representations and Warranties. Neither
Holdings, the Company nor any of their respective affiliates or Representatives is making, and they each hereby disclaim all representations or warranties
of any kind or nature whatsoever, oral or written, express or implied, on behalf of Holdings, the Company or any of their affiliates, including, without limitation, as to the accuracy or completeness
of any information regarding Holdings, the Company or any of the Company Subsidiaries furnished or made available to Pensare, Merger Sub and their Representatives (including, but not limited to, any
relating to financial condition, results of operations, projections, assets or liabilities of Holdings, the Company and the Company Subsidiaries), except for the representations and warranties
expressly set forth in this Article IV and Article V (as modified by the disclosures set
forth in the Company Disclosure Schedules).
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to Pensare and Merger Sub as follows:
SECTION 5.01 Corporate Organization. Holdings is a limited liability
company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite
32
limited
liability company power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where
the failure to have such power, authority and governmental approvals would not, individually or in the aggregate, prevent or materially delay the consummation of the Merger or any of the Transactions.
SECTION 5.02 Authority Relative to This Agreement. Holdings has all
necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by Holdings and the consummation by Holdings of the Transactions, have been duly and validly authorized by all necessary limited liability company action, and
no other proceedings on the part of Holdings are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of
appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by Holdings and, assuming due authorization, execution and delivery by Pensare
and Merger Sub, constitutes a legal, valid and binding obligation of Holdings, enforceable against Holdings in accordance with its terms subject to the Remedies Exceptions.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) Except
as set forth in Section 5.03(a) of the Company Disclosure Schedule, the execution and delivery of this
Agreement by Holdings does not, and subject to receipt of the filing and recordation of appropriate merger documents as required by the DCGL and of the consents, approvals, authorizations or permits,
filings and notifications contemplated by Section 5.03(b), the performance of this Agreement by Holdings will not (i) conflict with or
violate the certificate of formation or limited liability company agreement of Holdings, as amended through the date hereof, (ii) conflict with or violate any Law, rule, regulation, order,
judgment or decree applicable to Holdings or by which any of its property or assets is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Holdings pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Holdings is a party or
by which Holdings or any of its property or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not have or reasonably be expected to have a material and adverse effect on Holdings.
(b) The
execution and delivery of this Agreement by Holdings does not, and the performance of this Agreement Holdings will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the
Exchange Act, Blue Sky Laws and state takeover laws, and filing and recordation of appropriate merger documents as required by the DGCL and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, prevent or materially delay consummation of any of the Transactions or
otherwise prevent Holdings from performing its material obligations under this Agreement.
SECTION 5.04 Board Approval; Vote Required. The Holdings Board, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in
any way, has duly approved and adopted this Agreement and the Transactions contemplated hereby. The only vote necessary to approve this Agreement and the Transactions contemplated hereby, in addition
to the approvals contemplated in Section 4.18, is the affirmative vote of the Holdings Board.
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SECTION 5.05 Accredited Investor. Holdings is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.
SECTION 5.06 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Holdings.
SECTION 5.07 Exclusivity of Representations and Warranties. Neither
Holdings, the Company nor any of their respective affiliates or Representatives is making, and they each hereby disclaim all representations or warranties
of any kind or nature whatsoever, oral or written, express or implied, on behalf of Holdings, the Company or any of their affiliates, including, without limitation, as to the accuracy or completeness
of any information regarding Holdings, the Company or any of the Company Subsidiaries furnished or made available to Pensare, Merger Sub and their Representatives (including, but not limited to, any
relating to financial condition, results of operations, projections, assets or liabilities of Holdings, the Company and the Company Subsidiaries), except for the representations and warranties
expressly set forth in this Article V and in Article IV (as modified by the disclosures
set forth in the Company Disclosure Schedules).
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PENSARE AND MERGER SUB
Except as set forth in the Pensare SEC Reports (to the extent the qualifying nature of such disclosure is readily apparent from the content of
such Pensare SEC Reports, but excluding disclosures referred to in "Forward-Looking Statements", "Risk Factors" and any other disclosures therein to the extent they are of a predictive or cautionary
nature or related to forward-looking statements), Pensare and Merger Sub hereby, jointly and severally, represent and warrant to Holdings and the Company as follows:
SECTION 6.01 Corporate Organization.
(a) Each
of Pensare and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the
failure to have such power, authority and governmental approvals would not, individually or in the aggregate, prevent or materially delay the consummation of the Merger or any of the Transactions.
(b) Merger
Sub is the only subsidiary of Pensare. Except for Merger Sub, Pensare does not directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or business association or other person.
SECTION 6.02 Certificate of Incorporation and By-laws. Each of Pensare
and Merger Sub has heretofore furnished to the Company complete and correct copies of the Pensare Organizational Documents and the Merger Sub
Organizational Documents. The Pensare Organizational Documents and the Merger Sub Organizational Documents are in full force and effect. Neither Pensare nor Merger Sub is in violation of any of the
provisions of the Pensare Organizational Documents and the Merger Sub Organizational Documents.
SECTION 6.03 Capitalization.
(a) The
authorized capital stock of Pensare consists of (i) 100,000,000 shares of Pensare Common Stock, and (ii) 1,000,000 shares of preferred stock, par value
$0.0001 per share ("Pensare Preferred Stock"). As of the date of this Agreement (i) 13,822,538 shares of Pensare Common Stock are issued and
outstanding (which includes 6,060,038 shares subject to Redemption Rights),
34
all
of which are validly issued, fully paid and non-assessable and not subject to any preemptive rights, (ii) no shares of Pensare Common Stock are held in the treasury of Pensare,
(iii) 26,037,500 Pensare Warrants are issued and outstanding, each exercisable for one share of Pensare Common Stock at an exercise price of $11.50, (iv) 26,037,500 shares of Pensare
Common Stock are reserved for future issuance pursuant to the Pensare Warrants and (v) 31,050,000 rights ("Pensare Rights"), each to receive 1/10
of a share of Pensare Common Stock upon the consummation of a Business Combination (as defined in the Pensare Certificate of Incorporation, a "Business
Combination") are issued and outstanding. As of the date of this Agreement, there are no shares of Pensare Preferred Stock issued and outstanding.
(b) Except
for the Subscription Agreements, if any, or as otherwise set forth in this Section 6.03, there are no
options, warrants, preemptive rights, calls, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of
Pensare or obligating Pensare to issue or sell any shares of capital stock of, or other equity interests in, Pensare. All shares of Pensare Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable. Neither Pensare nor any subsidiary
of Pensare is a party to, or otherwise bound by, and neither Pensare nor any subsidiary of Pensare has granted, any equity appreciation rights, participations, phantom equity or similar rights. There
are no voting trusts, voting agreements, proxies, shareholder agreements or other agreements with respect to the voting or transfer of Pensare Common Stock or any of the equity interests or other
securities of Pensare or any of its subsidiaries. There are no outstanding contractual obligations of Pensare to repurchase, redeem or otherwise acquire any shares of Pensare Common Stock. There are
no outstanding contractual obligations of Pensare to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person.
(c) The
authorized capital stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per share (the "Merger Sub Common
Stock"). As of the date hereof, 100 shares of Merger Sub Common Stock are issued and outstanding. All outstanding shares of Merger Sub Common Stock have been duly authorized,
validly issued, fully paid and are non-assessable and are not subject to preemptive rights, and are held by Pensare free and clear of all Liens, other than transfer restrictions under applicable
securities laws and the Merger Sub Organizational Documents.
(d) All
outstanding Pensare Units, shares of Pensare Common Stock, Pensare Rights and Pensare Warrants have been issued and granted in compliance with all applicable
securities laws and other applicable Laws and were issued free and clear of all Liens other than transfer restrictions under applicable securities laws and the Pensare Organizational Documents.
(e) Each
Founder is obligated to vote all of the shares of Pensare Common stock that he, she or it owns in favor of approving the Transactions. No Founder is entitled to
have redeemed any of his, her or its shares of Pensare Capital Stock pursuant to the Pensare Organizational Documents.
(f) The
Stock Consideration being delivered by Pensare hereunder shall be duly and validly issued, fully paid and nonassessable, and each such share or other security shall
be issued free and clear of preemptive rights and all Liens, other than transfer restrictions under applicable securities laws and the Pensare Organizational Documents. The Stock Consideration will be
issued in compliance with all applicable securities Laws and other applicable Laws and without contravention of any other person's rights therein or with respect thereto.
(g) The
PIPE Securities being delivered by Pensare hereunder shall be duly authorized for issuance by the Company and, when duly executed, authenticated, issued and
delivered, will constitute valid and binding obligations of the Company, enforceable against Pensare in accordance
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with
their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights
and remedies of creditors or by general equitable principles. Upon conversion of the PIPE Securities into shares of Pensare Common stock (the "Converted
Shares"), such Converted Shares shall be duly and validly issued, fully paid and nonassessable, and each Converted Share shall be issued free and clear of preemptive rights and
all Liens, other than restrictions under applicable securities law and the Pensare Organizational Documents. The Converted Shares will be issued in compliance with all applicable securities Laws and
other applicable Laws and without contravention of any other person's rights therein or with respect thereto.
SECTION 6.04 Authority Relative to This Agreement. Each of Pensare,
and Merger Sub have all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by each of Pensare and Merger Sub and the consummation by each of Pensare and Merger Sub of the Transactions, have been duly
and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Pensare or Merger Sub are necessary to authorize this Agreement or to consummate the
Transactions (other than (a) with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding shares of Pensare Common Stock and by
the holders of a majority of the then-outstanding shares of Merger Sub Common Stock, and the filing and recordation of appropriate merger documents as required by the DGCL, and (b) with respect
to the issuance of Pensare Common Stock and the amendment and restatement of the Pensare Certificate of Incorporation pursuant to this Agreement, the approval of majority of the then-outstanding
shares of Pensare Common Stock). This Agreement has been duly and validly executed and delivered by Pensare and Merger Sub and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Pensare or Merger Sub, enforceable against Pensare or Merger Sub in accordance with its terms subject to the Remedies Exceptions.
SECTION 6.05 No Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by each of Pensare and Merger Sub do not, and the performance of this Agreement by each of Pensare and Merger Sub will not,
(i) conflict with or violate the Pensare Organizational Documents or the Merger Sub Organizational Documents, (ii) assuming that all consents, approvals, authorizations and other actions
described in Section 6.05(b) have been obtained and all filings and obligations described in Section 6.05(b) have been made, conflict with or
violate any Law, rule, regulation, order, judgment or decree applicable to each of Pensare or
Merger Sub or by which any of their property or assets is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of each of Pensare
or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which each of Pensare or Merger Sub is a
party or by which each of Pensare or Merger Sub or any of their property or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not have or reasonably be expected to have a Pensare Material Adverse Effect.
(b) The
execution and delivery of this Agreement by each of Pensare and Merger Sub do not, and the performance of this Agreement by each of Pensare and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and state takeover laws, and filing and recordation of appropriate merger documents as required by the DGCL and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or
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to
make such filings or notifications, would not, individually or in the aggregate, prevent or materially delay consummation of any of the Transactions or otherwise prevent Pensare or Merger Sub from
performing its material obligations under this Agreement.
SECTION 6.06 Compliance. Neither Pensare nor Merger Sub is or has been
in conflict with, or in default, breach or violation of, (a) any Law applicable to Pensare or Merger Sub or
by which any property or asset of Pensare or Merger Sub is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Pensare or Merger Sub is a party or by which Pensare or Merger Sub or any property or asset of Pensare or Merger Sub is bound, except, in each case, for any such
conflicts, defaults, breaches or violations that would not have or reasonably be expected to have a Pensare Material Adverse Effect. Each of Pensare and Merger Sub is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for Pensare or Merger Sub
to own, lease and operate its properties or to carry on its business as it is now being conducted.
SECTION 6.07 SEC Filings; Financial Statements.
(a) Pensare
has filed all forms, reports, schedules, statements and other documents, including any exhibits thereto, required to be filed by it with the Securities and
Exchange Commission (the "SEC") since July 5, 2017, together with any amendments, restatements or supplements thereto (collectively, the
"Pensare SEC Reports"). Pensare has heretofore furnished to the Company true and correct copies of all amendments and modifications that have not been
filed by Pensare with the SEC to all agreements, documents and other instruments that previously had been filed by Pensare with the SEC and are currently in effect. The Pensare SEC Reports
(i) were prepared in all material respects in accordance with either the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations promulgated thereunder, and (ii) did not, at the time they were
filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they were made, not misleading. Each director and executive officer of Pensare has filed with the SEC on a timely basis all
statements required with respect to Pensare by Section 16(a) of the Exchange Act and the rules and regulations thereunder. As used in this Section 6.07, the term "file" shall be broadly
construed to include any manner in which a document or information is furnished, supplied or
otherwise made available to the SEC or Nasdaq Capital Market.
(b) Each
of the financial statements (including, in each case, any notes thereto) contained in the Pensare SEC Reports was prepared in accordance with GAAP (applied on a
consistent basis) and Regulation S-X and Regulation S-K, as applicable, throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the financial position, results of operations and cash flows of Pensare as at the
respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments
which have not had, and would not reasonably be expected to have a Pensare Material Adverse Effect). Pensare has no off-balance sheet arrangements that are not disclosed in the Pensare SEC Reports. No
financial statements other than those of Pensare are required by GAAP to be included in the consolidated financial statements of Pensare.
(c) Except
as and to the extent set forth in the Pensare SEC Reports, neither Pensare nor Merger Sub has any liability or obligation of a nature (whether accrued, absolute,
contingent or otherwise) required to be reflected on a balance sheet prepared in accordance with GAAP, except for liabilities and obligations arising in the ordinary course of Pensare's and Merger
Sub's business.
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(d) Pensare
is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of Nasdaq Capital Market.
(e) Pensare
is eligible to register the resale of the Stock Consideration for resale by Holdings and its members under a registration statement on Form S-3
promulgated under the Securities Act.
SECTION 6.08 Absence of Certain Changes or Events. Since
March 31, 2019, or as expressly contemplated by this Agreement, or specifically disclosed in any Pensare SEC Report filed since March 31, 2019
and prior to the date of this Agreement, (a) Pensare has conducted its business in the ordinary course and in a manner consistent with past practice, and (b) there has not been any
Pensare Material Adverse Effect.
SECTION 6.09 Absence of Litigation. There is no Action pending or, to
the knowledge of Pensare, threatened against Pensare, or any property or asset of Pensare, before any Governmental Authority.
Neither Pensare nor any material property or asset of Pensare is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge
of Pensare, continuing investigation by, any Governmental Authority.
SECTION 6.10 Board Approval; Vote Required.
(a) The
Pensare Board, by resolutions duly adopted by majority vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in any way,
has duly (i) determined that this Agreement and the Transactions are fair to and in the best interests of Pensare and its stockholders, (ii) approved this Agreement and the Transactions
and declared their advisability, (iii) recommended that the stockholders of Pensare approve and adopt this Agreement and approve the Transactions contemplated by this Agreement, and directed
that this Agreement and the Transactions, contemplated hereby, be submitted for consideration by the stockholders of Pensare at the Pensare Stockholders' Meeting.
(b) The
only vote of the holders of any class or series of capital stock of Pensare necessary to approve the Transactions is the affirmative vote of the holders of a
majority of the outstanding shares of Pensare Common Stock.
(c) The
Merger Sub Board, by resolutions duly adopted by written consent and not subsequently rescinded or modified in any way, has duly (i) determined that this
Agreement and the Merger are fair to and in the best interests of Merger Sub and its sole stockholder, (ii) approved this Agreement and the Merger and declared their advisability,
(iii) recommended that the sole stockholder of Merger Sub approve and adopt this Agreement and approve the Merger and directed that this Agreement and the transactions contemplated hereby be
submitted for consideration by the sole stockholder of Merger Sub.
(d) The
only vote of the holders of any class or series of capital stock of Merger Sub is necessary to approve this Agreement, the Merger and the other Transactions is the
affirmative vote of the holders of a majority of the outstanding shares of Merger Sub Common Stock.
SECTION 6.11 No Prior Operations of Merger Sub.
Merger
Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations or
incurred any obligation or liability, other than as contemplated by this Agreement.
SECTION 6.12 Pensare Material Contracts.
(a) The
Pensare SEC Reports include true, correct and complete copies of each "material contract" (as such term is defined in Regulation S-K of the SEC) to which
Pensare or Merger Sub is party (the "Pensare Material Contracts").
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(b) Each
Pensare Material Contract is in full force and effect and, to the knowledge of Pensare, is valid and binding upon and enforceable against each of the parties
thereto, except insofar as enforceability may be limited by the Remedies Exceptions. True, correct and complete copies of all Pensare Material Contracts have been made available to Holdings and the
Company.
SECTION 6.13 Employees. Other than any former officers or as
described in the Pensare SEC Reports, Pensare has never had any employees. Other than reimbursement of any out-of-pocket
expenses incurred by Pensare's officers and directors in connection with activities on Pensare's behalf in an aggregate amount not in excess of the amount of cash held by Pensare outside of the Trust
Account, Pensare has no unsatisfied material liability with respect to any employee. Pensare does not currently maintain or have any direct liability under any benefit plan, and neither the execution
and delivery of this Agreement or the other Ancillary Agreements nor the consummation of the Transactions will (i) result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director, officer or employee of Pensare, or (ii) result in the acceleration of the time of payment or vesting of any such benefits.
SECTION 6.14 Taxes.
(a) Pensare
and Merger Sub (i) have duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be
filed by any of them as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (ii) have timely paid all Taxes that are shown as due on such filed
Tax Returns and any other material Taxes that Pensare or Merger Sub are otherwise obligated to pay, except with respect to current Taxes not yet due and payable or otherwise being contested in good
faith or that are described in clause (a)(v) below; (iii) with respect to all material Tax Returns filed by or with respect to any of them, have not waived any statute of limitations
with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; (iv) do not have any deficiency, audit, examination, investigation or other proceeding
in respect of a material amount of Taxes or material Tax matters pending or threatened in writing, for a Tax period which the statute of limitations for assessments remains open; and (v) have
provided adequate reserves in accordance with GAAP in the most recent consolidated financial statements of
Pensare, for any material Taxes of Pensare that have not been paid, whether or not shown as being due on any Tax Return.
(b) Neither
Pensare nor Merger Sub is a party to, is bound by or has an obligation under any Tax sharing agreement, Tax indemnification agreement, Tax allocation agreement
or similar contract or arrangement (including any agreement, contract or arrangement providing for the sharing or ceding of credits or losses) or has a potential liability or obligation to any person
as a result of or pursuant to any such agreement, contract, arrangement or commitment other than an agreement, contract, arrangement or commitment the primary purpose of which does not relate to
Taxes.
(c) None
of Pensare or Merger Sub will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under
Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Section 7121 of the Code
(or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; or (iii) installment sale made on or prior to the Closing Date.
(d) Neither
Pensare nor Merger Sub has been a member of an affiliated group filing a consolidated, combined or unitary U.S. federal, state, local or foreign income Tax
Return.
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(e) Neither
Pensare nor Merger Sub has any material liability for the Taxes of any person under Treasury Regulation section 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or otherwise.
(f) Neither
Pensare nor Merger Sub has any request for a material ruling in respect of Taxes pending between Pensare and/or Merger Sub, on the one hand, and any Tax
authority, on the other hand.
(g) Neither
Pensare nor Merger Sub has in any year for which the applicable statute of limitations remains open distributed stock of another person, or has had its stock
distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
(h) Neither
Pensare nor Merger Sub has engaged in or entered into a "listed transaction" within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(i) There
are no Tax Liens upon any assets of Pensare or Merger Sub except for Taxes that are not yet due and payable.
SECTION 6.15 Listing.
The issued and outstanding Pensare Units are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol
"WRLSU." The issued and outstanding shares of Pensare Common Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the
symbol "WRLS". The issued and outstanding Pensare Warrants are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol
"WRLSW". The issued and outstanding Pensare Rights are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol "WRLSR".
As of the date of this Agreement, there is no Action pending or, to the knowledge of Pensare, threatened in writing against Pensare by the Nasdaq Capital Market or the SEC with respect to any
intention by such entity to deregister the Pensare Units, the shares of Pensare Common Stock, Pensare Rights or Pensare Warrants or terminate the listing of Pensare on the Nasdaq Capital Market. None
of Pensare or any of its affiliates has taken any action in an attempt to terminate the registration of the Pensare Units, the shares of Pensare Common Stock, the Pensare Rights or the Pensare
Warrants under the Exchange Act.
SECTION 6.16 Brokers.
Except for EarlyBirdCapital, Inc., no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of Pensare or Merger Sub.
SECTION 6.17 Pensare Trust Fund.
As of the date of this Agreement, Pensare has no less than $63,000,000.00 in the trust fund established by Pensare for the benefit of its public stockholders (the
"Trust Fund") maintained in a trust account at J.P. Morgan Chase Bank (the "Trust Account"). The monies
of such Trust Account are invested in United States Government securities or money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940,
as amended, and held in trust by Continental Stock Transfer & Trust Co. (the "Trustee") pursuant to the Investment Management Trust
Agreement, dated as of July 27, 2017, between Pensare and the Trustee (the "Trust Agreement"). The Trust Agreement has not been amended or
modified and is valid and in full force and effect and is enforceable in accordance with its terms, subject to the Remedies Exceptions. Pensare has complied in all material respects with the terms of
the Trust Agreement and is not in breach thereof or default thereunder and there does not exist under the Trust Agreement any event which, with the giving of notice or the lapse of time, would
constitute such a breach or default by Pensare or the Trustee. There are no separate contracts, agreements, side letters or other understandings (whether written or unwritten, express or implied):
(i) between Pensare and the Trustee that would cause the description of the Trust Agreement in the Pensare SEC Reports to be inaccurate
40
in
any material respect; or (ii) to the knowledge of Pensare, that would entitle any person (other than stockholders of Pensare who shall have elected to redeem their shares of Pensare Common
Stock pursuant to the Pensare Organizational Documents) to any portion of the proceeds in the Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be released except:
(A) to pay income and franchise taxes from any interest income earned in the Trust Account; and (B) upon the exercise of Redemption Rights in accordance with the provisions of the
Pensare Organizational Documents. As of the date hereof, there are no Actions pending or, to the knowledge of Pensare, threatened in writing with respect to the Trust Account. Upon consummation of the
Merger and notice thereof to the Trustee pursuant to the Trust Agreement, Pensare shall cause the Trustee to, and the Trustee shall thereupon be obligated to, release to Pensare as promptly as
practicable, the Trust Funds in accordance with the Trust Agreement at which point the Trust Account shall terminate; provided, however that the
liabilities and obligations of Pensare due and owing or incurred at or prior to the Effective Time shall be paid as and when due,
including all amounts payable (a) to stockholders of Pensare who shall have exercised their Redemption Rights, (b) with respect to filings, applications and/or other actions taken
pursuant to this Agreement required under Law, (c) to the Trustee for fees and costs incurred in accordance with the Trust Agreement; and (d) to third parties
(e.g., professionals, printers, etc.) who have rendered services to Pensare in connection with its efforts to effect the Merger (including the $10,867,500 fee owed by Pensare to
EarlyBirdCapital, Inc., pursuant to that certain Business Combination Marketing Agreement, dated July 27, 2017, between EarlyBirdCapital, Inc. and Pensare).
SECTION 6.18 Prior Business Operations.
Pensare has limited its activities to those activities (a) contemplated in the Prospectus or (b) otherwise necessary to consummate the Merger and the other Transactions
contemplated by this Agreement.
SECTION 6.19 Pensare's and Merger Sub's Investigation and Reliance.
Each of Pensare and Merger Sub is a sophisticated purchaser and has made its own independent investigation, review and analysis regarding Holdings, the Company and the Company
Subsidiaries and the Transactions, which investigation, review and analysis were conducted by Pensare and Merger Sub together with expert advisors, including legal counsel, that they have engaged for
such purpose. Pensare, Merger Sub and their Representatives have been provided with full and complete access to the Representatives, properties, offices, plants and other facilities, books and records
of Holdings, the Company and the Company Subsidiaries and other information that they have requested in connection with their investigation of Holdings, the Company, the Company Subsidiaries and the
Transactions. Neither Pensare nor Merger Sub is relying on any statement, representation or warranty, oral or written, express or implied, made by Holdings, the Company or any of the Company
Subsidiaries or any of their respective Representatives, except as expressly set forth in Article IV and V (as modified by the Company Disclosure
Schedule). Neither the Company, Holdings nor any of their respective owners, members, stockholders, affiliates
or Representatives shall have any liability to Pensare, Merger Sub or any of their respective stockholders, affiliates or Representatives resulting from the use of any information, documents or
materials made available to Pensare or Merger Sub or any of their Representatives, whether orally or in writing, in any confidential information memoranda, "data rooms," management presentations, due
diligence discussions or in any other form in expectation of the Transactions. Neither Holdings, the Company nor any of their respective owners, members, stockholders, affiliates or Representatives is
making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving Holdings, the Company and/or the Company Subsidiaries.
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ARTICLE VII.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.01 Conduct of Business by the Company Pending the Merger.
(a) Holdings
and the Company agree that, between the date of this Agreement and the Effective Time or the earlier termination of this Agreement, except as expressly
contemplated by any other provision
of this Agreement or any Ancillary Agreement, unless Pensare shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned):
(i) the
businesses of the Company and the Company Subsidiaries shall be conducted in the ordinary course of business and in a manner consistent with past practice; and
(ii) Holdings
and the Company shall use their commercially reasonable efforts to preserve substantially intact the business organization of the Company and the Company
Subsidiaries, to keep available the services of the current officers, key employees and consultants of the Company and the Company Subsidiaries and to preserve the current relationships of the Company
and the Company Subsidiaries with Customers, Suppliers and other persons with which the Company or any Company Subsidiary has significant business relations.
(b) By
way of amplification and not limitation, except as expressly contemplated by any other provision of this Agreement or any Ancillary Agreement, except as set forth on Section 7.01(b) of the Company
Disclosure Schedule or as otherwise required by Law or any contracts or agreements to which the Company or a
Company Subsidiary is a party, neither the Company nor any Company Subsidiary shall, and Holdings shall cause the Company and each Company Subsidiary not to, between the date of this Agreement and the
Effective Time or the earlier termination of this Agreement, directly or indirectly, do any of the following without the prior written consent of Pensare (which consent shall not be unreasonably
withheld, conditioned or delayed):
(i) amend
or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents, other than to amend the indemnity provisions of such
documents to mirror the indemnity provisions in the Pensare organizational documents;
(ii) issue,
sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of any class of
capital stock of the Company or any Company Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company or any Company Subsidiary or (B) except in the ordinary course of business and in a manner consistent with past
practice, any material assets of the Company or any Company Subsidiary;
(iii) declare,
set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, other than
as necessary to make any required payments under the Company Credit Agreements;
(iv) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock, other than redemptions of equity
securities from former employees upon the terms set forth in the underlying agreements governing such equity securities;
(v) (A)
acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership,
other business organization or any division thereof or any material amount of assets; or (B) incur any indebtedness for borrowed money (other than borrowings under the Company Credit
42
Agreements)
or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any
security interest in any of its assets, in each case, except in the ordinary course of business and consistent with past practice;
(vi) (A)
hire any additional employees or consultants except in the ordinary course of business, (B) fill current vacancies or vacancies arising after the date of
this Agreement due to the termination of any employee's employment or consultant's services except in the ordinary course of business, or (C) increase the compensation payable or to become
payable or, other than health and welfare plan renewals in the ordinary course of business consistent with past practices, the benefits provided to its directors or officers, in each case except in
the ordinary course of business;
(vii) other
than pursuant to the terms of an agreement entered into prior to the date of this Agreement and reflected on Section 4.10(a) of the Company Disclosure Schedule, grant any severance or termination
pay to, or enter into any employment, consulting or
severance agreement with, any director or officer of the Company or of any Company Subsidiary, other than in the ordinary course of business consistent with past practice;
(viii) adopt,
amend and/or terminate any Plan except as may be required by applicable Law, is necessary in order to consummate the Transactions, or health and welfare plan
renewals in the ordinary course of business;
(ix) take
any action, other than reasonable and usual actions in the ordinary course of business, with respect to accounting policies or procedures, other than as required
by GAAP;
(x) make
any material tax election or settle or compromise any material United States federal, state, local or non-United States income tax liability;
(xi) materially
amend, modify or consent to the termination of any Material Contract or amend, waive, modify or consent to the termination of the Company's or any Company
Subsidiary's material rights thereunder, except in the ordinary course of business;
(xii) intentionally
permit any material item of Company IP to lapse or to be abandoned, invalidated, dedicated to the public, or disclaimed, or otherwise become
unenforceable or fail to perform or make any applicable filings, recordings or other similar actions or filings, or fail to pay all required fees and taxes required or advisable to maintain and
protect its interest in each and every material item of Company IP; or
(xiii) enter
into any formal or informal agreement or otherwise make a binding commitment to do any of the foregoing.
SECTION 7.02 Conduct of Business by Pensare and Merger Sub Pending the Merger.
Except as expressly contemplated by any other provision of this Agreement or any Ancillary Agreement (including entering into various Subscription Agreements, issuing the PIPE Securities
and consummating the Private Placement) and except as set forth on Schedule 7.02, Pensare agrees that from the date of this Agreement until the
earlier of the termination of this Agreement and the Effective Time, unless the Company shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned),
the businesses of Pensare and Merger Sub shall be conducted in the ordinary course of business and in a manner consistent with past practice. By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement or any Ancillary Agreement, or in connection with the terms and conditions of, any Subscription Agreement, except as otherwise required
by Law or as set forth on Schedule 7.02, neither Pensare nor Merger Sub shall, between the date of this Agreement and the Effective Time or the
earlier termination of this Agreement, directly or indirectly, do any of the following without the prior
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written
consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned:
(a) amend
or otherwise change the Pensare Organizational Documents or the Merger Sub Organizational Documents or form any subsidiary of Pensare other than Merger Sub, other
than one or more amendments to extend the Termination Date as defined in Section 9.6 of the Pensare Certificate of Incorporation;
(b) declare,
set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, other than
redemptions from the Trust Fund that are required pursuant to the Pensare Organizational Documents, including the Pensare Stockholder Redemptions;
(c) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of the Pensare Securities except for redemptions from the
Trust Fund that are required pursuant to the Pensare Organizational Documents, including the Pensare Stockholder Redemptions;
(d) issue,
sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, any shares of any class of capital
stock or other securities of Pensare or Merger Sub, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Pensare or Merger Sub (except for entering into various Subscription Agreements, issuing the PIPE Securities and consummating the
Private Placement);
(e) acquire
(including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership,
other business organization or enter into any strategic joint ventures, partnerships or alliances with any other person;
(f) incur
any indebtedness for borrowed money or guarantee any such indebtedness of another person or persons, issue or sell any debt securities or options, warrants, calls
or other rights to acquire any debt securities of Pensare, as applicable, enter into any "keep well" or other agreement to maintain any financial statement condition or enter into any arrangement
having the economic effect of any of the foregoing, in each case, except in the ordinary course of business consistent with past practice;
(g) make
any change in any method of financial accounting or financial accounting principles, policies, procedures or practices, except as required by a concurrent amendment
in GAAP or applicable Law made subsequent to the date hereof, as agreed to by its independent accountants;
(h) make
any material tax election or settle or compromise any material United States federal, state, local or non-United States income tax liability, except in the ordinary
course consistent with past practice;
(i) liquidate,
dissolve, reorganize or otherwise wind up the business and operations of Pensare or Merger Sub;
(j) amend
the Trust Agreement or any other agreement related to the Trust Account; or
(k) enter
into any formal or informal agreement or otherwise make a binding commitment to do any of the foregoing.
SECTION 7.03 Claims Against Trust Account.
Holdings and the Company agree that, notwithstanding any other provision contained in this Agreement, Holdings and the Company do not now have, and shall not at any time prior to the
Effective Time have, any claim to, or make any claim against, the Trust Fund, regardless of whether such claim arises as a result of, in connection with or relating in any way to, the business
relationship between Holdings and the Company on the one hand,
44
and
Pensare on the other hand, this Agreement, or any other agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal
liability (any and all such claims are collectively referred to in this Section 7.03 as the
"Claims"). Notwithstanding any other provision contained in this Agreement, Holdings and the Company hereby irrevocably waive any Claim they may have,
now or in the future and will not seek recourse against the Trust Fund for any reason whatsoever in respect thereof; provided, however, that the foregoing
waiver will not limit or prohibit Holdings or the Company from pursuing a claim against Pensare, Merger Sub or any other
person (i) for legal relief against monies or other assets of Pensare or Merger Sub held outside of the Trust Account or for specific performance or other equitable relief in connection with
the Transactions or (ii) for damages for breach of this Agreement against Pensare (or any successor entity) or Merger Sub in the event this Agreement is terminated for any reason and Pensare
consummates a Business Combination transaction with another party. In the event that Holdings or the
Company commences any action or proceeding against or involving the Trust Fund in violation of the foregoing, Pensare shall be entitled to recover from Holdings and the Company the associated
reasonable legal fees and costs in connection with any such action, in the event Pensare prevails in such action or proceeding.
ARTICLE VIII.
ADDITIONAL AGREEMENTS
SECTION 8.01 Proxy Statement
(a) As
promptly as practicable after the delivery of the PCAOB Audited Financial Statements by the Company to Pensare, Pensare and shall prepare and file with the SEC a
proxy statement (as amended or supplemented, the "Proxy Statement") to be sent to the stockholders of Pensare relating to the meeting of Pensare's
stockholders (the "Pensare Stockholders' Meeting") to be held to consider approval and adoption of the business combination provided for in this
Agreement by approving and adopting (i) this Agreement and the Transactions, (ii) the amendments to the Pensare Certificate of Incorporation set forth in Exhibit A, (iii) the
issuance of Pensare Common Stock as contemplated by this Agreement and pursuant to the Private Placement (if any),
(iv) the Equity Plan and (v) a proposal to adjourn the Pensare Stockholders' Meeting, as necessary, to solicit additional proxies if there are not sufficient votes at the time of the
Pensare Stockholders' Meeting to approve the foregoing proposals, and (v) any other proposals the parties deem necessary to effectuate the Merger and the other Transactions or as may be
mutually agreed upon by Holdings and Pensare (collectively, the "Pensare Proposals"). Holdings and the Company shall furnish all information concerning
the Company as Pensare may reasonably request in connection with such actions and the preparation of the Proxy Statement. Pensare shall file the definitive Proxy Statement with the SEC and cause the
Proxy Statement to be mailed to its stockholders of record, as of the record date to be established by the board of directors of Pensare, as promptly as practicable (but in no event later than five
(5) Business Days) following the earlier to occur of: (Y) in the event the preliminary Proxy Statement is not reviewed by the SEC, the expiration of the waiting period in
Rule 14a-6(a) under the Exchange Act; or (Z) in the event the preliminary Proxy Statement is reviewed by the SEC, receipt of oral or written notification of the completion of the review
by the SEC.
(b) Pensare
covenants that none of the Pensare Board or any committee thereof shall withdraw or modify, or propose publicly or by formal action of the Pensare Board to
withdraw or modify, in a manner adverse to the Company, the Pensare Recommendation or the approval or recommendation by the Pensare Board of the Pensare Proposals and the Proxy Statement shall include
the Pensare Recommendation and the recommendation of the Pensare Board to the stockholders of Pensare in favor of the Pensare Proposals.
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(c) Prior
to filing with the SEC, Pensare will make available to Holdings drafts of the Proxy Statement and any other documents to be filed with the SEC, both preliminary
and final, and any amendment or supplement to the Proxy Statement or such other document and will provide Holdings with a reasonable opportunity to comment on such drafts and shall consider such
comments in good faith. Pensare shall not file any such documents with the SEC without the prior written consent of Holdings (such consent not to be unreasonably withheld, conditioned or delayed).
Pensare will advise Holdings promptly after it receives notice thereof, of: (A) the time when the Proxy Statement has been filed; (B) in the event the preliminary Proxy Statement is not
reviewed by the SEC, the expiration of the waiting period in Rule 14a-6(a) under the Exchange Act; (C) in the event the preliminary Proxy Statement is reviewed by the SEC, receipt of
oral or written notification of the completion of the review by the SEC; (D) the filing of any supplement or amendment to the Proxy Statement; (E) the issuance of any stop order by the
SEC; (F) any request by the SEC for amendment of the Proxy Statement; (G) any comments from the SEC relating to the Proxy Statement and responses thereto; and (H) requests by the
SEC for additional information. Prior to responding to any requests or comments from the SEC, Pensare will make available to Holdings drafts of any such response and provide the Company with a
reasonable opportunity to comment on such drafts.
(d) Pensare
represents that the information supplied by Pensare for inclusion in the Proxy Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of Pensare, (ii) the time of the Pensare Stockholders' Meeting, and (iii) the Effective Time, contain any untrue
statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were
made, not misleading. If, at any time prior to the Effective Time, any event or circumstance relating to Pensare or Merger Sub, or their respective officers or directors or otherwise supplied by
Pensare for inclusion in the Proxy Statement, should be discovered by Pensare which should be set forth in an amendment or a supplement to the Proxy Statement, so that such documents would not include
any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, Pensare shall
promptly inform Holdings. All documents that Pensare is responsible for filing with the SEC in
connection with the Merger or the other transactions contemplated by this Agreement, will comply as to form and substance in all material aspects with the applicable requirements of the Securities Act
and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. Pensare shall make all necessary filings, if any, with respect to the Transactions under the
Securities Act, the Exchange Act and applicable "blue sky" laws, and any rules and regulations thereunder.
(e) Holdings
and the Company represent that the information supplied by Holdings and the Company for inclusion in the Proxy Statement shall not, at (i) the time the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of Pensare, (ii) the time of the Pensare Stockholders' Meeting, and (iii) the
Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time prior to the Effective Time, any event or circumstance relating to Holdings, the Company or any Company Subsidiary, or their
respective officers or directors or otherwise supplied by Holdings or the Company for inclusion in the Proxy Statement, should be discovered by Holdings or the Company which should be set forth in an
amendment or a supplement to the Proxy Statement, so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, Holdings and the Company shall promptly inform Pensare. All documents that Holdings or the Company is responsible for
filing with the SEC in connection with the Merger or the other transactions
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contemplated
by this Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the
Exchange Act and the rules and regulations thereunder.
SECTION 8.02 Pensare Stockholders' Meetings; and Merger Sub and the Company Stockholder's Approval.
(a) Pensare
shall call and hold the Pensare Stockholders' Meeting as promptly as practicable for the purpose of voting solely upon the Pensare Proposals, and Pensare shall
use its reasonable best efforts to hold the Pensare Stockholders' Meeting within 30 Business Days following date the Proxy Statement is mailed to the stockholders of Pensare. Pensare shall use its
reasonable best efforts to obtain the approval of the Pensare Proposals at the Pensare Stockholders' Meeting, including by soliciting from its
stockholders proxies as promptly as possible in favor of the Pensare Proposals, and shall take all other action necessary or advisable to secure the required vote or consent of its stockholders
therefor.
(b) Promptly
following the execution of this Agreement, Pensare shall approve and adopt this Agreement and approve the Merger and the other Transactions, as the sole
stockholder of Merger Sub.
(c) Promptly
following the execution of this Agreement, Holdings shall approve and adopt this Agreement and approve the Merger and the other Transactions, as the sole
stockholder of the Company.
SECTION 8.03 Access to Information; Confidentiality.
(a) From
the date of this Agreement until the Effective Time, Holdings and Pensare shall (and shall cause their respective subsidiaries to): (i) provide to the other
party (and the other party's officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives, collectively,
"Representatives") reasonable access at reasonable times upon prior notice to the officers, employees, agents, properties, offices and other facilities
of such party and its subsidiaries and to the books and records thereof; and (ii) furnish promptly to the other party such information concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of such party and its subsidiaries as the other party or its Representatives may reasonably request. Notwithstanding the foregoing, neither Holdings nor
Pensare shall be required to provide access to or disclose information where the access or disclosure would jeopardize the protection of attorney-client privilege or contravene applicable Law (it
being agreed that the parties shall use their commercially reasonable efforts to cause such information to be provided in a manner that would not result in such jeopardy or contravention).
(b) All
information obtained by the parties pursuant to this Section 8.03 shall be kept confidential in accordance
with the confidentiality agreement, dated May 15, 2019 (the "Confidentiality Agreement"), between Pensare and Computex Technology Solutions,
which is a d/b/a for Computex, Inc.
(c) Notwithstanding
anything in this Agreement to the contrary, each party (and its Representatives) may consult any tax advisor regarding the tax treatment and tax
structure of the Transactions and may disclose to any other person, without limitation of any kind, the tax treatment and tax structure of the Transactions and all materials (including opinions or
other tax analyses) that are provided relating to such treatment or structure, in each case in accordance with the Confidentiality Agreement.
SECTION 8.04 Solicitation. From and after the date hereof until the
Effective Time or, if earlier, the valid termination of this Agreement in accordance with Section 10.01, Holdings and the Company shall not, and shall cause the Company Subsidiaries not to and
shall direct their respective
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Representatives
not to, (i) initiate, solicit, facilitate or encourage (including by way of furnishing non-public information), whether publicly or otherwise, any inquiries with respect to, or
the making of, any Acquisition Proposal, (ii) engage in any negotiations or discussions concerning, or provide access to its properties, books and records or any Confidential Information of the
Company or the Company Subsidiaries to, any person relating to an Acquisition Proposal, (iii) enter into, engage in and maintain discussions or negotiations with respect to any Acquisition
Proposal (or inquiries, proposals or offers or other efforts that would reasonably be expected to lead to any Acquisition Proposal) or otherwise cooperate with or assist or participate in, or
facilitate any such inquiries, proposals, offers, efforts, discussions or negotiations, (iv) amend or grant any waiver or release under any standstill or similar agreement with respect to any
class of equity securities of the Company or any of the Company Subsidiaries, (v) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Acquisition Proposal,
(vi) approve, endorse, recommend, execute or enter into any agreement in principle, letter of intent, memorandum of understanding, term sheet, acquisition agreement, merger agreement, option
agreement, joint venture agreement, partnership agreement or other contract relating to any Acquisition Proposal (each, a "Company Acquisition
Agreement") or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal, or (vii) resolve or agree to do any of the foregoing or
otherwise authorize or permit any of its Representatives to take any such action. Holdings and the Company shall, and shall instruct and cause the Company Subsidiaries and each of their respective
Representatives to immediately cease any solicitations, discussions or negotiations with any person (other than the parties hereto and their respective Representatives) in connection with an
Acquisition Proposal. Holdings and the Company shall promptly notify Pensare (and in any event within twenty-four hours) of the receipt of any Acquisition Proposal after the date hereof, which notice
shall identify the third party making any Acquisition Proposal and shall include a summary of the material terms and conditions of any material developments, discussions or negotiations in connection
therewith, and any material modifications to the financial or other terms and conditions of any such Acquisition Proposal.
SECTION 8.05 Employee Benefits Matters.
(a) During
the period commencing at the Closing Date and ending on the date which is twelve (12) months from the Closing Date (or if earlier, the date of the
employee's termination of employment with Pensare and its subsidiaries), Pensare shall cause the Surviving Corporation and each of its subsidiaries, as applicable, to provide the employees of the
Company and the Company Subsidiaries who remain employed immediately after the Effective Time (the "Continuing Employees") with annual
base salary or wage level, annual target bonus opportunities (excluding equity-based compensation), and employee benefits (excluding any retiree healthcare or defined benefit retirement benefits) that
are substantially similar and comparable, in the aggregate, to the annual base salary or wage level, annual target bonus opportunities (excluding equity-based compensation), and employee benefits
(excluding any retiree healthcare or defined benefit retirement benefits) provided by the Company and the Company Subsidiaries to the Continuing Employees immediately prior to the Closing Date. The
parties shall cooperate to establish an equity incentive award plan for the employees of the Surviving Corporation to be effective after the Closing (the "Equity
Plan").
(b) The
Continuing Employees shall receive credit for purposes of eligibility to participate, vesting and determining the level of benefits, as applicable, under any
employee benefit plan, program or arrangement established or maintained by the Surviving Corporation or any of its subsidiaries (including, without limitation, any employee benefit plan as defined in
Section 3(3) of ERISA and any vacation or other paid time-off program or policy) for service accrued or deemed accrued prior to the Effective Time with the Company or any Company Subsidiary; provided, however, that such crediting of service shall not operate to duplicate any benefit or the
funding of any such benefit. In addition, Pensare shall use commercially reasonable efforts to (i) cause to be
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waived
any eligibility waiting periods, any evidence of insurability requirements and the application of any pre-existing condition limitations under each of the employee benefit plans established or
maintained by the Surviving Corporation or any of its subsidiaries that cover the Continuing Employees or their dependents, and (ii) cause any eligible expenses incurred by any Continuing
Employee and his or her covered dependents, during the portion of the plan year in which the Closing occurs, under those health and welfare benefit plans in which such Continuing Employee currently
participates to be taken into account under those health and welfare benefit plans in which such Continuing Employee participates subsequent to the Closing Date for purposes of satisfying all
deductible, coinsurance, and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year. Following the Closing, Surviving
Corporation will honor all accrued but unused vacation and other paid time off of the Continuing Employees that existed immediately prior to the Closing.
SECTION 8.06 Directors' and Officers' Indemnification and Insurance.
(a) The
certificate of incorporation and by-laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification, advancement or
expense reimbursement than are set
forth in the by-laws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely
the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such modification shall be required by
applicable Law. Pensare further agrees that with respect to the provisions of the by-laws or limited liability company agreements of the Company Subsidiaries relating to indemnification, advancement
or expense reimbursement, such provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of such Company Subsidiary, unless such modification shall be required by
applicable Law.
(b) The
Surviving Corporation shall purchase and have in place at the Closing a "tail" or "runoff" policy (the "D&O Tail")
providing directors' and officers' liability insurance coverage for the benefit of those persons who are covered by the directors' and officers' liability insurance policies maintained by the Company
and the Company Subsidiaries as of the Closing with respect to matters occurring prior to the Effective Time. The D&O Tail shall provide for terms with respect to coverage, deductibles and amounts
that are no less favorable than those of the policy in effect immediately prior to the Effective Time for the benefit of the Company's and Company Subsidiaries' directors and officers, and shall
remain in effect for the six-year period following the Closing. Pensare shall, and shall cause the Surviving Corporation to, maintain the D&O Tail in full force and effect for its full term and cause
all obligations thereunder to be honored by the Surviving Corporation and its subsidiaries, as applicable, and no other party shall have any further obligation to purchase or pay for such insurance
pursuant to this Section 8.06(b).
(c) From
and after the Effective Time, the Surviving Corporation shall, and Pensare shall cause the Surviving Corporation and its subsidiaries to, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer or director of the Company or any of the Company Subsidiaries
(the "D&O Indemnified Parties") against any and all losses, damages, liabilities, deficiencies, claims, interest, awards, judgments, penalties, costs
and expenses (including reasonable attorneys' fees, costs and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) arising out of or relating to any threatened
or actual Action based in whole or in part on or arising out of or relating in whole or in part to the fact that such person is or was a director or officer of the Company or any of the Company
Subsidiaries, whether pertaining to any matter existing or occurring at or prior to the Closing Date and whether asserted or claimed prior to, or
49
at
or after, the Closing Date (the "D&O Indemnified Liabilities"), including all D&O Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or relating to this Agreement or the Transactions, in each case to the full extent permitted under applicable Law (and the Surviving Corporation shall, and Pensare shall cause
the Surviving Corporation and its subsidiaries to, pay expenses in advance of the final disposition of any such action or proceeding to each D&O Indemnified Party). Any D&O Indemnified Party wishing
to claim indemnification under this Section 8.06 shall notify the Surviving Corporation upon learning of any such Action (but the failure so to
notify shall not relieve a party from any liability which it may have under this Section 8.06 except to the extent such failure prejudices such
party). The parties agree that all rights to indemnification hereunder, including provisions relating to advances of expenses incurred in defense of any such action or suit, existing in favor of the
D&O Indemnified Parties with respect to matters occurring through the Closing Date shall continue in full force and effect for a period of not less than six years from the Closing Date; provided,
however, that all rights to indemnification in respect of any D&O Indemnified Liabilities asserted or made within such period shall continue until the disposition of such D&O Indemnified Liabilities.
(d) Pensare
covenants, for itself and its successors and assigns, including the Surviving Corporation and its subsidiaries, that it and they shall not institute any Action
in any court or before any administrative agency or before any other tribunal against any of the current and former directors of the Company or the Company Subsidiaries, in their capacity as such or
as officers of the Company or any Company Subsidiaries, with respect to any liabilities, actions or causes of action, judgments, claims or demands of any nature or description (consequential,
compensatory, punitive or otherwise), in each such case to the extent resulting from their status of a director or officer of the Company or one of the Company Subsidiaries.
SECTION 8.07 Notification of Certain Matters. Holdings and the
Company shall give prompt notice to Pensare, and Pensare shall give prompt notice to Holdings and the Company, of any event which a party becomes
aware of between the date of this Agreement and the Closing (or the earlier termination of this Agreement in accordance with Article X), the
occurrence, or non-occurrence of which causes or would reasonably be expected to cause any of the conditions set forth in Article IX to fail.
SECTION 8.08 Further Action; Reasonable Best Efforts
(a) Upon
the terms and subject to the conditions of this Agreement, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken,
appropriate action, and to do, or cause to be done, such things as are necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective the Transactions, including,
without limitation, using its reasonable best efforts to obtain all permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with
the Company and the Company Subsidiaries as set forth in Section 9.02(j) necessary for the consummation of the Transactions and to fulfill the
conditions to the Merger. In case, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of
each party shall use their reasonable best efforts to take all such action.
(b) Each
of the parties shall keep each other apprised of the status of matters relating to the Transactions, including promptly notifying the other parties of any
communication it or any of its affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement and permitting the other parties to review in advance,
and to the extent practicable consult about, any proposed communication by such party to any Governmental Authority in connection with the Transactions. No party to this Agreement shall agree to
participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry
50
unless
it consults with the other parties in advance and, to the extent permitted by such Governmental Authority, gives the other parties the opportunity to attend and participate at such meeting.
Subject to the terms of the Confidentiality Agreement, the parties will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other parties
may reasonably request in connection with the foregoing. Subject to the terms of the Confidentiality Agreement, the parties will provide each other with copies of all material correspondence, filings
or communications, including any documents, information and data contained therewith, between them or any of their Representatives, on the one hand, and any Governmental Authority or members of its
staff, on the other hand, with respect to this Agreement and the Transactions contemplated hereby. No party shall take or cause to be taken any action before any Governmental Authority that is
inconsistent with or intended to delay its action on requests for a consent or the consummation of the Transactions.
SECTION 8.09 Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been agreed to by each of Pensare and Holdings.
Thereafter, between the date of this Agreement and the Closing Date (or the earlier termination of this Agreement in accordance with Article X)
unless otherwise prohibited by applicable Law or the requirements of the Nasdaq Capital Market, each of Pensare and Holdings shall each use its reasonable best efforts to consult with each other
before issuing any press release or otherwise making any public statements with respect to this Agreement, the Merger or any of the other Transactions, and shall not issue any such press release or
make any such public statement without the prior written consent of the other party. Furthermore, nothing contained in this Section 8.09 shall
prevent Pensare or Holdings and/or its respective affiliates from furnishing customary or other reasonable information concerning the Transactions to their investors and prospective investors.
SECTION 8.10 Pensare Management. Prior to the Closing, Pensare and
Holdings shall cooperate in good faith to select additional persons that are mutually acceptable to Pensare and Holdings to be
appointed at Closing to senior managements positions at Pensare and the Surviving Corporation (in addition to the persons being appointed as officers of Pensare and the Surviving Corporation pursuant
to Section 2.05).
SECTION 8.11 Trust Account. As of the Effective Time, the obligations
of Pensare to dissolve or liquidate within a specified time period as contained in Pensare's Certificate of
Incorporation will be terminated and Pensare shall have no obligation whatsoever to dissolve and liquidate the assets of Pensare by reason of the consummation of the Merger or otherwise, and no
stockholder of Pensare shall be entitled to receive any amount from the Trust Account. At least 48 hours prior to the Effective Time, Pensare shall provide notice to the Trustee in accordance
with the Trust Agreement and shall deliver any other documents, opinions or notices required to be delivered to the Trustee pursuant to the Trust Agreement and cause the Trustee prior to the Effective
Time to, and the Trustee shall thereupon be obligated to, transfer all funds held in the Trust Account to Pensare and thereafter shall cause the Trust Account and the Trust Agreement to terminate.
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SECTION 8.12 Resale Registration Statement. Within five
(5) Business Days following the Closing Date, Pensare shall prepare and file or cause to be prepared and filed with the SEC, a registration
statement on Form S-3 or such other applicable form (as amended or supplemented from time to time, the "Registration Statement"), in connection
with the registration under the Securities Act of an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act, registering the resale from time-to-time of the shares
of Pensare Common Stock issued to Holdings pursuant to this Agreement (including any such shares of Pensare Common Stock transferred by Holdings to its members) (the
"Registrable Securities"). Pensare shall use its reasonable best efforts to cause the Registration Statement to comply with the rules and regulations
promulgated by the SEC, including providing any necessary opinions of counsel, and to have the Registration Statement declared effective under the Securities Act. Notwithstanding the foregoing,
Pensare's obligations under this Section 8.12 are contingent upon Holdings (and any members of Holdings to which Holdings transferred Registrable
Securities) furnishing in writing to Pensare such information regarding Holdings (or such members of Holdings), the securities of Pensare held by Holdings (or its affiliates) and the intended method
of disposition of the Registrable Securities as shall be reasonably requested by Pensare to effect the registration of such Registrable Securities, and shall execute such documents in connection with
such registration as Pensare may reasonably request that are customary of a selling stockholder in similar situations. Pensare shall use reasonable best efforts to cause the Registration Statement to
be declared effective as soon as possible after filing, but in no event later than sixty (60) days following the filing deadline (the "Effectiveness
Deadline"); provided, that the Effectiveness Deadline shall be extended to ninety (90) days after the filing deadline if the Registration Statement is reviewed by, and
receives comments from, the staff of the SEC. Once effective, Pensare shall use reasonable best efforts to keep the Registration Statement continuously effective and to be supplemented and amended to
the extent necessary to ensure that such Registration Statement is available for the resale of the Registrable Securities; provided, however, that as to
any particular Registrable Securities, such securities shall cease to be Registrable Securities (and Pensare shall have no further
obligations to maintain the effectiveness of the Registration Statement with respect thereto) when: (a) such securities shall have been sold, transferred, disposed of or exchanged in accordance
with the Registration Statement (or another registration statement filed under the Securities Act); (b) such securities shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by Pensare and subsequent public distribution of them shall not require registration under the Securities Act; (c) such
securities shall have ceased to be outstanding; or (d) such securities are freely saleable under Rule 144 without volume or manner of sale limitations. Pensare shall bear its own costs
and expenses associated with its obligations under this Section 8.12.
SECTION 8.13 Tax Matters. Each of Pensare, Merger Sub and the Company
shall use their respective commercially reasonable efforts to cause the Merger to qualify, and agree not to, and not
to permit or cause any of their affiliates or subsidiaries to, take any action which to its knowledge could reasonably be expected to prevent or impede the Merger from qualifying, as a reorganization
within the meaning of Section 368(a) of the Code. This Agreement is intended to constitute, and the parties hereto hereby adopt this Agreement as, a "plan of reorganization" within the meaning
of Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). Each of Pensare, Merger Sub and the Company shall report the Merger as a reorganization within the meaning of Section 368(a) of
the Code unless otherwise required pursuant to a "determination" within the meaning of Section 1313(a) of the Code, including attaching the statement described in Treasury Regulations
Section 1.368-3(a) on or with its Tax Return for the taxable year of the Merger.
SECTION 8.14 PCAOB Audited Financials. Holdings and the Company shall
use reasonable best efforts to deliver true and complete copies of the audited consolidated balance sheet of the Company and the
consolidated Company Subsidiaries as of December 31, 2016, December 31, 2017 and December 31, 2018, and the related audited consolidated statements of income and cash flows of the
Company and the consolidated Company Subsidiaries for such years, each audited in accordance
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with
the auditing standards of the PCAOB (collectively, the "PCAOB Audited Financials") not later than August 1, 2019.
SECTION 8.15 Stock Exchange Listing. Pensare will use its reasonable
best efforts to cause the Stock Consideration or, if determined to be appropriate by Pensare and Holdings or otherwise listed in
connection with the Private Placement of PIPE Securities, the Pensare Securities, issued in connection with the Transactions to be approved for listing on the Nasdaq Capital Market at Closing. During
the period from the date hereof until the Closing, Pensare shall use its reasonable best efforts to keep the Pensare Units, Pensare Common Stock, Pensare Rights and Pensare Warrants listed for trading
on the Nasdaq Capital Market.
SECTION 8.16 Contact with Customers, Suppliers and other Business Relations. From the date hereof until the Closing Date, Pensare and Merger Sub shall not, and shall cause their affiliates not to, and shall direct their Representatives not
to, contact or communicate with any customers, suppliers, distributors or licensors of the Company or the Company Subsidiaries or any other persons having a business relationship with the Company or
the Company Subsidiaries regarding the Transactions without the prior written consent of Holdings or the Company (which shall not be unreasonably withheld, delayed or conditioned). Pensare and its
Representatives may freely contact the Company's employees set forth on Section 8.16 of the Company Disclosure Schedule (the
"Management Team") to discuss the post-Closing transition relating to the Transactions and may contact other employees of the Company to discuss the
post-Closing transition relating to the transactions contemplated hereby only with the consent of an individual from the Management Team (which shall not be unreasonably withheld, delayed or
conditioned).
SECTION 8.17 Extension. If, by November 1, 2019, Pensare and
Holdings determine that that the Closing is unlikely to be consummated on or before December 1, 2019 (the
"First Expiration Date"), then Pensare shall take all actions necessary to obtain the approval of the stockholders of Pensare to extend the deadline for
Pensare to consummate its initial Business Combination (the "Extension") to a date after the First Expiration Date but prior to the Outside Date in
accordance with the Pensare Organizational Documents. Pensare shall use its reasonable best efforts to obtain stockholder approval for any and all required Extensions during the term of this
Agreement.
SECTION 8.18 Release. Effective upon and following the Closing,
Pensare, on its own behalf and on behalf of its affiliates, Related Parties, Representatives, successors and assigns
claiming through or by Pensare, generally, absolutely, irrevocably, unconditionally and completely releases and forever discharges Holdings and each of its affiliates, Related Parties,
Representatives, successors and assigns (collectively, the "Stockholder Released Parties") from all disputes, claims, losses, controversies, demands,
rights, liabilities, actions and causes of action of every kind and nature, whether known or unknown, arising from any matter concerning any of Holdings, the Company or any Company Subsidiary
occurring prior to the Closing Date (other than as contemplated by this Agreement), including for controlling equityholder liability or breach of any fiduciary duty relating to any pre-Closing actions
or failures to act by the Stockholder Released Parties; provided, however, that nothing in this Section 8.18 shall release Holdings or the Company or any Company Subsidiary from their obligations under this Agreement or the other Ancillary
Agreements.
SECTION 8.19 Guarantees and Security Interests relating to Holdings. Promptly following the execution of this Agreement, Pensare and the Company shall use commercially reasonable efforts to release Holdings from any corporate
guaranty or security agreement to which it is a party that has been provided to any person in connection with the operation of the business of the Company and the Company Subsidiaries (collectively,
the "Guarantees"). If Pensare and the Company fail to release any Guarantees (other than those required to be released at Closing pursuant to Section 9.03(i)), and any claims are made on any such Guarantees for matters involving the Company or a Company Subsidiary that occur after the
Closing, Pensare and Merger Sub shall, on a joint and several basis, defend,
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indemnify
and hold Holdings harmless from and against any and all damages, losses and expenses resulting from such claims.
ARTICLE IX.
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party. The obligations of
Holdings, Company, Pensare and Merger Sub to consummate the Transactions, including the Merger, are subject to the satisfaction or waiver
(where permissible) at or prior to the Closing of the following conditions:
(a) Pensare Stockholder Approval. The Pensare Proposals shall have been approved and adopted by the requisite
affirmative vote of the stockholders of Pensare in accordance with the Proxy Statement, the DGCL, the Pensare Organizational Documents and the rules and regulations of the Nasdaq Capital Market.
(b) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law,
rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Transactions, including the Merger, illegal or otherwise prohibiting consummation
of the Transactions, including the Merger.
(c) Available Cash. After giving effect to (i) the exercise of the Redemption Rights and payments related
thereto and (ii) the sale and issuance by Pensare of Pensare Common Stock or other PIPE Securities of Pensare, if any, between the date of this Agreement and the Effective Time, Pensare shall
have at least an aggregate of $35 million of cash held either in or outside of the Trust Account.
SECTION 9.02 Conditions to the Obligations of Pensare and Merger Sub. The obligations of Pensare and Merger Sub to consummate the Transactions, including the Merger, are subject to the satisfaction or waiver (where permissible) at
or prior to the Closing of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of (i) Holdings and the Company
contained in Section 4.01 (Organization and Qualification; Subsidiaries), Section 4.03
(Capitalization), Section 4.04 (Authority Relative to this Agreement), Section 4.18 (Board
Approval; Vote Required),
Section 4.26 (Brokers), and (ii) Holdings contained in Section 5.01 (Corporation Organization), Section 5.02 (Authority Relative to this
Agreement), Section 5.04 (Board Approval; Vote
Required) and Section 5.06 (Brokers), shall each be true and correct in all respects as of the Closing Date as though made on the Closing Date
(but giving effect to any limitation as to "materiality" or "Company Material Adverse Effect" or any similar limitation set forth therein), except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date. All other representations and warranties of Holdings
and the Company contained in this Agreement shall be true and correct (without giving any effect to any limitation as to "materiality" or "Company Material Adverse Effect" or any similar limitation
set forth therein) in all respects as of the Closing Date, as though made on and as of the Closing Date, except (i) to the extent that any such representation and warranty expressly speaks as
of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date and (ii) where the failure of such representations and warranties to be true
and correct (whether as of the Closing Date or such earlier date), taken as a whole, does not cause a Company Material Adverse Effect.
(b) Agreements and Covenants. Holdings and the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
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(c) Officer Certificate. Holdings and the Company shall have delivered to Pensare a certificate, dated the date
of the Closing, signed by an officer of Holdings and the Company, certifying as to the satisfaction of the conditions specified in Sections 9.02(a), 9.02(b) and
9.02(d).
(d) Material Adverse Effect. Since the date of this Agreement, no Company Material Adverse Effect shall have
occurred.
(e) Resignation. Other than those persons who Pensare has identified as continuing directors, all members of the
Company Board and the Board of Directors of the Company Subsidiaries shall have executed written resignations effective as of the Effective Time.
(f) Stock Exchange Listing. The shares of Pensare Common Stock shall be listed on the Nasdaq Capital Market as
of the Closing Date.
(g) Ancillary Agreements. Holdings and Company, as applicable, shall deliver, or cause to be delivered, to
Pensare duly executed copies of the Ancillary Agreements to which it is a party.
(h) FIRPTA Tax Certificates. On or prior to the Closing, the Company shall deliver to Pensare a properly
executed certification that shares of Company Common Stock are not "U.S. real property interests" in accordance with the Treasury Regulations under Sections 897 and 1445 of the Code, together
with a notice to the IRS (which shall be filed by Pensare with the IRS following the Closing) in accordance with the provisions of Section 1.897-2(h)(2) of the Treasury Regulations.
(i) PCAOB Audited Financials. The Company shall have delivered to Pensare the PCAOB Audited Financials.
(j) Third Party Consents. All consents from third parties under any Material Contract to which the Company or
any Company Subsidiary is a party or by which it is bound required as a result of the transactions contemplated by this Agreement shall have been obtained from such third parties.
SECTION 9.03 Conditions to the Obligations of Holdings and the Company. The obligations of Holdings and the Company to consummate the Transactions, including the Merger, are subject to the satisfaction or waiver (where permissible) at
or prior to Closing of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of Pensare and Merger Sub contained in Section 6.01 (Corporate Organization), Section 6.03 (Capitalization), Section 6.04 (Authority Relative to this Agreement) Section 6.10 (Board Approval; Vote
Required), and Section 6.16 (Brokers), shall be true and correct in all respects as of the Closing Date as though made on the Closing Date (but
giving effect to any limitation as to "materiality" or "Pensare Material Adverse Effect" or any similar limitation set forth therein), except to the extent that any such representation and warranty
expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date. All other representations and warranties of Pensare and Merger
Sub contained in this Agreement shall be true and correct (without giving any effect to any limitation as to "materiality" or "Pensare Material Adverse Effect" or any similar limitation set forth
herein) in all respects as of the Closing Date, as though made on and as of the Closing Date, except (i) to the extent that any such representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall be true and correct as of such earlier date and (ii) where the failure of such representations and warranties to be true and
correct (whether as of the Closing Date or such earlier date), taken as a whole, does not cause a Pensare Material Adverse Effect.
(b) Agreements and Covenants. Pensare and Merger Sub shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
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(c) Officer Certificate. Pensare shall have delivered to Holdings a certificate, dated the date of the Closing,
signed by the President of Pensare, certifying as to the satisfaction of the conditions specified in Sections 9.03(a), 9.03(b), 9.03(d) and 9.03(i).
(d) Material Adverse Effect. Since the date of this Agreement, no Pensare Material Adverse Effect shall have
occurred.
(e) Disbursement of Trust Account. Pensare shall have made all necessary and appropriate arrangements with the
Trustee to have all of the funds contained in the Trust Account disbursed to Pensare immediately prior to the Effective Time, and all such funds release from the Trust Account shall be available to
Pensare.
(f) Stock Exchange Listing. A supplemental listing shall have been filed with the Nasdaq Capital Market as of
the Closing Date to list the shares constituting the Stock Consideration.
(g) Ancillary Agreements. Each of Pensare and Merger Sub shall deliver, or cause to be delivered, to Holdings
and the Company a duly executed copy of the Ancillary Agreements to which it is a party.
(h) Telecommunications Contract. Pensare shall have provided to Holdings the Telecommunications Contract, duly
executed by all parties thereto, and such contract shall be in full force and effect without any breach by the parties thereto as of the Closing.
(i) Releases. Pensare shall have provided to Holdings written releases from all third parties that are a party
to the agreements set forth in Section 9.03(i) of the Company Disclosure Schedule, releasing Holdings from all obligations or liabilities under
such agreements and terminating all security interests and other Liens with respect to Holdings contemplated in such agreements.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the Transactions by the stockholders of the Company or Pensare, as follows:
(a) by
mutual written consent of Pensare and Holdings; or
(b) by
either Pensare or Holdings if the Effective Time shall not have occurred prior to April 1, 2020 (the "Outside
Date"); provided, however, that this Agreement may not be terminated under this Section 10.01(b) by or on behalf of any party
that either directly or indirectly through its affiliates is in breach or violation of any
representation, warranty, covenant, agreement or obligation contained herein and such breach or violation is the principal cause of the failure of a condition set forth in Article IX on or prior to
the Outside Date; or
(c) by
either Pensare or Holdings if any Governmental Authority in the United States shall have enacted, issued, promulgated, enforced or entered any injunction, order,
decree or ruling (whether temporary, preliminary or permanent) which has become final and nonappealable and has the effect of making consummation of the Transactions, including the Merger, illegal or
otherwise preventing or prohibiting consummation of the Transactions, the Merger; or
(d) by
either Pensare or Holdings if any of the Pensare Proposals shall fail to receive the requisite vote for approval at the Pensare Stockholders' Meeting duly convened
therefor or at any adjournment or postponement thereof; or
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(e) by
Pensare upon a breach of any representation, warranty, covenant or agreement on the part of Holdings or the Company set forth in this Agreement, or if any
representation or warranty of Holdings or the Company shall have become untrue, in either case such that the conditions set forth in Sections 9.02(a) and 9.02(b)
would not be satisfied ("Terminating Company
Breach"); provided that Pensare has not waived such Terminating Company Breach and Pensare and Merger Sub are not then in
material breach of their representations, warranties, covenants or agreements in this Agreement; provided further that, if such Terminating Company
Breach is curable by Holdings or the Company, Pensare may not terminate this Agreement under this Section 10.01(e) for so long as Holdings and
the Company continues to exercise its reasonable efforts to cure such breach, unless such breach is not cured within thirty (30) days after notice of such breach is provided by Pensare to
Holdings; or by Pensare if there shall have occurred a Company Material Adverse Effect after the date of this Agreement;
(f) by
Holdings upon a breach of any representation, warranty, covenant or agreement on the part of Pensare and Merger Sub set forth in this Agreement, or if any
representation or warranty of Pensare and Merger Sub shall have become untrue, in either case such that the conditions set forth in Sections 9.03(a) and 9.03(b)
would not be satisfied ("Terminating Pensare
Breach"); provided that Holdings or the Company has not waived such Terminating Pensare Breach and Holdings and the Company are
not then in material breach of their representations, warranties, covenants or agreements in this Agreement; provided, however, that, if such Terminating
Pensare Breach is curable by Pensare and Merger Sub, Holdings may not terminate this Agreement under this Section 10.01(f) for so long as Pensare and Merger Sub continue to exercise their
reasonable efforts to cure such breach, unless such breach is
not cured within thirty (30) days after notice of such breach is provided by Holdings to Pensare; or by Holdings if there shall have occurred a Pensare Material Adverse Effect after the date of
this Agreement;
(g) by
Pensare if the PCAOB Audited Financial Statements shall not have been delivered to Pensare by the Company on or before August 2, 2019; or
(h) by
either Pensare or the Company if Pensare shall have failed to obtain an Extension required pursuant to Section 8.17 prior to the consummation of the Transactions.
SECTION 10.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 10.01, this Agreement shall forthwith
become void, and there shall be no liability under this Agreement on the part of any party hereto, except as set forth in Section 8.09, Section 10.02, Section 10.03, Section 11.01, Section 11.05, Section 11.06 and Section 11.07 or in the case of termination subsequent to a willful or
intentional material breach of this Agreement by a party hereto.
SECTION 10.03 Expenses. Except as set forth in this Section 10.03 or elsewhere in this Agreement, all Expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not the Merger or any other Transaction is consummated, except that Pensare shall
pay, whether or not the Transactions are consummated, all (i) Expenses of the parties relating to preparing, printing, filing and mailing the Proxy Statement, (ii) Expenses relating to
all SEC and other regulatory filing fees incurred in connection with the Proxy Statement, and (iii) reasonable Expenses relating to legal, accounting and other professional advisor fees (not
including investment banking or broker fees) incurred by Holdings and the Company in connection with this Agreement and the Transactions contemplated herein, the audit and review of the Company's
financial statements, 409A valuations and the preparation of portions of the Proxy Statement, and in connection therewith, Pensare has funded an escrow account with $500,000 to pay such Expenses of
Holdings and the Company. Reimbursements of such Expenses shall be made from such escrow account within five (5) Business Days of the Company's written request (with invoices) and Pensare's
approval thereof (which shall not be unreasonably withheld, conditioned or delayed). Until the termination of this Agreement, each time such escrow funds are reduced to $100,000, Pensare shall
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replenish
the account back to such amount as shall be sufficient to pay all remaining Expenses of Holdings and the Company required to be reimbursed pursuant to this Section 10.03 (as reasonably determined
by the Company and Pensare). For avoidance of doubt, neither Holdings nor the Company shall be obligated
to pay back any Expenses paid by Pensare in the event the Transactions are not consummated. "Expenses", as used in this Agreement, shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and
mailing of the Proxy Statement, the solicitation of stockholder approvals, and all other matters related to the Closing of the Merger and the other Transactions.
SECTION 10.04 Amendment. This Agreement may be amended in writing by
the parties hereto at any time prior to the Effective Time. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto.
SECTION 10.05 Waiver. At any time prior to the Effective Time,
(i) Pensare may (a) extend the time for the performance of any obligation or other act of Holdings or the
Company, (b) waive any inaccuracy in the representations and warranties of Holdings or the Company contained herein or in any document delivered by Holdings or the Company pursuant hereto and
(c) waive compliance with any agreement of Holdings or the Company or any condition to its own obligations contained herein and (ii) Holdings may (a) extend the time for the
performance of any obligation or other act of Pensare or Merger Sub, (b) waive any inaccuracy in the representations and warranties of Pensare or Merger Sub contained herein or in any document
delivered by Pensare and/or Merger pursuant hereto and (c) waive compliance with any agreement of Pensare or Merger Sub or any condition to its own obligations contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.01 Non-Survival of Representations, Warranties and Agreements. The representations, warranties, agreements and covenants to be performed prior to or at the Effective Time in this Agreement and in any certificate delivered
pursuant hereto shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 10.01, as the case may be, except
that the agreements set forth in Article II and Article III and Sections 8.05, 8.06, 8.09, 8.11, 8.12, 8.13, 8.18 and 8.19 and this Article XI shall survive
the Effective Time and the provisions of Sections 8.03(b) and Section 10.03 and this Article XI shall survive the termination of this Agreement.
SECTION 11.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by email or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this Section 11.02):
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Pensare Acquisition Corp.
1720 Peachtree Street, Suite 629
Atlanta, GA 30309
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Attention:
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Dr. Robert Willis
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Email:
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rw@pensaregrp.com
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Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
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Attention:
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Alan I. Annex, Esq.
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Email:
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annexa@gtlaw.com
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Stratos Management Systems Holdings, LLC
5355 W. Sam Houston Pkwy N
Suite 390
Houston, Texas 77041-5235
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Facsimile No:
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(713) 780-7348
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Telephone No:
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(713) 331-4250
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Attention:
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Sam Haffar
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Email:
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shaffar@computex-inc.com
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Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
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Facsimile No:
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(713) 236-5432
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Telephone No:
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(713) 547-2208
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Attention:
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Ricardo Garcia-Moreno, Esq.
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Email:
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Ricardo Garcia-Moreno@haynesboone.com
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SECTION 11.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent
possible.
SECTION 11.04 Entire Agreement; Assignment. This Agreement and the
Ancillary Agreements constitute the entire agreement among the parties with respect to the subject matter hereof and supersede, except as
set forth in Section 8.03(b), all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to
the subject matter hereof, except for the Confidentiality Agreement. This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise) by any party without the
prior express written consent of the other parties hereto.
SECTION 11.05 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 8.06 (which is intended to be for the benefit of
the persons covered thereby and may be enforced by such persons).
SECTION 11.06 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed
in that State. All legal actions and proceedings arising out of or relating to this Agreement
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shall
be heard and determined exclusively in any Delaware Chancery Court; provided, that if jurisdiction is not then available in the Delaware Chancery
Court, then any such legal Action may be brought in any federal court located in the State of Delaware or any other Delaware state court. The parties hereto hereby (a) irrevocably submit to the
exclusive jurisdiction of the aforesaid courts for themselves and with respect to their respective properties for the purpose of any Action arising out of or relating to this Agreement brought by any
party hereto, and (b) agree not to commence any Action relating thereto except in the courts described above in Delaware, other than Actions in any court of competent jurisdiction to enforce
any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of
process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or
as a defense, counterclaim or otherwise, in any Action arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to
the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that
(i) the Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
SECTION 11.07 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any litigation
directly or indirectly arising out of, under or in connection with this Agreement or the Transactions. Each of the parties hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the
other hereto have been induced to enter into this Agreement and the Transactions, as applicable, by, among other things, the mutual waivers and certifications in this Section 11.07.
SECTION 11.08 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
SECTION 11.09 Counterparts. This Agreement may be executed and
delivered (including by facsimile or portable document format (pdf) transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
SECTION 11.10 Specific Performance. The parties agree that
irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof, and, accordingly,
that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the
parties' obligation to consummate the Merger) in the Court of Chancery of the State of Delaware or, if that court does not have jurisdiction, any court of the United States located in the State of
Delaware without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity as expressly permitted in this Agreement. Each of the parties
hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a
prerequisite to obtaining equitable relief.
SECTION 11.11 Legal Representation. Pensare, Merger Sub, the Company
and their respective affiliates acknowledge and agree that Haynes and Boone, LLP
("H&B") has acted as counsel for Holdings, the Company and the Company Subsidiaries for several years and that Holdings reasonably
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anticipates
that H&B will continue to represent Holdings in future matters. Accordingly, Pensare, Merger Sub, the Company and their respective affiliates expressly consent to H&B representation of
Holdings in any post-Closing matter in which the interests of Pensare, Merger Sub, the Surviving Corporation and the Company Subsidiaries, on the one hand, and Holdings, on the other hand, are
adverse, including, without limitation, any matter relating to the Transactions or any disagreement or dispute relating thereto, and whether or not such matter is one in which H&B may have previously
advised Holdings, the Company, the Company Subsidiaries or their respective affiliates. Furthermore, Pensare, Merger Sub, the Surviving Corporation, the Company and the Company Subsidiaries
irrevocably waive (and Pensare shall cause all such persons to irrevocably waive) any right they may have to discover or obtain information or documentation relating to the representation of Holdings,
the Company or the Company Subsidiaries by H&B in the Transactions, to the extent that such information or documentation was privileged as to Holdings or any of its affiliates, and such parties agree
they shall not try to obtain any such information or documentation under any process. Pensare, Merger Sub, the Surviving Corporation, the Company, the Company Subsidiaries and their respective
affiliates further covenant and agree that each such party shall not assert (and Pensare shall cause all such person not to assert) any claim against H&B in respect of legal services provided to the
Company, the Company Subsidiaries or their affiliates by H&B in connection with this Agreement or the Transactions. Upon and after the Closing, the Surviving Corporation and the Company Subsidiaries
shall cease to have any attorney-client relationship with H&B, unless and to the extent H&B is specifically engaged in writing by the Surviving Corporation to represent the Surviving Corporation after
the Closing and either such engagement involves no conflict of interest with respect to Holdings or Holdings consents in writing to such representation at the time to such engagement. Any such
representation of the Surviving Corporation by H&B after the Closing shall not affect the foregoing provisions hereof. Pensare, Merger Sub, the Surviving Corporation, the Company Subsidiaries and
their affiliates acknowledge and agree
that Holdings is the only party with the right to assert or waive an attorney-client privilege with respect to any communication between Holdings, the Company, the Company Subsidiaries and/or their
affiliates and any person representing them that occurred at any time prior to the Closing, and therefore such privilege cannot be waived without the prior written consent of Holdings in its sole
discretion.
SECTION 11.12 Limitation of Damages. Notwithstanding anything in this
Agreement to the contrary, no party hereto shall be liable to any other party hereto for any punitive, consequential or special
damages or damages based on any type of multiple relating to the breach or alleged breach of this Agreement.
[Signature
Page Follows.]
61
IN
WITNESS WHEREOF, Pensare, Merger Sub, Holdings and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly
authorized.
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PENSARE ACQUISITION CORP.
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By
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/s/ DARRELL J. MAYS
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Name:
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Darrell J. Mays
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Title:
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CEO
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TANGO MERGER SUB CORP.
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By
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/s/ DARRELL J. MAYS
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Name:
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Darrell J. Mays
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Title:
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CEO
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STRATOS MANAGEMENT SYSTEMS HOLDINGS, LLC
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By
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/s/ SAM HAFFAR
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Name:
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Sam Haffar
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Title:
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President and Chief Executive Officer
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STRATOS MANAGEMENT SYSTEMS, INC.
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By
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/s/ SAM HAFFAR
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Name:
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Sam Haffar
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Title:
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President and Chief Executive Officer
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[Signature Page to Business Combination Agreement]
EXHIBIT A
Amended and Restated Certificate of Incorporation of Pensare
[see attached]
Exhibit A-1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PENSARE ACQUISITION CORP.
,
2020
Pensare
Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY AS FOLLOWS:
1. The
name of the Corporation is "Pensare Acquisition Corp." The original certificate of incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware (the "Secretary of State") on April 7, 2016 (the "Original
Certificate"). The first certificate of amendment of the Original Certificate was filed with the Secretary of State on May 10, 2016. The second certificate of amendment
of the Original Certificate was filed with the Secretary of State on December 19, 2016. The third certificate of amendment of the Original Certificate was filed with the Secretary of State on
May 11, 2017. The Amended and Restated Certificate of Incorporation (the "First Amended and Restated
Certificate"), was filed on July 27, 2017 which both restates and amends the provisions of the Original Certificate, as amended.
2. This
Second Amended and Restated Certificate of Incorporation (the "Second Amended and Restated Certificate"), which both
restates and amends the provisions of the First Amended and Restated Certificate, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of
Delaware and by the affirmative vote of the Corporation's stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware (the
"DGCL").
3. The
text of the First Amended and Restated Certificate is hereby restated and amended in its entirety to read as follows:
ARTICLE I
NAME
The
name of the corporation is [ ] (the "Corporation").
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. In addition to
the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or
convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.
ARTICLE III
REGISTERED AGENT
The street address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New
Castle, State of Delaware 19801, and the name of the Corporation's registered agent at such address is The Corporation Trust Company.
Exhibit A-2
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital Stock.
The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 505,000,000 shares, consisting of
(a) 500,000,000 shares of common stock, par value $0.0001 per share (the "Common Stock"), and (b) 5,000,000 shares of preferred stock, par
value $0.0001 per share (the "Preferred Stock").
Section 4.2 Preferred Stock.
The Board of Directors of the Corporation (the "Board") is hereby expressly authorized to provide out of the unissued shares of the
Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations,
powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the
resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a "Preferred Stock
Designation") filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such
resolution or resolutions.
Section 4.3 Common Stock.
(a) Except
as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock
shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the stockholders generally are entitled to vote.
(b) Except
as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the
stockholders of the Corporation, the holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the
stockholders, and no holder of any series of Preferred Stock, as such, shall be entitled to any voting powers in respect thereof. Notwithstanding the foregoing, except as otherwise required by law or
this Second Amended and Restated Certificate (including a Preferred Stock Designation), the holders of the Common Stock shall not be entitled to vote on any amendment to this Second Amended and
Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such
affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any
Preferred Stock Designation) or the DGCL.
(c) Subject
to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of the Common Stock shall be entitled to
receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or
funds of the Corporation legally available therefor, and shall share equally on a per share basis in such dividends and distributions.
(d) Subject
to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the Common Stock shall be
entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them.
Exhibit A-3
Section 4.4 Rights and Options.
The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any
class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise
and other terms and conditions of such rights, warrants or options; provided, however, that the
consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Board Powers.
The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by
statute, this Second Amended and Restated Certificate or the Bylaws of the Corporation ("Bylaws"), the Board is hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Second Amended and Restated Certificate, and the
Bylaws.
Section 5.2 Number, Election and Term.
(a) The
number of directors of the Corporation shall be not less than three, with at least one director in each of Class I, Class II and Class III. The
exact number of directors shall be fixed from time to time by the action of a majority of the entire Board, provided that no decrease in the number of directors shall shorten the term of any incumbent
director.
(b) Subject
to Section 5.5 hereof, the Board shall be divided into three classes, as nearly equal in number as
possible and designated Class I, Class II and Class III. The Board is authorized to assign members of the Board already in office to Class I, Class II or
Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended
and Restated Certificate; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the effectiveness of this Second
Amended and Restated Certificate; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of
this Second Amended and Restated Certificate. At each succeeding annual meeting of the stockholders of
the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate, successors to the class of
directors whose term expires at that annual meeting shall be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier
death, resignation or removal. Subject to Section 5.5 hereof, if the number of directors is changed, any increase or decrease shall be
apportioned by the Board among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the
term of any incumbent director. The Board is hereby expressly authorized, by resolution or resolutions thereof, to assign members of the Board already in office to the aforesaid classes at the time
this Second Amended and Restated Certificate (and therefore such classification) becomes effective in accordance with the DGCL.
(c) Subject
to Section 5.5 hereof, a director shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor has been elected and qualified, subject, however, to such director's earlier death, resignation, retirement, disqualification or removal.
(d) Unless
and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.
Exhibit A-4
Section 5.3 Newly Created Directorships and Vacancies.
Subject to Section 5.5 hereof, newly created directorships resulting from an increase in the number of directors and any vacancies
on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office,
even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term of the class of directors to
which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director's earlier death, resignation,
retirement, disqualification or removal.
Section 5.4 Removal.
Subject to Section 5.5 hereof, any or all of the directors may be removed from office at any time with cause and only by the
affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting
together as a single class.
Section 5.5 Preferred StockDirectors.
Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders of one or more
series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and
other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock
Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such
terms.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to
adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended,
altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders
of any class or series of capital stock of the Corporation required by law, this Second Amended and Restated Certificate (including any Preferred Stock Designation), or by the Bylaws, the affirmative
vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws; and provided further, however, that no
Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had
not been adopted.
ARTICLE VII
MEETINGS OF STOCKHOLDERS; ADVANCE NOTICE
Section 7.1 Meetings.
Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the
Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of
the stockholders to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders may not be called by another person or persons.
Section 7.2 Advance Notice.
Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be
given in the manner provided in the Bylaws.
Exhibit A-5
Section 7.3 Stockholder Action by Written Consent Without a Meeting.
The stockholders of the Corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 Limitation of Director Liability.
A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent
such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence
shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
Section 8.2 Indemnification and Advancement of Expenses.
(a) To
the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is
or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director
or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other
enterprise or nonprofit entity, including service with respect to an employee benefit plan (an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss
suffered and expenses (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes, damages, claims and penalties and amounts paid in settlement) reasonably incurred by such
indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys' fees) incurred by an indemnitee in
defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, if the DGCL requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or officer of the Corporation
(and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon the Corporation's
receipt of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights
shall continue as to an indemnitee who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings to enforce rights to
indemnification and advancement of expenses, the Corporation shall indemnify and
advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
(b) The
rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall
not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or
disinterested directors, or otherwise.
Exhibit A-6
(c) Any
repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the
adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise
required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior
thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any
proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption
of such inconsistent provision.
(d) This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or
permitted by law, to indemnify and to advance expenses to persons other than indemnitees.
ARTICLE IX
FORUM
Section 9.1 Forum.
Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including a beneficial owner) to bring
(i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other
employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or this Certificate of
Incorporation or the Corporation's Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or if the
Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district
court for the District of Delaware) in all cases subject to the court's having personal jurisdiction over the indispensable parties named as defendants. Notwithstanding the foregoing, (a) the
provisions of this Section 9.1 will not apply to suits brought to enforce any liability or duty created by the Exchange Act of 1934, as amended,
or any other claim for which the federal courts have exclusive jurisdiction and (b) unless the Corporation consents in writing to the selection of an alternative forum, the federal district
courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action against the Corporation or any director, officer, employee or agent
of the Corporation and arising under the Securities Act of 1933, as amended.
Section 9.2 Foreign Action.
If any action the subject matter of which is within the scope of Section 9.1 is filed in a court other than a court located within
the State of Delaware (a "Foreign Action") in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal
jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 9.1 (an "FSC
Enforcement Action") and (ii) having service of process made upon
such stockholder in any such FSC Enforcement Action by service upon such stockholder's counsel in the Foreign Action as agent for such stockholder.
Section 9.3 Severability.
If any provision or provisions of this Article IX shall be held to be invalid, illegal or unenforceable as applied to any person or
entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the
remaining provisions of this Article IX (including, without limitation, each portion of any sentence of this Article IX containing any such
provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or
unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise
acquiring any interest in
Exhibit A-7
shares
of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article IX.
ARTICLE X
CORPORATE OPPORTUNITY
The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers
or directors, or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of
the date of this Second Amended and Restated Certificate or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with
respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and
such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.
ARTICLE XI
AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second
Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State
of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons by and pursuant to this
Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article XI.
[Signature Page Follows]
Exhibit A-8
IN
WITNESS WHEREOF, Pensare Acquisition Corp. has caused this Second Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized
officer as of the date first set forth above.
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PENSARE ACQUISITION CORP.
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By:
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Name:
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[Signature Page to Second Amended and Restated Certificate of Incorporation]
EXHIBIT B
Directors and Officers of Surviving Corporation
Director
Officers
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Chief Executive OfficerSam Haffar
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PresidentRobert Willis
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Chief Financial OfficerJesus Perez
Exhibit B-1
Exhibit C
Lock-Up Agreement
Exhibit C-1
LOCK-UP AGREEMENT
, 2020
Pensare
Acquisition Corp.
720 Peachtree Street, Suite 629
Atlanta, GA 30309
Ladies
and Gentlemen:
This
letter agreement (this "Agreement") relates to that certain Business Combination Agreement, dated as of July 24, 2019 (the
"Combination Agreement"), by and among Pensare Acquisition Corp., a Delaware corporation ("Pensare"),
Tango Merger Sub Corp., a Delaware corporation ("Merger Sub"), Stratos Management Systems Holdings, LLC, a Delaware limited liability company
("Holdings"), and Stratos Management Systems, Inc., a Delaware corporation (the "Company").
Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Combination Agreement.
1. As
used in this Agreement:
(a) "Lock-Up Shares" means (i) any and all shares of Pensare Common Stock issued pursuant to the Combination Agreement
that are beneficially owned by Navigation Capital Partners II, L.P. ("Navigation") as determined based on the distribution provisions set forth
in Article X of that certain Amended and Restated Limited Liability Company Agreement of Holdings dated effective October 3, 2012 (as amended), which is presently expected to be
approximately % of the total number of shares of Pensare Common Stock issued pursuant to the Combination Agreement, and (ii) any other securities of Pensare issued as a dividend
or other distribution with respect to or in exchange for or in replacement of any such shares or as the result of any split, combination of shares, recapitalization, merger, consolidation or other
reorganization; and
(b) "Release Date" means the earliest to occur of (i) the first anniversary of the date hereof or (ii) the last
day of the Escrow Period, as such term is defined in that certain Stock Escrow Agreement, dated as of July 27, 2017, to which the Company, Pensare Sponsor Group LLC, MasTec, Inc.,
Continental Stock Transfer & Trust Company and certain other persons are parties.
2. In
order to induce Pensare to consummate the transactions contemplated by, and as required by Section 9.02(g) of, the Combination Agreement, each of the
undersigned hereby agrees that, during the period (the "Lock-Up Period") beginning on the date hereof and expiring on the Release Date, the undersigned
will not: (a) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise transfer, dispose of or agree to transfer or dispose of, directly or
indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to any
Lock-Up Shares, (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Lock-Up Shares, in cash
or otherwise, or (c) publicly announce any intention to effect any transaction specified in clause (a) or (b). The undersigned represent and warrant to Pensare that the Lock-Up Shares
shall constitute not less than 50% of the total number of shares of Pensare Common Stock issued pursuant to the Purchase Agreement. For avoidance of doubt, the parties acknowledge and agree that other
than the restrictions created above with respect to the Lock-Up Shares, there shall be no restrictions created under this Agreement with respect to any other shares of Pensare Common Stock held or
owned by Holdings.
3. Each
of the undersigned hereby authorizes Pensare during the Lock-Up Period to cause the transfer agent for Pensare Common Stock to decline to transfer, and to note stop
transfer restrictions on the stock register and other records relating to, the Lock-Up Shares for which the undersigned is the record holder and, in the case of Lock-Up Shares for which the
undersigned is the beneficial but
Exhibit C-2
not
the record holder, agrees during the Lock-Up Period to cause the record holder to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock
register and other records relating to, such Lock-Up Shares.
4. Notwithstanding
the foregoing, the undersigned may sell or otherwise transfer Lock-Up Shares:
(i) if
the undersigned is not a natural person, to its direct or indirect equity holders or to any of its other affiliates;
(ii) as
a bona fide gift or gifts;
(iii) to
the immediate family members (including spouses, significant others, lineal descendants, brothers and sisters) of the undersigned;
(iv) to
a family trust, foundation or partnership established for the exclusive benefit of the undersigned, its equity holders or any of their respective immediate family
members;
(v) to
a charitable foundation controlled by the undersigned, its equityholders or any of their respective immediate family members;
(vi) if
the undersigned is not a natural person, to any affiliate, investment fund controlled or managed by the undersigned, or commonly controlled investment fund; or
(vii) if
the undersigned is not a natural person, through distributions to limited or general partners, members, stockholders or affiliates of the undersigned;
provided, however, that upon any distribution or other sale or transfer pursuant to any of
clauses (i) through (vii) above by Holdings to Navigation, Navigation shall be subject in all respects to and bound by the transfer restrictions and other terms and conditions contained
in this Agreement, and in the case of any subsequent distribution, sale or transfer pursuant to clauses (i) through (vii) above by Navigation or any transferee of Navigation, such sale
or transfer shall be conditioned upon entry by such transferees into a written agreement, addressed to Pensare, agreeing to be bound by the transfer restrictions and other terms and conditions
contained in this Agreement.
5. The
undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the
legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with
enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above written.
6. This
Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings,
agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified
or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.
7. No
party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party. Any
purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be
binding on the undersigned and its successors and assigns.
8. This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to conflicts of law principles
that would result in the
Exhibit C-3
application
of the substantive laws of another jurisdiction. The parties hereto (i) all agree that any action, proceeding, claim or dispute arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the Delaware Chancery Court, or if such court does not have subject matter jurisdiction, in any court of the United States located in the State of Delaware,
and irrevocably submits
to such jurisdiction and venue, which jurisdiction and venue shall be exclusive and (ii) waives any objection to such exclusive jurisdiction and venue or that such courts represent an
inconvenient forum.
9. Any
notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent by express mail or
similar private courier service, by certified mail (return receipt requested) or email transmission to the address or email address (as applicable) set forth below such party's name on the signature
page hereto.
[Signature on the following page]
Exhibit C-4
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Very truly yours,
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STRATOS MANAGEMENT SYSTEMS HOLDINGS, LLC
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By:
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Name:
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Title:
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Address:
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NAVIGATION CAPITAL PARTNERS II, L.P.
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By:
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Name:
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Title:
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Accepted and Agreed:
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PENSARE ACQUISITION CORP.
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By:
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Name:
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Title:
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ANNEX B
PENSARE HOLDINGS, INC.
2020 EQUITY INCENTIVE PLAN
PENSARE HOLDINGS, INC.
2020 EQUITY INCENTIVE PLAN
PENSARE HOLDINGS, INC.
2020 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of this PENSARE
HOLDINGS, INC. 2020 EQUITY INCENTIVE PLAN (the "Plan") is to assist PENSARE HOLDINGS, INC. (the
"Company"), and its Related Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality executives and other
employees, officers, directors, consultants and other persons who provide services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons and the Company's shareholders, and providing such persons with performance incentives to expend their maximum efforts in
the creation of shareholder value.
2. Definitions. For purposes of the Plan, the following
terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof and elsewhere herein.
(a) "Award" means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Share granted as
a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with any other right or interest relating to Shares or other property (including cash),
granted to a Participant under the Plan.
(b) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted
by the Committee hereunder.
(c) "Beneficiary" shall mean the person, persons, trust or trusts that have been designated by a Participant in his or her
most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant's death or to which Awards or other rights are transferred
if and to the extent permitted under Section 10(b) hereof. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary
means the Participant's estate.
(d) "Beneficial Owner" and "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Cause" shall have the equivalent meaning or the same meaning as "cause" or "for cause" set forth in any employment,
consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such
agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable manner, his or her duties as assigned by the Company or a Related Entity, (ii) any
violation or breach by the Participant of his or her employment, consulting or other similar agreement with the Company or a Related Entity, if any, (iii) any violation or breach by the
Participant of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company or a Related Entity, (iv) any act by the Participant of dishonesty or bad
faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the Participant's work performance, or
(vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the Company or any Related Entity. The good faith determination by the
Committee of whether the Participant's Continuous Service was terminated by the Company for "Cause" shall be final and binding for all purposes hereunder.
(g) "Change in Control" shall mean a Change in Control as defined in Section 9(b) of the Plan.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and
successor provisions and regulations thereto.
1
(i) "Committee" shall mean a committee designated by the Board to administer the Plan; provided, however, that if the Board
fails to designate a committee or if there are no longer any members on the committee so designated by the Board, or for any other reason determined by the Board, then the Board shall serve as the
Committee. While it is intended that the Committee shall consist of at least two directors, each of whom shall be (i) a "non-employee director" within the meaning of Rule 16b-3 (or any
successor rule) under the Exchange Act, unless administration of the Plan by "non-employee directors" is not then required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan and (ii) "Independent", the failure of the Committee to be so comprised shall not invalidate any Award that otherwise satisfies the terms of the Plan.
(j) "Consultant" shall mean any consultant or advisor who provides services to the Company or any Related Entity, so long as
(i) such person renders bona fide services that are not in connection with the offer and sale of the Company's securities in a capital-raising transaction, (ii) such person does not
directly or indirectly promote or maintain a market for the Company's securities, and (iii) the identity of such person would not preclude the Company from offering or selling securities to
such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act of 1933 or, if the Company is required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act of 1933.
(k) "Continuous Service" shall "mean the uninterrupted provision of services to the Company or any Related Entity in any
capacity of Employee, Director, Consultant or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave of absence (including,
without limitation, sick leave, military leave, or any other authorized personal leave), (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of
Employee, Director, Consultant or other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of
Employee, Director, Consultant or other service provider (except as otherwise provided in the Award Agreement).
(l) "Director" shall mean a member of the Board or the board of directors of any Related Entity.
(m) "Disability" shall mean, unless otherwise defined in an Award Agreement, for purposes of the exercise of an Incentive
Stock Option, a permanent and total disability, within the meaning of Code Section 22(e)(3), and for all other purposes, the Participant's inability to perform the duties of his or her position
with the Company or any Related Entity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months.
(n) "Dividend Equivalent" shall mean a right, granted to a Participant under Section 6(g) hereof, to receive cash,
Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.
(o) "Effective Date" shall mean the effective date of the Plan, which shall be
[ · ], 2020.
(p) "Eligible Person" shall mean each Director, Employee, Consultant and other person who provides services to the Company or
any Related Entity. The foregoing notwithstanding, only Employees of the Company, or any parent corporation or subsidiary corporation of the Company (as those terms are defined in
Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive Stock Options. An Employee on leave of absence may, in the
discretion of the Committee, be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation in the Plan.
2
(q) "Employee" shall mean any person, including an officer or Director, who is an employee of the Company or any Related
Entity, or is a prospective employee of the Company or any Related Entity (conditioned upon and effective not earlier than, such person becoming an employee of the Company or any Related Entity). The
payment of a director's fee by the Company or a Related Entity shall not be sufficient to constitute "employment" by the Company.
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.
(s) "Fair Market Value" shall mean the fair market value of Shares, Awards or other property on the date as of which the
value is being determined, as determined by the Committee, or under procedures established by the Committee, subject to the following:
(i) If,
on such date, the Shares are listed on an international, national or regional securities exchange or market system, the Fair Market Value of a Share shall be the
closing price of a Share (or the mean of the closing bid and asked prices of a Share if the Share is so quoted instead) as quoted on the applicable Listing Market (as defined below), as reported in
The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Share
has traded on such Listing Market, the date on which the Fair Market Value shall be established shall be the last day on which the Share was so traded prior to the relevant date, or such other
appropriate day as shall be determined by the Board, in its discretion.
(ii) If,
on such date, the Share are not listed on an international, national or regional securities exchange or market system, the Fair Market Value of a Share shall be as
determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.
(t) "Good Reason" shall, with respect to any Participant, have the equivalent meaning or the same meaning as "good reason" or
"for good reason" set forth in any employment, consulting or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such
agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant's duties
or responsibilities as assigned by the Company or a Related Entity, or any other action by the Company or a Related Entity which results in a material diminution in such duties or responsibilities,
excluding for this purpose an action which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; (ii) any material failure by the
Company or a Related Entity to comply with its obligations to the Participant as agreed upon, other than a failure which is remedied by the Company or a Related Entity promptly after receipt of notice
thereof given by the Participant; (iii) the Company's or Related Entity's requiring the Participant to be based at any office or location outside of fifty (50) miles from the location of
employment or service as of the date of Award, except for travel reasonably required in the performance of the Participant's responsibilities; or (iv) a material breach by the Company or any
Related Entity of any employment, consulting or other agreement under which the Participant provides services to the Company or any Related Entity. For purposes of this Plan, upon termination of a
Participant's Continuous Service, Good Reason shall not be deemed to exist unless the Participant's termination of Continuous Service for Good Reason occurs within sixty (60) days following the
initial existence of one of the conditions specified in clauses (i) through (iv) above, the Participant provides the Company or the Related Entity for which the Participant provides
services with written notice of the existence of such condition with thirty (30) days after the initial existence of the condition, and the Company fails to remedy the condition within thirty
(30) days after its receipt of notice.
3
(u) "Incentive Stock Option" shall mean any Option intended to be designated as an incentive stock option within the meaning
of Section 422 of the Code or any successor provision thereto.
(v) "Independent", when referring to either the Board or members of the Committee, shall have the same meaning as used in the
rules of the Listing Market.
(w) "Incumbent Board" shall mean the Incumbent Board as defined in Section 9(b)(ii) hereof.
(x) "Listing Market" shall mean the international or national securities exchange on which any securities of the Company are
listed for trading, and if not listed for trading, by the rules of the Nasdaq Stock Market.
(y) "Option" shall mean a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards
at a specified price during specified time periods.
(z) "Optionee" shall mean a person to whom an Option is granted under this Plan or any person who succeeds to the rights of
such person under this Plan.
(aa) "Other Stock-Based Awards" shall mean Awards granted to a Participant under Section 6(i) hereof.
(bb) "Parent" shall mean any corporation (other than the Company), whether now or hereafter existing, in an unbroken chain of
corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns stock possessing 50% or more of the combined voting power of all classes of stock in one of
the other corporations in the chain.
(cc) "Participant" shall mean a person who has been granted an Award under the Plan which remains outstanding, including a
person who is no longer an Eligible Person.
(dd) "Performance Award" shall mean any Award granted pursuant to Section 6(h) hereof.
(ee) "Performance Period" shall mean that period established by the Committee at the time any Performance Award is granted or
at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.
(ff) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, and shall include a "group" as defined in Section 13(d) thereof.
(gg) "Related Entity" shall mean any Parent or Subsidiary, and any business, corporation, partnership, limited liability
company or other entity designated by the Committee in which the Company, a Parent or a Subsidiary holds a substantial ownership interest, directly or indirectly and with respect to which the Company
may offer or sell securities pursuant to the Plan in reliance upon either Rule 701 under the Securities Act of 1933 or, if the Company is required to file reports pursuant to Section 13
or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act of 1933.
(hh) "Restricted Stock" shall mean any Share issued with such risks of forfeiture and other restrictions as the Committee, in
its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such
time or times, in installments or otherwise, as the Committee may deem appropriate.
(ii) "Restricted Stock Award" shall mean an Award granted to a Participant under Section 6(d) hereof.
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(jj) "Restricted Stock Unit" shall mean a right to receive Shares, including Restricted Stock, cash measured based upon the
value of Shares, or a combination thereof, at the end of a specified deferral period.
(kk) "Restricted Stock Unit Award" shall mean an Award of Restricted Stock Units granted to a Participant under
Section 6(e) hereof.
(ll) "Restriction Period" shall mean the period of time specified by the Committee that Restricted Stock Awards shall be
subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose.
(mm) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
(nn) "Shares" shall mean the shares of common stock of the Company, in each case, and such other securities as may be
substituted (or resubstituted) for Shares pursuant to Section 10(c) hereof.
(oo) "Stock Appreciation Right" shall mean a right granted to a Participant under Section 6(c) hereof.
(pp) "Subsidiary" shall mean any corporation or other entity in which the Company has a direct or indirect ownership interest
of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in
which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.
(qq) "Substitute Awards" shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or
exchange for, Awards previously granted, or the right or obligation to make future Awards, by a company (i) acquired by the Company or any Related Entity, (ii) which becomes a Related
Entity after the date hereof, or (iii) with which the Company or any Related Entity combines.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee except
to the extent (and subject to the limitations imposed by Section 3(b) hereof) the Board elects to administer the Plan, in which case the Plan shall be administered by only those members of the
Board who are Independent members of the Board, in which case references herein to the "Committee" shall be deemed to include references to the Independent members of the Board. The Committee shall
have full and final authority, subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms
and conditions of, and all other matters relating to, Awards, prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the
Plan, construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the
Committee may deem necessary or advisable for the administration of the Plan. In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be
required to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of any other Eligible Persons
or Participants. Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Related Entity or any Participant or Beneficiary, or any
transferee under Section 10(b) hereof or any other person claiming rights from or through any of the foregoing persons or entities.
5
(b) Manner of Exercise of Committee Authority. The Committee, and not the Board, shall
exercise sole and exclusive discretion (i) on any matter relating to a Participant then subject to Section 16 of the Exchange
Act with respect to the Company to the extent necessary in order that transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act, and (ii) with respect to
any Award to an Independent Director. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority
of the Committee. The Committee may delegate to members of the Board, or officers or managers of the Company or any Related Entity, or committees thereof, the authority, subject to such terms and
limitations as the Committee shall determine, to perform such functions, including administrative functions as the Committee may determine to the extent that such delegation will not result in the
loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company. The Committee may appoint agents to
assist it in administering the Plan, including, without limitation, appointing one or more members of the Company's management, with the power or authority otherwise granted to the Committee under
this Plan with respect to a number of Shares reserved and available for delivery under the Plan, subject to the terms and limitations of such power or authority as determined by the Committee in its
sole and absolute discretion. In no event, however, may an agent appointed by the Committee to assist it in administering the Plan be permitted to grant Awards to, or exercise any discretion with
respect to any and all other matters relating to Awards previously granted to, such agent appointed by the Committee to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and the Board, and each member thereof, shall
be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or Employee, the Company's independent auditors, Consultants or any other agents
assisting in the administration of the Plan. Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalf of the Committee or the Board, shall not be
personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action or determination.
4. Shares Subject to Plan.
(a) Limitation on Overall Number of Shares Available for Delivery Under Plan. Subject to
adjustment as provided in Section 10(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be equal to
[ · ]. Any Shares delivered under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be granted if the number
of Shares to be delivered in connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares that would be counted against the
limit upon settlement of then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem
or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards and Adjustments to Limits.
(i) If
any Shares subject to an Award are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not
result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination,
6
non-issuance
or cash settlement, again be available for delivery with respect to Awards under the Plan.
(ii) The
full number of Shares subject to an Option granted under this Plan shall count against the number of Shares remaining available for issuance pursuant to Awards
granted under the Plan, even if the exercise price of the Option is satisfied through net-settlement or by delivering Shares to the Company (by either actual delivery or attestation). Upon exercise of
Stock Appreciation Rights granted under the Plan that are settled in Shares, the full number of Stock Appreciation Rights (rather than the net number of Shares actually delivered upon exercise) shall
count against the maximum number of Shares remaining available for issuance pursuant to Awards granted under the Plan.
(iii) Shares
withheld from an Award granted under this Plan to satisfy tax withholding requirements shall count against the maximum number of Shares remaining available for
issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements shall not be added back to the Plan Share pool.
(iv) Substitute
Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participant in any period. Additionally, in the
event that an entity acquired by the Company or any Related Entity or with which the Company or any Related Entity combines has shares available under a pre-existing plan approved by its shareholders
and not adopted in contemplation of such acquisition or combination, the shares available for delivery pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party
to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan if and to the extent that the use of such Shares would
not require approval of the Company's shareholders under the rules of the Listing Market. Awards using such available shares shall not be
made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees
or Directors prior to such acquisition or combination.
(v) Any
Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.
(vi) Notwithstanding
anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, the maximum aggregate number
of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be
[ · ] Shares. In no event shall any Incentive Stock Options be granted under the
Plan after the tenth anniversary of the date on which the Board adopts the Plan.
(vii) Notwithstanding
anything in this Section 4 to the contrary, but subject to adjustment as provided in Section 10(c) hereof, in any fiscal year of the
Company during any part of which the Plan is in effect, no Participant who is a Director but is not also an Employee or Consultant may be granted any Awards that have a "fair value" as of the date of
grant, as determined in accordance with FASB ASC Topic 718 (or any other applicable accounting guidance), that exceeds
$[ · ] in the aggregate.
5. Eligibility. Awards may be granted under the Plan only to
Eligible Persons.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant
7
or
thereafter (subject to Section 10(e) hereof), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of the Participant's Continuous Service and terms permitting a Participant to make elections relating to his or her Award. Except as
otherwise expressly provided herein, the Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the
Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the
requirements of the laws of the State of Delaware, no consideration other than services may be required for the grant (as opposed to the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to any Eligible Person on the
following terms and conditions:
(i) Exercise Price. Other than in connection with Substitute Awards, the exercise price
per Share purchasable under an Option shall be determined by the Committee, provided that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of
the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option. If an Employee owns or is deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted. Other than pursuant to
Section 10(c)(i) and (ii) of this Plan, the Committee shall not be permitted to (A) lower the exercise price per Share of an Option after it is granted, (B) cancel an
Option when the exercise price per Share exceeds the Fair Market Value of the underlying Shares in exchange for cash or another Award (other than in connection with Substitute Awards),
(C) cancel an outstanding Option in exchange for an Option with an exercise price that is less than the exercise price of the original Options or (D) take any other action with respect
to an Option that may be treated as a repricing pursuant to the applicable rules of the Listing Market, without approval of the Company's shareholders.
(ii) Time and Method of Exercise. The Committee shall determine the time or times at
which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method by which
notice of exercise is to be given and the form of exercise notice to be used, the time or times at which Options shall cease to be or become exercisable following termination of Continuous Service or
upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including in
the discretion of the Committee a cashless exercise procedure), the form of such payment, including, without limitation, cash, Shares (including without limitation the withholding of Shares otherwise
deliverable pursuant to the Award), other Awards or awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or
any other applicable law), and the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants.
8
(iii) Form of Settlement. The Committee may, in its sole discretion, provide that the
Shares to be issued upon exercise of an Option shall be in the form of Restricted Stock or other similar securities.
(iv) Incentive Stock Options. The terms of any Incentive Stock Option granted under the
Plan shall comply in all respects with the provisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and
conditions:
(A) the
Option shall not be exercisable for more than ten years after the date such Incentive Stock Option is granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the
term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant;
(B) the
aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted
under the Plan and all other option plans of the Company (and any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of
the Code, respectively) that become exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000;
and
(C) if
Shares acquired by exercise of an Incentive Stock Option are disposed of within two years following the date the Incentive Stock Option is granted or one year
following the transfer of such Shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the Committee may reasonably require.
(c) Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to any
Eligible Person in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a "Tandem Stock Appreciation Right"), or without regard
to any Option (a "Freestanding Stock Appreciation Right"), in each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions of
the Plan, including the following:
(i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation
Right as determined by the Committee. The grant price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on the date of grant, in the case of a Freestanding
Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right. Other than pursuant to Section 10(c)(i)
9
and
(ii) of the Plan, the Committee shall not be permitted to (A) lower the grant price per Share of a Stock Appreciation Right after it is granted, (B) cancel a Stock
Appreciation Right when the grant price per Share exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards),
(C) cancel an outstanding Stock Appreciation Right in exchange for a Stock Appreciation Right with a grant price that is less than the grant price of the original Stock Appreciation Right, or
(D) take any other action with respect to a Stock Appreciation Right that may be treated as a repricing pursuant to the applicable rules of the Listing Market, without shareholder approval.
(ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the
time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or future service
requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the method of
exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be
delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions of any
Stock Appreciation Right.
(iii) Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be
granted at the same time as the related Option is granted or, for Options that are not Incentive Stock Options, at any time thereafter before exercise or expiration of such Option. Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the exercise
price at which Shares can be acquired pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option,
then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option
equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock
Appreciation Right has been exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the related Option has been exercised.
(d) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock
Awards to any Eligible Person on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock Awards shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan during the Restriction Period. The terms of any
Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The
restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a
Restricted Stock Award, a Participant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the period that the Restricted Stock Award is subject to a risk of forfeiture, subject to
Section 10(b) below and except as otherwise provided in the Award Agreement, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the
Participant or Beneficiary.
10
(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a
Participant's Continuous Service during the applicable Restriction Period, the Participant's Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been
satisfied shall be forfeited and reacquired by the Company; provided that, subject to the limitations set forth in Section 6(j) hereof, the Committee may provide, by resolution or other action
or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced
in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of a Restricted Stock Award, the
Committee shall either (A) require that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted, or (B) require that payment
be delayed (with or without interest at such rate, if any, as the Committee shall determine) and remain subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with
respect to which such cash dividend is payable, in each case in a manner that does not violate the requirements of Section 409A of the Code. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Shares or other property have been distributed.
(e) Restricted Stock Unit Award. The Committee is authorized to grant Restricted Stock
Unit Awards to any Eligible Person on the following terms and conditions:
(i) Award and Restrictions. Satisfaction of a Restricted Stock Unit Award shall occur
upon expiration of the deferral period specified for such Restricted Stock Unit Award by the Committee (or, if permitted by the Committee, as elected by the Participant in a manner that does not
violate the requirements of Section 409A of the Code). In addition, a Restricted Stock Unit Award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee
may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise, as the Committee may determine. A Restricted Stock Unit Award may be satisfied by delivery of Shares, cash equal to the Fair
Market Value of the specified number of Shares covered by the Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant or thereafter. Prior to satisfaction
of a Restricted Stock Unit Award, a Restricted Stock Unit Award carries no voting or dividend or other rights associated with Share ownership. Prior to satisfaction of a Restricted Stock Unit Award,
except as otherwise provided in an Award Agreement and as permitted under Section 409A of the Code, a Restricted Stock Unit Award may not be sold, transferred, pledged, hypothecated, margined
or otherwise encumbered by the Participant or any Beneficiary.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a
Participant's Continuous Service during the applicable deferral period or portion thereof to
11
which
forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Stock Unit Award), the Participant's Restricted Stock Unit Award that is at that time subject to a risk
of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by
resolution or other action or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Restricted Stock Unit Award shall be waived in whole or in part
in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of any Restricted Stock Unit Award.
(iii) Dividend Equivalents. As a condition to the grant of a Restricted Stock Unit, the
Committee shall require that any cash dividends paid on a Share attributable to such Restricted Stock Unit be delayed (with or without interest at such rate, if any, as the Committee shall determine)
and remain subject to
restrictions and a risk of forfeiture to the same extent as the Restricted Stock Unit with respect to which such cash dividend is payable, in a manner that does not violate the requirements of
Section 409A of the Code. Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Unit with respect to which such Shares or other property have been distributed.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant
Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent
necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards granted hereunder shall be subject to such
other terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to
any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued, or whether such Dividend Equivalents shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify; provided, that in no event shall such Dividend Equivalents be paid out to
Participants prior to vesting of the corresponding Shares underlying the Award. Any such determination by the Committee shall be made at the grant date of the applicable Award. Notwithstanding the
foregoing, Dividend Equivalents credited in connection with an Award that vests based on the achievement of performance goals shall be subject to restrictions and risk of forfeiture to the same extent
as the Award with respect to which such Dividend Equivalents have been credited.
(h) Performance Awards. The Committee is authorized to grant Performance Awards to any
Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by the Committee, subject to the provisions of Section 8 if and to the extent that the Committee
shall, in its sole discretion, determine that an Award shall be subject to those provisions. The performance criteria to be achieved during any Performance Period and the length of the Performance
Period shall be determined by the Committee upon the grant of each Performance Award. Except as provided in Section 9 or as may be provided in an Award Agreement, Performance Awards will be
distributed only after the end of the relevant Performance Period. The
12
performance
goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 8(b), or in the case of an
Award that the Committee determines shall not be subject to Section 8 hereof, any other criteria that the Committee, in its sole discretion, shall determine should be used for that purpose. The
amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period
or, in accordance with procedures established by the Committee, on a deferred basis in a manner that does not violate the requirements of Section 409A of the Code.
(i) Other Stock-Based Awards. The Committee is authorized, subject to limitations under
applicable law, to grant to any Eligible Person such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as
deemed by the Committee to be consistent with the purposes of the Plan. Other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards granted under the Plan, and
such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan. Except as otherwise provided in the last sentence of
Section 6(h) hereof, the Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this
Section 6(i) shall be purchased for such consideration, (including without limitation loans from the Company or a Related Entity provided that such loans are not in violation of
Section 13(k) of the Exchange Act or any rule or regulation adopted thereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without
limitation, cash, Shares, other Awards or other property, as the Committee shall determine.
(j) Minimum Vesting Conditions. Except for certain limited situations (including death,
disability, retirement, a Change in Control referred to in Section 9, grants to new hires to replace forfeited compensation, grants representing payment of earned Performance Awards or other
incentive compensation, Substitute Awards or grants to Directors), all Awards granted under this Plan shall be subject to a minimum vesting period of one (1) year (the
"Minimum Vesting Condition"); provided, that such Minimum Vesting Condition will not be required on
Awards covering, in the aggregate, a number of Shares not to exceed 5% of the maximum Share pool limit set forth in Section 4(a) hereof (subject to adjustment as provided in
Section 10(c) hereof).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a Related Entity, or
any other right of a Participant to receive payment from the Company or any Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award
is equivalent in value to the cash compensation (for example, Restricted Stock or Restricted Stock Units), or in which the exercise price, grant price or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying Shares minus the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted
with an exercise price or grant price "discounted" by the amount of the cash compensation surrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made
in a manner intended to be exempt from or comply with Section 409A of the Code.
13
(b) Term of Awards. The term of each Award shall be for such period as may be determined
by the Committee; provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years (or in the case of an Incentive Stock Option such shorter term as may
be required under Section 422 of the Code); provided, however, that in the event that on the last day of the term of an Option or a Stock Appreciation Right, other than an Incentive Stock
Option, (i) the exercise of the Option or Stock Appreciation Right is prohibited by applicable law, or (ii) Shares may not be purchased, or sold by certain employees or directors of the
Company due to the "black-out period" of a Company policy or a "lock-up" agreement undertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation
Right may be extended by the Committee for a period of up to thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement, provided that such extension of
the term of the Option or Stock Appreciation Right would not cause the Option or Stock Appreciation Right to violate the requirements of Section 409A of the Code.
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan
and any applicable Award Agreement, payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Shares, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis,
provided that any determination to pay in installments or on a deferred basis shall be made by the Committee at the date of grant. Any installment or deferral provided for in the preceding sentence
shall, however, subject to the terms of the Plan, be subject to the Company's compliance with the provisions of the Sarbanes-Oxley Act of 2002, as amended, the rules and regulations adopted by the
Securities and Exchange Commission thereunder, all applicable rules of the Listing Market and any other applicable law, and in a manner intended to be exempt from or otherwise satisfy the requirements
of Section 409A of the Code. Subject to Section 7(e) of this Plan, the settlement of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in
the sole discretion of the Committee
or upon occurrence of one or more specified events (in addition to a Change in Control). Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without
limitation, may in the case of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the exercise or grant
price. Installment or deferred payments may be required by the Committee (subject to Section 7(e) of this Plan, including the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. The acceleration of the
settlement of any Award, and the payment of any Award in installments or on an deferred basis, all shall be done in a manner that is intended to be exempt from or otherwise satisfy the requirements of
Section 409A of the Code. The Committee may, without limitation, make provision for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares.
(d) Exemptions from Section 16(b) Liability. It is the intent of the Company that
the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption
(except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of
Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so
that such Participant shall avoid liability under Section 16(b).
14
(e) Code Section 409A.
(i) The
Award Agreement for any Award that the Committee reasonably determines to constitute a "nonqualified deferred compensation plan" under Section 409A of the
Code (a "Section 409A Plan"), and the provisions of the Section 409A Plan applicable to that Award, shall be construed in a manner
consistent with the applicable requirements of Section 409A of the Code, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and
the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A
of the Code.
(ii) If
any Award constitutes a Section 409A Plan, then the Award shall be subject to the following additional requirements, if and to the extent required to comply
with Section 409A of the Code:
(A) Payments
under the Section 409A Plan may be made only upon (u) the Participant's "separation from service", (v) the date the Participant becomes
"disabled", (w) the Participant's death, (x) a "specified time (or pursuant to a fixed schedule)" specified in the Award Agreement at the date of the deferral of such compensation,
(y) a "change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets" of the Company, or (z) the occurrence of an
"unforeseeble emergency";
(B) The
time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other
applicable guidance issued by the Internal Revenue Service;
(C) Any
elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of
Section 409A(a)(4) of the Code; and
(D) In
the case of any Participant who is "specified employee", a distribution on account of a "separation from service" may not be made before the date which is six months
after the date of the Participant's "separation from service" (or, if earlier, the date of the Participant's death).
For
purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be
applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.
(iii) Notwithstanding
the foregoing, or any provision of this Plan or any Award Agreement, the Company does not make any representation to any Participant or Beneficiary
that any Awards made pursuant to this Plan are exempt from, or satisfy, the requirements of, Section 409A of the Code, and the Company shall have no liability or other obligation to indemnify
or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest or penalties that the Participant or any Beneficiary may incur in the event that any provision of this Plan,
or any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A of the Code.
15
8. Reserved.
9. Change in Control.
(a) Effect of "Change in Control." If and only to the extent provided in any employment
or other agreement between the Participant and the Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined by the Committee in its sole discretion and without
any requirement that each Participant be treated consistently, and except as otherwise provided in Section 9(a)(iv) hereof, upon the occurrence of a "Change in Control," as defined in
Section 9(b):
(i) Any
Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control, shall become immediately vested and
exercisable, subject to applicable restrictions set forth in Section 10(a) hereof.
(ii) Any
restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Restricted Stock Unit Award or an Other Stock-Based Award
subject only to future service requirements granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver
by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof.
(iii) With
respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, the Committee may, in its discretion, consider such
Awards to have been earned and payable based on achievement of performance goals or based upon target performance (either in full or pro-rata based on the portion of the Performance Period completed
as of the Change in Control), except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a).
(iv) Except
as otherwise provided in any employment or other agreement for services between the Participant and the Company or any Subsidiary, and unless the Committee
otherwise determines in a specific instance, each outstanding Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Other Stock-Based Award shall not be accelerated
as described in Sections 9(a)(i), (ii) and (iii), if either (A) the Company is the surviving entity in the Change in Control and the Option, Stock Appreciation Right, Restricted
Stock Award, Restricted Stock Unit Award or Other Stock-Based Award continues to be outstanding after the Change in Control on substantially the same terms and conditions as were applicable
immediately prior to the Change in Control or (B) the successor company or its parent company assumes or substitutes for the applicable Award, as determined in accordance with
Section 10(c)(ii) of this Plan.
(b) Definition of "Change in Control". Unless otherwise specified in any employment or
other agreement for services between the Participant and the Company or any Related Entity, or in an Award Agreement, a "Change in Control" shall mean
the occurrence of any of the following:
(i) The
acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of
the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting
Securities") (the foregoing Beneficial Ownership hereinafter being referred to as a "Controlling Interest"); provided, however,
that for purposes of this Section 9(b), the following acquisitions shall not constitute or result in a Change in Control: (v) any acquisition directly from the Company; (w) any
acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any Related
16
Entity;
or (z) any acquisition by any entity pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) below; or
(ii) During
any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date
(the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Consummation
of (A) a reorganization, merger, statutory share exchange or consolidation or similar transaction involving (x) the Company or
(y) any one or more Subsidiaries whose combined revenues for the prior fiscal year represented more than 50% of the consolidated revenues of the Company and its Subsidiaries for the prior
fiscal year (the "Major Subsidiaries"), or (B) a sale or other disposition of all or substantially all of the assets of the Company or the Major
Subsidiaries, or the acquisition of assets or equity of another entity by the Company or any of its Subsidiaries (each of the events referred to in clauses (A) and (B) sometimes
hereinafter being referred to a "Business Combination"), unless, following such Business Combination,
(1) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of
members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more
subsidiaries) (the "Continuing Entity") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Voting Securities, (excluding any outstanding voting securities of the Continuing Entity that such Beneficial Owners hold immediately following the consummation of the Business
Combination as a result of their ownership, prior to such consummation, of voting securities of any company or other entity involved in or forming part of such Business Combination other than the
Company), (2) no Person (excluding any employee benefit plan (or related trust) of the Company or any Continuing Entity or any entity controlled by the Continuing Entity or any Person that as
of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Continuing Entity except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the Board of
Directors or other governing body of the Continuing Entity were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval
by the shareholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding
anything to the contrary herein, the term "Change in Control" shall not include any sale of assets, a merger or other transaction
effected exclusively for the purpose of changing
17
the
domicile of the Company, or an initial public offering underwritten on a firm commitment basis pursuant to a registration statement filed with the Securities Exchange Commission.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or qualification of such Shares
or other required action under any federal or state law, rule or regulation, listing or other required action with respect to the Listing Market, or compliance with any other obligation of the
Company, as the Committee, may consider appropriate, and may require any Participant to make such representations, furnish such
information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right or interest
granted under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised
during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon), are by gift or pursuant to a domestic relations order, and are to a "Permitted Assignee" that is a permissible transferee under the applicable rules
of the Securities and Exchange Commission for registration of securities on a Form S-8 registration statement. For this purpose, a Permitted Assignee shall mean (i) the Participant's
spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) a trust for the benefit of one or more of the Participant
or the persons referred to in clause (i), (iii) a partnership, limited liability company or corporation in which the Participant or the persons referred to in clauses (i) and
(ii) are the only partners, members or shareholders, or (iv) a foundation in which any person or entity designated in clauses (i), (ii) or (iii) above control the
management of assets. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
(c) Adjustments.
(i) Adjustments to Awards. In the event that any extraordinary dividend or other
distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuer, then the Committee shall, in such
manner as it may deem appropriate and equitable, substitute, exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) the number and kind of Shares
18
subject
to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate in order to prevent the reduction or enlargement of benefits
under any Award.
(ii) Adjustments in Case of Certain Transactions. In the event of any merger,
consolidation or other reorganization in which the Company does not survive, or in the event of any Change in Control (and subject to the provisions of Section 9 of this Plan relating to the
vesting of Awards in the event of any Change in Control), any outstanding Awards may be dealt with in accordance with any of the following approaches, without the requirement of obtaining any consent
or agreement of a Participant as such, as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (A) the
continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (B) the assumption or substitution for, as those terms are defined below, the outstanding Awards by
the surviving entity or its parent or subsidiary, (C) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (D) settlement of the value of the
outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation Rights, shall be measured by the
amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction). For the purposes
of this Plan, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Stock-Based Award shall be considered assumed or substituted for if
following the applicable transaction the Award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit
Award, Performance Award or Other Stock-Based Award immediately prior to the applicable transaction, on substantially the same vesting and other terms and conditions as were applicable to the Award
immediately prior to the applicable transaction, the consideration (whether stock, cash or other securities or property) received in the applicable transaction by holders of Shares for each Share held
on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the applicable transaction is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the
successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award, Restricted
Stock Unit Award, Performance Award or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in
fair market value to the per share consideration received by holders of Shares in the applicable transaction. The determination of such substantial equality of value of consideration shall be made by
the Committee in its sole discretion and its determination shall be conclusive and binding. The Committee shall give written notice of any proposed transaction referred to in this
Section 10(c)(ii) a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that
Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then
exercisable (including any Awards that may become exercisable upon the closing date of such transaction). A Participant may condition his or her exercise of any Awards upon the consummation of the
transaction.
19
(iii) Other Adjustments. The Committee or the Board is authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards (including Awards subject to satisfaction of performance goals, or performance goals and conditions relating thereto) in recognition
of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit, or the
financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view
of the Committee's assessment of the business strategy of the Company, any Related Entity or business unit thereof, performance of comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant.
(d) Award Agreements. Each Award Agreement shall either be (a) in writing in a
form approved by the Committee and executed by the Company by an officer duly authorized to act on its behalf, or (b) an electronic notice in a form approved by the Committee and recorded by
the Company (or its designee) in an electronic recordkeeping system used for the purpose of tracking one or more types of Awards as the Committee may provide; in each case and if required by the
Committee, the Award Agreement shall be executed or otherwise electronically accepted by the recipient of the Award in such form and manner as the Committee may require. The Committee may authorize
any officer of the Company to execute any or all Award Agreements on behalf of the Company. The Award Agreement shall set forth the material terms and conditions of the Award as established by the
Committee consistent with the provisions of the Plan.
(e) Taxes. The Company and any Related Entity are authorized to withhold from any Award
granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company or any Related Entity and
Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, either on a mandatory or elective basis in the discretion of the Committee. The amount of
withholding tax paid with respect to an Award by the withholding of Shares otherwise deliverable pursuant to the Award or by delivering Shares already owned shall not exceed the maximum statutory
withholding required with respect to that Award (or such other limit as the Committee shall impose, including without limitation, any limit imposed to avoid or limit any financial accounting expense
relating to the Award).
(f) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or
terminate the Plan, or the Committee's authority to grant Awards under the Plan, without the consent of shareholders or Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's shareholders not later than the annual meeting next following such Board action if such shareholder approval is required by any federal or state law or
regulation (including, without limitation, Rule 16b-3) or the rules of the Listing Market, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to
shareholders for approval; provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under the terms of any previously granted and outstanding Award. The Committee may waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Award theretofore granted and any Award Agreement relating thereto, except as otherwise provided in the Plan; provided that, except as otherwise permitted by the Plan or
Award Agreement, without the consent of an affected Participant, no
20
such
Committee or the Board action may materially and adversely affect the rights of such Participant under terms of such Award.
(g) Clawback of Benefits.
(i) The
Company may (A) cause the cancellation of any Award, (B) require reimbursement of any Award by a Participant or Beneficiary, and (C) effect any
other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with any Company policies that currently exist or that may from time to time be adopted or
modified in the future by the Company and/or applicable law (each, a "Clawback Policy"). In addition, a Participant may be required to repay to the
Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with any Clawback Policy. By accepting an Award, a Participant is also
agreeing to be bound by any existing or future Clawback Policy adopted by the Company, or any amendments that may from time to time be made to the Clawback Policy in the future by the Company in its
discretion (including without limitation any Clawback Policy adopted or amended to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant's
Award Agreements may be unilaterally amended by the Company, without the Participant's consent, to the extent that the Company in its discretion determines to be necessary or appropriate to comply
with any Clawback Policy.
(ii) If
the Participant, without the consent of the Company, while employed by or providing services to the Company or any Related Entity or after termination of such
employment or service, violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the
Company or any Related Entity, as determined by the Committee in its sole discretion, then (i) any outstanding, vested or unvested, earned or unearned portion of the Award may, at the
Committee's discretion, be canceled and (ii) the Committee, in its discretion, may require the Participant or other person to whom any payment has been made or Shares or other property have
been transferred in connection with the Award to forfeit and pay over to the Company, on demand, all or any portion of the gain (whether or not taxable) realized upon the exercise of any Option or
Stock Appreciation Right and the value realized (whether or not taxable) on the vesting or payment of any other Award during the time period specified in the Award Agreement or otherwise specified by
the Committee
(h) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken
hereunder or under any Award shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the
Company or a Related Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person's or Participant's Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and Employees, or (iv) conferring on a
Participant any of the rights of a shareholder of the Company or any Related Entity including, without limitation, any right to receive dividends or distributions, any right to vote or act by written
consent, any right to attend meetings of shareholders or any right to receive any information concerning the Company's or any Related Entity's business, financial condition, results of operation or
prospects, unless and until such time as the Participant is duly issued Shares on the stock books of the Company or any Related Entity in accordance with the terms of an Award. None of the Company,
its officers or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant is duly issued Shares pursuant to the Award on the
stock books of the Company in accordance with the terms of an Award. Neither the Company, nor any Related Entity, nor any of their respective officers, directors, representatives or agents is granting
any rights under the Plan to the Participant
21
whatsoever,
oral or written, express or implied, other than those rights expressly set forth in this Plan or the Award Agreement.
(i) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained in the Plan
or any Award Agreement shall give any such Participant any rights that are greater than those of a general creditor of
the Company or Related Entity that issues the Award; provided that the Committee may authorize the creation of trusts and deposit therein cash, Shares, other Awards or other property, or make other
arrangements to meet the obligations of the Company or Related Entity under the Plan. Such trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments,
subject to such terms and conditions as the Committee may specify and in accordance with applicable law.
(j) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as
it may deem desirable.
(k) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined
by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
(l) Governing Law. Except as otherwise provided in any Award Agreement, the validity,
construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware, in each case, without
giving effect to principles of conflict of laws, and applicable federal law.
(m) Foreign Laws. The Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability of
the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.
(n) Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan shall
become effective on the Effective Date, subject to subsequent approval, within 12 months of its adoption by the Board, by shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code Section 422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock
exchange or automated quotation system on which the Shares may be listed or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to
shareholder approval, but may not be exercised or otherwise settled in the event the shareholder approval is not obtained. The Plan shall terminate at the earliest of (a) such time as no Shares
remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of the Effective Date. Awards outstanding upon expiration of the
Plan shall remain in effect until they have been exercised or terminated, or have expired.
22
(o) Construction and Interpretation. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender. Headings of Articles and Sections hereof are inserted for convenience and reference and constitute no part of the Plan.
(p) Severability. If any provision of the Plan or any Award Agreement shall be
determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and
all provisions shall remain enforceable in any other jurisdiction.
23
ANNEX C
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PENSARE ACQUISITION CORP.
,
2020
Pensare
Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY AS FOLLOWS:
1. The
name of the Corporation is "Pensare Acquisition Corp." The original certificate of incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware (the "Secretary of State") on April 7, 2016 (the "Original
Certificate"). The first certificate of amendment of the Original Certificate was filed with the Secretary of State on May 10, 2016. The second certificate of amendment
of the Original Certificate was filed with the Secretary of State on December 19, 2016. The third certificate of amendment of the Original Certificate was filed with the Secretary of State on
May 11, 2017. The Amended and Restated Certificate of Incorporation (the "First Amended and Restated Certificate"), was filed on July 27,
2017 which both restates and amends the provisions of the Original Certificate, as amended.
2. This
Second Amended and Restated Certificate of Incorporation (the "Second Amended and Restated Certificate"), which both
restates and amends the provisions of the First Amended and Restated Certificate, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of
Delaware and by the affirmative vote of the Corporation's stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware (the
"DGCL").
3. The
text of the First Amended and Restated Certificate is hereby restated and amended in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is [ ] (the
"Corporation").
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. In addition to
the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or
convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.
ARTICLE III
REGISTERED AGENT
The street address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New
Castle, State of Delaware 19801, and the name of the Corporation's registered agent at such address is The Corporation Trust Company.
1
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital Stock. The total number of shares of all classes of capital stock, each
with a par value of $0.0001 per share, which the Corporation is authorized to issue is
505,000,000 shares, consisting of (a) 500,000,000 shares of common stock, par value $0.0001 per share (the "Common Stock"), and
(b) 5,000,000 shares of preferred stock, par value $0.0001 per share (the "Preferred Stock").
Section 4.2 Preferred Stock. The Board of Directors of the Corporation (the "Board") is hereby expressly authorized to provide out of the
unissued shares of the Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting
rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions
thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a
"Preferred Stock Designation") filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by
law, now or hereafter, to adopt any such resolution or resolutions.
Section 4.3 Common Stock.
(a) Except
as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock
shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the stockholders generally are entitled to vote.
(b) Except
as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the
stockholders of the Corporation, the holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the
stockholders, and no holder of any series of Preferred Stock, as such, shall be entitled to any voting powers in respect thereof. Notwithstanding the foregoing, except as otherwise required by law or
this Second Amended and Restated Certificate (including a Preferred Stock Designation), the holders of the Common Stock shall not be entitled to vote on any amendment to this Second Amended and
Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such
affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any
Preferred Stock Designation) or the DGCL.
(c) Subject
to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of the Common Stock shall be entitled to
receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or
funds of the Corporation legally available therefor, and shall share equally on a per share basis in such dividends and distributions.
(d) Subject
to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the Common Stock shall be
entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them.
2
Section 4.4 Rights and Options. The Corporation has the authority to create and issue rights,
warrants and options entitling the holders thereof to acquire from the Corporation any shares of its
capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration,
times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any
shares of capital stock issuable upon exercise thereof may not be less than the par value
thereof.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Board Powers. The business and affairs of the Corporation shall be managed by, or under the
direction of, the Board. In addition to the powers and authority expressly conferred
upon the Board by statute, this Second Amended and Restated Certificate or the Bylaws of the Corporation ("Bylaws"), the Board is hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Second Amended and Restated
Certificate, and the Bylaws.
Section 5.2 Number, Election and Term.
(a) The
number of directors of the Corporation shall be not less than three, with at least one director in each of Class I, Class II and Class III. The
exact number of directors shall be fixed from time to time by the action of a majority of the entire Board, provided that no decrease in the number of directors shall shorten the term of any incumbent
director.
(b) Subject
to Section 5.5 hereof, the Board shall be divided into three classes, as nearly equal in number as
possible and designated Class I, Class II and Class III. The Board is authorized to assign members of the Board already in office to Class I, Class II or
Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the effectiveness of this Second Amended
and Restated Certificate; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the effectiveness of this Second
Amended and Restated Certificate; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of
this
Second Amended and Restated Certificate. At each succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation
following the effectiveness of this Second Amended and Restated Certificate, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term or
until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.5 hereof, if the number of directors is
changed, any increase or decrease shall be apportioned by the Board among the classes so as to
maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. The Board is hereby
expressly authorized, by resolution or resolutions thereof, to assign members of the Board already in office to the aforesaid classes at the time this Second Amended and Restated Certificate (and
therefore such classification) becomes effective in accordance with the DGCL.
(c) Subject
to Section 5.5 hereof, a director shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor has been elected and qualified, subject, however, to such director's earlier death, resignation, retirement, disqualification or removal.
(d) Unless
and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.
3
Section 5.3 Newly Created Directorships and Vacancies. Subject to Section 5.5 hereof, newly created directorships resulting from an increase in the number of
directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the
remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full
term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such
director's earlier death, resignation, retirement, disqualification or removal.
Section 5.4 Removal. Subject to Section 5.5
hereof, any or all of the directors may be removed from office at any time with
cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
Section 5.5 Preferred StockDirectors. Notwithstanding any other provision of this
Article V, and except as otherwise required by law, whenever
the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the
removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate
(including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V
unless expressly provided by such terms.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to
adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended,
altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders
of any class or series of capital stock of the Corporation required by law, this Second Amended and Restated Certificate (including any Preferred Stock Designation), or by the Bylaws, the affirmative
vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws; and provided further, however, that no
Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had
not been adopted.
ARTICLE VII
MEETINGS OF STOCKHOLDERS; ADVANCE NOTICE
Section 7.1 Meetings. Subject to the rights, if any, of the holders of any outstanding series of the
Preferred Stock, and to the requirements of applicable law, special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board,
and the ability of the stockholders to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders may not be called by another
person or persons.
Section 7.2 Advance Notice. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of the stockholders of
the Corporation shall be given in the manner provided in the Bylaws.
4
Section 7.3 Stockholder Action by Written Consent Without a Meeting. The stockholders of the
Corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special
meeting.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 Limitation of Director Liability. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended. Any amendment, modification or repeal
of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment,
modification or repeal.
Section 8.2 Indemnification and Advancement of Expenses.
(a) To
the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is
or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by
reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan
(an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any
other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys' fees, judgments, fines, ERISA
excise taxes, damages, claims and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not
prohibited by applicable law pay the expenses (including attorneys' fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or
her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon the Corporation's receipt of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such
indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses
conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings
to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and
advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
(b) The
rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall
not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or
disinterested directors, or otherwise.
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(c) Any
repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the
adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise
required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior
thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any
proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption
of such inconsistent provision.
(d) This
Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or
permitted by law, to indemnify and to advance expenses to persons other than indemnitees.
ARTICLE IX
FORUM
Section 9.1 Forum. Unless the Corporation consents in writing to the selection of an alternative forum,
the sole and exclusive forum for any stockholder (including a beneficial
owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director,
officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or this
Certificate of Incorporation or the Corporation's Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware
(or if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the
federal district court for the District of Delaware) in all cases subject to the court's having personal jurisdiction over the indispensable parties named as defendants.
Section 9.2 Foreign Action. If any action the subject matter of which is within the scope of
Section 9.1 is filed in a court other than
a court located within the State of Delaware (a "Foreign Action") in the name of any stockholder, such stockholder shall be deemed to have consented to
(i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 9.1 (an
"FSC Enforcement Action") and (ii) having service of process made upon
such stockholder in any such FSC Enforcement Action by service upon such stockholder's counsel in the Foreign Action as agent for such stockholder.
Section 9.3 Severability. If any provision or provisions of this Article IX shall be held to be invalid, illegal or unenforceable as
applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other
circumstance and of the remaining provisions of this Article IX (including, without limitation, each portion of any sentence of this Article IX
containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or
unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise
acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article IX.
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ARTICLE X
CORPORATE OPPORTUNITY
The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers
or directors, or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of
the date of this Second Amended and Restated Certificate or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with
respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and
such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.
ARTICLE XI
AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second
Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted,
in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII,
all rights, preferences and privileges herein conferred upon stockholders, directors or any
other persons by and pursuant to this Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article XI.
[Signature Page Follows]
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IN
WITNESS WHEREOF, Pensare Acquisition Corp. has caused this Second Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized
officer as of the date first set forth above.
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PENSARE ACQUISITION CORP.
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By:
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Name:
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Title:
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[Signature Page to Second Amended and Restated Certificate of Incorporation]
ANNEX D
[LETTERHEAD OF CASSEL SALPETER & CO., LLC]
July 24,
2019
Pensare
Acquisition Corp.
1720 Peachtree Street, Suite 629
Atlanta, GA 30309
Attention: The Board of Directors
Members
of the Board of Directors:
We
understand that Pensare Acquisition Corp. (the "Company") intends to enter into a Business Combination Agreement (the "Agreement") by and among the Company, Tango Merger Sub Corp.
("Merger Sub"), Stratos Management Systems Holdings, LLC ("Holdings"), and Stratos Management Systems, Inc. ("Stratos"). We have been advised that pursuant to the Agreement, among other
things (i) Stratos will merge with Merger Sub (the "Merger"), with Merger Sub surviving the Merger as a wholly owned subsidiary of the Company, (ii) the outstanding shares of common
stock, par value $0.001 per share ("Stratos Common Stock"), of Stratos will be canceled and (iii) the Company shall issue and pay to Holdings, as sole stockholder of Stratos a number of
shares of common stock, par value $0.001 per share ("Company Common Stock"), of the Company or other equity securities of the Company as provided by the Agreement (the "Stock Consideration") and an
amount in cash (the "Cash Consideration" and, together with the Stock Consideration, the "Merger Consideration") as determined pursuant to the Agreement.
You
have requested that Cassel Salpeter & Co., LLC render an opinion (this "Opinion") to the Board of Directors of the Company (the "Board") as to whether, as of the
date of this Opinion, the Merger Consideration to be issued and paid by the Company in the Merger pursuant to the Agreement is fair, from a financial point of view, to the Company. For purposes of our
analyses and this Opinion we have, with your consent, assumed that the Merger Consideration will have a value equal to $46,380,000 and Stratos will have net debt of $18,620,000 immediately prior to
the consummation of the Merger.
In
arriving at this Opinion, we have made such reviews, analyses, and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we
have:
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Reviewed a draft, dated July 22, 2019, of the Agreement.
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Reviewed certain publicly available financial information and other data with respect to the Company and Stratos that we deemed relevant.
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Reviewed certain other information and data with respect to the Company and Stratos made available to us by the Company and Stratos, including
financial projections with respect to the future financial performance of Stratos for the years ending December 31, 2019 through December 31, 2021, prepared by management of Stratos as
adjusted by Stratos management (the "Projections") and other internal financial information furnished to us by or on behalf of the Company and Stratos.
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Considered the publicly available financial terms of certain transactions that we deemed relevant.
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Considered and compared the financial and operating performance of Stratos with that of companies with publicly traded equity securities that
we deemed relevant.
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Discussed the business, operations, and prospects of Stratos and the proposed Merger with the Company's and Stratos's management and certain of
the Company's and Stratos's representatives.
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Conducted such other analyses and inquiries, and considered such other information and factors as we deemed appropriate.
This
Opinion only addresses whether, as of the date hereof, the Merger Consideration to be issued and paid by the Company in the Merger pursuant to the Agreement is fair, from a
financial point of view, to the Company. It does not address any other terms, aspects, or implications of the Merger, the Agreement or any related or other transaction or agreement, including, without
limitation, (i) the private placement or placements to be consummated by the Company immediately prior to the consummation of the Merger or any transaction that may be consummated by the
Company following the Merger, (ii) any term or aspect of the Merger that is not susceptible to financial analysis, (iii) the fairness of the Merger, or all or any portion of the Merger
Consideration, to any security holders of the Company, Stratos or any other person or any creditors or other constituencies of the Company, Stratos or any other person, (iv) the appropriate
capital structure of the Company or whether the Company should be issuing debt or equity securities or a combination of both, nor (v) the fairness of the amount or nature, or any other aspect,
of any compensation or consideration payable to or received by any officers, directors, or employees of any parties to the Merger, or any class of such persons, relative to the Merger Consideration in
the Merger or otherwise. We are not expressing any opinion as to what the value of shares of Company Common Stock or any other security of the Company actually will be when issued in the Merger or the
prices at which Company Common Stock, any other security of the Company or Stratos Common Stock may trade, be purchased or sold at any time.
This
Opinion does not address the relative merits of the Merger as compared to any alternative transaction or business strategy that might exist for the Company, or the merits of the
underlying decision by the Board or the Company to engage in or consummate the Merger. The financial and other terms of the Merger were determined pursuant to negotiations between the parties to the
Agreement and were not determined by or pursuant to any recommendation from us. In addition, we were not authorized to, and we did not, solicit indications of interest from third parties regarding a
potential transaction involving the Company.
In
arriving at this Opinion, we have, with your consent, relied upon and assumed, without independently verifying, the accuracy and completeness of all of the financial and other
information that was supplied or otherwise made available to us or available from public sources, and we have further relied upon the assurances of the Company's and Stratos's management that they
were not aware of any facts or circumstances that would make any such information inaccurate or misleading. We also have relied upon, without independent verification, the assessments of the
management of the Company and Stratos as to Stratos's existing and future technology, products and services and the validity and marketability of, and risks associated with, such technology, products
and services (including, without limitation, the development and marketing of such technology, products and services; and the life of all relevant patents and other intellectual and other property
rights associated with such technology, products and services), and we have assumed, at your direction, that there will be no developments with respect to any such matters that would adversely affect
our analyses or this Opinion. We are not legal, tax, accounting, environmental, or regulatory advisors, and we do not express any views or opinions as to any legal, tax, accounting, environmental, or
regulatory matters relating to the Company, Stratos, the Merger, or otherwise. We understand and have assumed that the Company has obtained or will obtain such advice as it deems necessary or
appropriate from qualified legal, tax, accounting, environmental, regulatory, and other professionals.
Stratos
has advised us and we have with your agreement assumed that the Projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of
the management of Stratos with respect to the future financial performance of Stratos, and we have assumed, at your direction, that the Projections provide a reasonable basis upon which to analyze and
evaluate Stratos and form an opinion. We express no view with respect to the Projections or the assumptions on which they are based. We have not evaluated the solvency or creditworthiness of the
Company, Stratos or any other party to the Merger, the fair value of the Company, Stratos or any of their respective assets or liabilities, or whether the Company, Stratos or any other party to the
Merger is paying or receiving reasonably equivalent value in the Merger under any applicable foreign, state, or federal laws relating to bankruptcy, insolvency, fraudulent transfer, or similar
matters, nor have we evaluated, in any way, the ability of the Company, Stratos or any other party to the Merger to pay its
obligations
when they come due. We have not physically inspected the Company's or Stratos' properties or facilities and have not made or obtained any evaluations or appraisals of the Company's or
Stratos'
assets or liabilities (including any contingent, derivative, or off-balance-sheet assets and liabilities). We have not attempted to confirm whether the Company and Stratos have good title to their
respective assets. Our role in reviewing any information was limited solely to performing such reviews as we deemed necessary to support our own advice and analysis and was not on behalf of the Board,
the Company, or any other party.
We
have assumed, with your consent, that the Merger will be consummated in a manner that complies in all respects with applicable foreign, federal, state, and local laws, rules, and
regulations and that, in the course of obtaining any regulatory or third party consents, approvals, or agreements in connection with the Merger, no delay, limitation, restriction, or condition will be
imposed that would have an adverse effect on the Company, Stratos or the Merger. We also have assumed, with your consent, that the final executed form of the Agreement will not differ in any material
respect from the draft we have reviewed and that the Merger will be consummated on the terms set forth in the Agreement, without waiver, modification, or amendment of any term, condition, or agreement
thereof that is material to our analyses or this Opinion. Without limitation to the foregoing, with your consent, we have further assumed that any adjustments to the Merger Consideration in accordance
with the Agreement or otherwise would not be material to our analyses or this Opinion. We have also assumed that the representations and warranties of the parties to the Agreement contained therein
are true and correct and that each such party will perform all of the covenants and agreements to be performed by it under the Agreement. We offer no opinion as to the contractual terms of the
Agreement or the likelihood that the conditions to the consummation of the Merger set forth in the Agreement will be satisfied.
Our
analyses and this Opinion are necessarily based upon market, economic, and other conditions as they exist on, and could be evaluated as of, the date hereof. Accordingly, although
subsequent developments may arise that would otherwise affect this Opinion, we do not assume any obligation to update, review, or reaffirm this Opinion to you or any other person or otherwise to
comment on or consider events occurring or coming to our attention after the date hereof.
This
Opinion is addressed to the Board for the use and benefit of the members of the Board (in their capacities as such) in connection with the Board's evaluation of the Merger. This
Opinion is not intended to and does not constitute advice or a recommendation to any of the Company's stockholders or any other security holders as to how such holder should vote or act with respect
to any matter relating to the Merger or otherwise.
We
will receive a fee for rendering this Opinion, no portion of which is contingent upon the completion of the Merger. In addition, the Company has agreed to reimburse certain of our
expenses and to indemnify us and certain related parties for certain liabilities that may arise out of our engagement or the rendering of this Opinion. In accordance with our policies and procedures,
a fairness committee was not required to, and did not, approve the issuance of this Opinion.
Based
upon and subject to the foregoing, it is our opinion that, as of the date of this Opinion, the Merger Consideration to be issued and paid by the Company in the Merger pursuant to
the Agreement is fair, from a financial point of view, to the Company.
Very
truly yours,
/s/
Cassel Salpeter & Co., LLC
Cassel
Salpeter & Co., LLC
ANNEX E
PRELIMINARY COPY
PENSARE ACQUISITION CORP.