Item 1.01. Entry into a Material
Definitive Agreement.
Amended and Restated Purchase Agreement
Effective as of December
1, 2020 (the “Closing Date”), American Virtual Cloud Technologies, Inc. (“AVCT” or the “Company”)
entered into an Amended and Restated Purchase Agreement (the “A&R Purchase Agreement”) with Ribbon Communications
Inc. (“Ribbon”), Ribbon Communications Operating Company, Inc. (“RCOCI”) and Ribbon Communications International
Limited (together with RCOCI, the “Sellers”, and together with Ribbon, the “Ribbon Parties”), and consummated
the transactions contemplated by the A&R Purchase Agreement (the “Closing”). The A&R Purchase Agreement amends
and restates in its entirety the Purchase Agreement entered into on August 5, 2020, by AVCT and the Ribbon Parties (the “Original
Purchase Agreement”), which Original Purchase Agreement was described in the Current Report on Form 8-K filed by AVCT on
August 11, 2020. At the Closing, AVCT purchased the Sellers’ cloud-based enterprise services business (also known as
the Kandy Communications business) (the “Business”) by acquiring certain of the Sellers’ and their respective
affiliates’ assets (and assuming certain of the Sellers’ and their respective affiliates’ liabilities) primarily
associated with the Business, and acquiring all of the outstanding interests of Kandy Communications LLC (the “Transaction”).
The A&R Purchase
Agreement revised the Original Purchase Agreement by, among other things, changing the consideration payable by AVCT to Ribbon
from 13.0 million shares of AVCT’s common stock (“Common Stock”) to $45.0 million, subject to certain adjustments,
in the form of units of AVCT’s securities (“Units”), each Unit consisting of (i) $1,000 in principal amount of
AVCT’s Series A-1 convertible debentures (the “Debentures”) and (ii) a warrant to purchase 100 shares of Common
Stock at an exercise price of $0.01 per whole share (the “Warrants”). At the Closing, AVCT issued to Ribbon Debentures
with an aggregate original principal amount of approximately $43.8 million and Warrants exercisable for 4,377,800 shares of Common
Stock.
The Debentures bear
interest at a rate of 10% per annum, accruing quarterly on the last day of each calendar quarter and added to the principal amount
of the Debentures, except upon maturity in which case accrued and unpaid interest is payable in cash. The entire principal amount
of each Debenture, together with accrued and unpaid interest thereon, is due and payable on the earlier of (i) such date, commencing
on or after June 1, 2023, as the holder thereof, at its sole option, upon not less than 30 days’ prior written notice to
the Company, demands payment thereof and (ii) the occurrence of a Change in Control (as defined in the Debentures). Each Debenture
is convertible, in whole or in part, at any time at the option of the holder thereof into that number of shares of Common Stock
calculated by dividing the principal amount being converted, together with all accrued but unpaid interest thereon, by the applicable
conversion price, initially $3.45. The conversion price is subject to customary adjustments for stock dividends, stock splits,
reclassifications and the like, and is also subject to price-based adjustment, on a “full ratchet” basis, in the event
of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the
then-applicable conversion price (subject to certain exceptions). The Debentures are subject to mandatory conversion if the closing
price of the Common Stock exceeds $6.00 for any 40 trading days within a consecutive 60 trading day-period, subject to the satisfaction
of certain other conditions. The Debentures are subordinated to all Senior Indebtedness (as defined in the Debentures), including
indebtedness under the Credit Agreement (as defined below).
Pursuant to the terms
of the Debentures, at the Closing AVCT’s subsidiaries issued to the holders of the Debentures a Guaranty (the “Guaranty”),
pursuant to which such subsidiaries jointly and severally guaranteed the obligations of AVCT under the Debentures.
Under the A&R Purchase
Agreement, the Company is required to take certain specified efforts to seek stockholder approval, for purposes of Nasdaq listing
rules, of the issuance of more than 20% of the Company’s outstanding Common Stock (the “Stockholder Approval”).
Until such Stockholder Approval is received, the terms of the Debentures and Warrants limit the number of shares of Common Stock
into which the Debentures and Warrants (together with any Debentures and Warrants issued pursuant to the PIPE (as defined below))
can be converted to no more than 19.9% of either the number of shares of Common Stock outstanding on the Closing Date or the total
voting power of the Company’s securities outstanding on the Closing Date that are entitled to vote on a matter voted on by
holders of Common Stock.
The foregoing descriptions
of the A&R Purchase Agreement, the Debentures, the Warrants and the Guaranty do not purport to be complete and are qualified
in their entireties by reference to the full text of the A&R Purchase Agreement, the form of Debenture, the form of Warrant
and the form of Guaranty, which are filed as Exhibits 2.1, 4.1, 4.2 and 10.1, respectively, to this Current Report on Form 8-K
and are incorporated herein by reference.
Amended and Restated Voting Agreement
Simultaneously with
the execution of the A&R Purchase Agreement, the Ribbon Parties entered into Amended and Restated Voting Agreements (the “A&R
Voting Agreements”) with each of Pensare Sponsor Group, LLC and Stratos Management Systems Holdings, LLC, each of which is
a greater than 5% stockholder of the Company (each, a “Significant Stockholder”). The Significant Stockholders hold
in the aggregate approximately 70% of AVCT’s outstanding shares of Common Stock. Pursuant to the A&R Voting Agreements,
each Significant Stockholder has agreed, with respect to all of the voting securities of AVCT that such Significant Stockholder
beneficially owns as of the date thereof or thereafter, to vote in favor of the Stockholder Approval. The A&R Voting Agreements
will terminate upon the Company obtaining the Stockholder Approval.
The foregoing description
of the A&R Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the full text
of the A&R Voting Agreements, which are filed as Exhibit 10.2 and Exhibit 10.3 to this Current Report on Form 8-K
and are incorporated herein by reference.
Investor Rights Agreement
Simultaneously with
the execution of the A&R Purchase Agreement, AVCT, Ribbon and the Significant Stockholders entered into an Investor Rights
Agreement (the “Investor Rights Agreement”). Pursuant to the terms of the Investor Rights Agreement, Ribbon received
customary registration rights with respect to the shares of Common Stock underlying the Debentures and Warrants issued to Ribbon.
In addition, under the Investor Rights Agreement, so long as Ribbon holds an amount of shares of Common Stock equal to at least
25% of the total number of shares of Common Stock issuable upon conversion of Debentures issued to Ribbon at the Closing (or Debentures
convertible in the aggregate into such amount) (the “Minimum Shares”), Ribbon will have the right to nominate one director
to the AVCT board of directors. If Ribbon holds the Minimum Shares and does not exercise its right to nominate one director, Ribbon
will have the right to designate a board observer. The Investor Rights Agreement also provides that each of the Significant Stockholders
will agree to support AVCT’s obligation to nominate and have elected Ribbon’s director nominee.
The Investor Rights
Agreement also provides that if AVCT consummates the sale of $50.0 million or more in Units in the PIPE by May 24, 2021, then Ribbon
will have the right to elect to have up to five million of its Units repurchased by AVCT for a purchase price of $1,000 per Unit
(provided that if less than $55.0 million in Units is sold in the PIPE by such date, the maximum number of Units that AVCT would
be obligated to repurchase would be equal to the difference between the number of Units sold in the PIPE and fifty thousand).
The foregoing description
of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text
of the A&R Purchase Agreement, which is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated
herein by reference.
Securities Purchase Agreement
Also on the Closing
Date, AVCT entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which SPAC
Opportunity Partners Investment Sub LLC (the “Initial Investor”) purchased, in a private placement on the Closing Date,
10,000 Units for an aggregate purchase price of $10.0 million, and AVCT may sell up to an additional 50,000 Units in one or more
additional closings on or before May 24, 2021 (collectively, the “PIPE”). The Initial Investor, which is an affiliate
of Lawrence Mock, the Chairman of AVCT’s Board of Directors and a significant stockholder of the Company, agreed that if
the total number of Units sold pursuant to the Securities Purchase Agreement as of such date is less than 35,000, it will purchase
such number of additional Units as is necessary to result in AVCT selling a total of 35,000 Units pursuant to the Securities Purchase
Agreement, subject to customary closing conditions. The Debentures and Warrants issued and issuable pursuant to the Securities
Purchase Agreement are substantially the same as those issued to Ribbon pursuant to the A&R Purchase Agreement, and the Company’s
obligations under the Debentures issued pursuant to the Securities Purchase Agreement are guaranteed by AVCT’s subsidiaries
pursuant to a Guaranty in the same form as the Guaranty issued to Ribbon.
Simultaneously with
the execution of the Securities Purchase Agreement, AVCT, certain of the other parties to the Registration Rights Agreement, dated
as of April 7, 2020 (the “Registration Rights Agreement”), to which AVCT is a party, and the Initial Investor entered
into an amendment and joinder to the Registration Rights Agreement (the “RRA Amendment”), pursuant to which the Initial
Investor was added as an additional “Holder” under the Registration Rights Agreement (and any additional investors
under the Securities Purchase Agreement will be added as additional Holders thereunder) and the shares of Common Stock underlying
the Debentures and Warrants issued and issuable pursuant to the terms of the Securities Purchase Agreement were added to the definition
of “Registrable Securities” under the Registration Rights Agreement.
The foregoing descriptions
of the Securities Purchase Agreement and the RRA Amendment do not purport to be complete and are qualified in their entireties
by reference to the full text of the Securities Purchase Agreement and RRA Amendment, which are filed as Exhibits 10.5 and
10.6, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Sixth Amendment to Loan Documents
Also on the Closing
Date, AVCT, the subsidiaries of AVCT and Comerica Bank (“Comerica”) entered into a Sixth Amendment to Loan Documents
(the “Sixth Amendment”). The Sixth Amendment added certain new subsidiaries of AVCT as guarantors under the Credit
Agreement, dated December 18, 2017 (as amended, the “Credit Agreement”), to which AVCT and Comerica are parties, and
otherwise amended certain provisions of the Credit Agreement and related loan documents to permit the consummation of the transactions
contemplated by the A&R Purchase Agreement and the Securities Purchase Agreement.
The foregoing description
of the Sixth Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the Sixth
Amendment, which is filed as Exhibit 10.7 to this Current Report on Form 8-K and is incorporated herein by reference.