Item
1.01 Entry into a Material Definitive Agreement.
AOC Key Solutions Transaction
On
April 2, 2020, Rekor Systems, Inc. (the “Company”)
entered into a Stock Purchase Agreement (the “Purchase
Agreement”) by and among the Company, AOC Key Solutions,
Inc., a Delaware corporation and wholly owned subsidiary of the
Company (“AOC”), and PurpleReign, LLC, a Virginia
limited liability company owned by the members of AOC’s
management (the “Buyer”), pursuant to which the Company
agreed to sell AOC, which specializes in proposal management and
writing, capture management, and market assessment services for
government contractors (the “Business”), to Buyer. B.
Riley FBR, Inc. provided the Company’s Board of Directors
with its opinion that, as of March 31, 2020, the consideration
received by the Company in the Transaction (as defined below) is
fair to the Company’s public stockholders, other than the
stockholder who owns the Buyer, from a financial point of
view.
Subject
to the terms and conditions of the Purchase Agreement, the Buyer
agreed to purchase all of the outstanding equity interests of AOC
for a purchase price of $4,000,000, comprising (i) $3,400,000 in
cash, and (ii) a subordinated promissory note (the
“Subordinated Note”) in the initial principal amount of
$600,000 (the “Transaction”). The Transaction closed
concurrently with execution of the Purchase Agreement.
The
Purchase Agreement contains customary representations, warranties
and covenants related to the Business and the Transaction. For a
period of two years, the Company has agreed not to engage
activities that compete with the Business, nor solicit customers of
the Business, among other covenants with respect to the Business as
set forth more fully in the Purchase Agreement. Both the Company
and the Buyer have agreed to indemnify the other party for losses
arising from certain breaches of covenants contained in the
Purchase Agreement and other liabilities, subject to certain
limitations.
The
Purchase Agreement also contains customary representations and
warranties that the Company and the Buyer made to each other as of
the date of the Purchase Agreement. The assertions embodied in
those representations and warranties were made solely for purposes
of the contract between the Company and the Buyer, and may be
subject to important qualifications and limitations agreed to by
the parties in connection with negotiating its terms. Moreover, the
representations and warranties are subject to a contractual
standard of materiality that may be different from what may be
viewed as material to stockholders of the Company, and the
representations and warranties may have been used to allocate risk
between the Company and the Buyer rather than establishing matters
as facts.
The
foregoing descriptions of the Purchase Agreement and the
Subordinated Note do not purport to be complete and are qualified
in their entirety by reference to the complete text of the Purchase
Agreement and Subordinated Note, respectively. A copy of the
Purchase Agreement is filed as Exhibit 2.1, and a copy of the
Subordinated Note is filed as Exhibit 10.1 to this Current Report
on Form 8-K and are incorporated by reference herein.
Second Amendment to Note Purchase Agreement
As
previously disclosed on the Company’s Current Report on Form
8-K, as filed with the Securities and Exchange Commission (the
“SEC”) on March 18, 2019, the Company entered into that
certain Note Purchase Agreement (the “Note Purchase
Agreement”), by and among the Company, the Company’s
guarantors from time to time party thereto (together with the
Company, the “Credit Parties”), the purchasers from
time to time party thereto (the “Purchasers”) and U.S.
Bank National Association as paying agent and collateral agent (in
such capacity, the “Agent”).
As previously disclosed on the Company’s Current Report on
Form 8-K as filed with the SEC on March 26, 2020, the Company
entered into a First Amendment to Note Purchase Agreement (the
“First Note Amendment”), by and among the Credit
Parties, the Purchasers and the Agent. Pursuant to the terms of the
First Note Amendment, the maturity date for the notes issued under
the First Note Purchase Agreement has been extended from March 11,
2021 to June 12, 2021, unless earlier accelerated pursuant to the
terms of the Note Purchase Agreement, as amended.
On April 2, 2020, the Company entered into a Partial Release and
Second Amendment to Note Purchase Agreement (the “Second
Amendment”), by and among the Credit Parties, the Purchasers
and the Agent. Pursuant to the terms of the Second Amendment, AOC
is released as a Credit Party and the assets related to AOC are
released as collateral, and the Asset Disposition Proceeds terms of
the Note Purchase Agreement were amended to reflect the
Transaction.