0001213900-20-016883.txt : 20200707 0001213900-20-016883.hdr.sgml : 20200707 20200707164045 ACCESSION NUMBER: 0001213900-20-016883 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20200702 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200707 DATE AS OF CHANGE: 20200707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ComSovereign Holding Corp. CENTRAL INDEX KEY: 0001178727 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT [3721] IRS NUMBER: 465538504 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-150332 FILM NUMBER: 201016454 BUSINESS ADDRESS: STREET 1: 11651 CENTRAL PARKWAY #118 CITY: JACKSONVILLE STATE: FL ZIP: 32224 BUSINESS PHONE: 904-834-4400 MAIL ADDRESS: STREET 1: 11651 CENTRAL PARKWAY #118 CITY: JACKSONVILLE STATE: FL ZIP: 32224 FORMER COMPANY: FORMER CONFORMED NAME: ComSovereign Holding Corp DATE OF NAME CHANGE: 20191210 FORMER COMPANY: FORMER CONFORMED NAME: DRONE AVIATION HOLDING CORP. DATE OF NAME CHANGE: 20140508 FORMER COMPANY: FORMER CONFORMED NAME: MACROSOLVE INC DATE OF NAME CHANGE: 20020725 8-K 1 ea123910-8k_comsovereignhold.htm CURRENT REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (date of earliest event reported): July 2, 2020

 

COMSOVEREIGN HOLDING CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   333-150332   46-5538504

(State or Other Jurisdiction

of Incorporation)

  (Commission File Number)   (IRS Employer
Identification No.)

 

5000 Quorum Drive, STE 400

Dallas, TX 75254

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (904) 834-4400

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   N/A   N/A

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On July 6, 2020, ComSovereign Holding Corp. (“we,” “us,” or “our company”) entered into an employment agreement with Mohan Tammisetti to serve as our Senior Vice President – Engineering and an employment agreement with Keith Kaczmarek to serve as our Senior Vice President – Business Development. The information required to be reported under this item with respect to such employment agreements is incorporated by reference to the fifth paragraph of Item 2.01 of this Current Report on Form 8-K. Copies of the employment agreements are attached as Exhibit 10.2 and 10.3 to this current report on Form 8-K and are incorporated by reference herein.

 

The foregoing summary of the employment agreements of Messrs. Tammisetti and Kaczmarek, including the information incorporated by reference to Item 2.01, is qualified in its entirety by the copy of such agreements filed as Exhibit 10.2 and 10.3 hereto and incorporated herein by reference.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

On July 6, 2020, we completed our previously announced acquisition (the “Acquisition”) of Virtual Network Communications Inc., a Virginia corporation (“VNC”), pursuant to an Agreement and Plan of Merger and Reorganization dated as of May 21, 2020 (the “Merger Agreement”), by and among our company and our wholly-owned subsidiaries, CHC Merger Sub 7, Inc. (“Merger Sub I”) and VNC Acquisition LLC (“Merger Sub II”), VNC and Mohan Tammisetti, solely in his capacity as the representative of the security holders of VNC.

 

As previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 22, 2020, we agreed to acquire 100% of the outstanding common stock of VNC pursuant to the terms of the Merger Agreement. In accordance with the terms of the Merger Agreement, Merger Sub I has merged with and into VNC (the “Initial Merger”), whereupon the separate corporate existence of Merger Sub I has ceased and VNC, as the surviving corporation of the Initial Merger, became a wholly-owned subsidiary of our company. Following the Initial Merger, VNC merged with and into Merger Sub II with Merger Sub II continuing as the surviving company and our wholly-owned subsidiary.

 

VNC is an EDGE telecom access radio developer and provider of both 4G LTE/Advanced and 5G capable radio equipment. Additionally, VNC has virtualized and patented an entire LTE Advanced network core solution that we believe eliminates much of the costly backbone equipment of telecom networks. VNC also has developed and is currently selling a rapidly-deployable network system that can be combined with the tethered aerostats and drones offered by our Drone Aviation subsidiary and enabled and operated in nearly any location in the world.

 

In connection with the Initial Merger, all of the issued and outstanding capital stock of VNC was automatically cancelled and the stockholders of VNC received merger consideration consisting of, in the aggregate: (i) $1,785,139 in cash and (ii) 11,738,210 shares of our common stock, par value $0.0001 per share, of which an aggregate of 4,000,000 shares is being held in an escrow fund for purposes of satisfying any post-closing indemnification claims of the former VNC security holders under the Merger Agreement. Pursuant to the merger agreement, we also issued to the holders of outstanding options and warrants of VNC, whether vested or unvested, in replacement of such options or warrants, options or warrants to purchase an aggregate of 4,261,790 shares of our common stock, all of which were fully vested. In addition, at the closing of the Acquisition, we paid approximately $1.142 million of outstanding payables of VNC.

 

In connection with the closing of the Acquisition, on July 6, 2020, we entered into an employment agreement with Mohan Tammisetti, VNC’s chief executive officer, to serve as our Senior Vice President – Engineering and an employment agreement with Keith Kaczmarek, VNC’s Chief Strategy Officer, to serve as our Senior Vice President – Business Development. Pursuant to such employment agreements, we will pay each of such executives a base salary in the amount of $150,000 and have granted to each such executive a stock option to purchase 100,000 shares of our common stock at a purchase price of $1.08 per share, subject to adjustment, which options vest as to 50,000 shares on the six-month anniversary of the date of grant and 50,000 shares on the first anniversary of the date of grant.

 

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We and VNC intend, for U.S. federal income tax purposes, that the mergers contemplated by the Merger Agreement qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and Treasury Regulations Sections 1.368-2(g) and 1.368-3(a), and the Merger Agreement was adopted as a plan of reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).

 

The information provided under this Item 2.01 is a summary of certain portions of the Merger Agreement and does not purport to be a complete description and is subject to, and qualified in its entirety by, (i) the information provided under Item 1.01 of our Current Report on Form 8-K filed on May 22, 2020 and (ii) the text of the Merger Agreement, a copy of which was attached as (a) Exhibit 10.1 to our Current Report on Form 8-K filed on May 22, 2020 and (b) is incorporated by reference herein as Exhibit 10.1 hereto.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On July 2, 2020, we sold $2,900,000 aggregate principal amount of our 9% Senior Convertible Debentures. The information required to be reported under this item with respect to such debentures is incorporated by reference to the second paragraph of Item 3.02 of this Current Report on Form 8-K.

 

On July 7, 2020, we sold $285,714 principal amount of our 12.5% OID convertible promissory notes. The information required to be reported under this item with respect to such notes is incorporated by reference to the third paragraph of Item 3.02 of this Current Report on Form 8-K.

 

Item 3.02 Unregistered Sale of Equity Securities.

 

On July 6, 2020, we sold an aggregate of 11,738,210 shares of our common stock and an aggregate 4,261,790 shares of our common stock underlying warrants and options, which were all issued in connection with the Acquisition. The information required to be reported under this Item with respect to such sale is incorporated by reference to Item 2.01 of this Current Report on Form 8-K.

 

In connection with the transactions contemplated by the Merger Agreement, on July 2, 2020, we sold an aggregate of 29 units (the “Units”) to accredited investors, including 19 Units to Dr. Dustin McIntire, our Chief Technology Officer, for a purchase price of $100,000 per Unit, or $2,900,000 in the aggregate. Each Unit consisted of a 9% Senior Convertible Debenture (the “Debentures”) of our company in the principal amount of $100,000 and warrants (the “July Warrants”) to purchase 10,000 shares of our common stock. The Debentures bear interest at the rate of 9% per annum, mature on September 30, 2020 and are convertible into shares of our common stock at a conversion price of $1.00 per share, subject to adjustment. The July Warrants are exercisable to purchase shares of our common stock at an exercise price of $1.00 per share, subject to adjustment, and expire on the earlier of (i) December 31, 2022 or (ii) the second anniversary of our consummation of a public offering of our common stock in connection with an up-listing of our common stock to a national securities exchange. The proceeds from the sale of the Units were applied to the cash consideration we paid in the Acquisition and related expenses.

 

As previously disclosed in our Current Report on Form 8-K filed with the SEC on May 5, 2020 (the “May 5, 2020 Form 8-K”), on April 29, 2020, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an investor, pursuant to which we sold to the investor $571,428 aggregate principal amount of 12.5% OID convertible promissory notes (the “Notes”) and warrants (the “May Warrants”) to purchase up to 317,460 shares of our common stock in two tranches. On April, 29, 2020, we issued and sold to the investor a Note in the principal amount of $285,714 and May Warrants to purchase 158,730 shares of common stock for proceeds of $250,000 (representing an original issue discount of 12.5%). On July 7, 2020, we sold to the investor an additional Note in the principal amount of $285,714 and May Warrants to purchase an additional 158,730 shares of common stock for proceeds of $250,000 (representing an original issue discount of 12.5%). Additional information with respect to the Purchase Agreement, the Notes and the May Warrants is disclosed in the May 5, 2020 Form 8-K and is incorporated herein by reference thereto. 

 

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Item 8.01 Other Information.

 

On July 7, 2020, we issued a press release press release announcing the completion of the Acquisition. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein.

 

The information under this Item 8.01, including Exhibit 99.1, is deemed “furnished” and not “filed” under Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

The following exhibits are filed with this Current Report on Form 8-K:

 

Exhibit
Number
  Description
     
4.1   Form of 9% Senior Convertible Debentures
     
4.2   Form of July Warrants to purchase common stock
     
10.1*   Agreement and Plan of Merger and Reorganization, dated as of May 21, 2020, among the Company. CHC Merger Sub 7, Inc., VNC Acquisition, LLC, Virtual Network Communications Inc. and the Stockholders’ Representative named therein (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 22, 2020 and incorporated herein by reference).
     
10.2   Employment Agreement dated as of June 7, 2020 between Mohan Tammisetti and ComSovereign Holding Corp.
     
10.3   Employment Agreement dated as of June 7, 2020 between Kieth Kaczmarek and ComSovereign Holding Corp.
     
99.1   Press Release, dated July 7, 2020, announcing the Company’s completion of the Acquisition of Virtual Network Communications Inc.

 

*Schedules, exhibits and similar supporting attachments or agreements to the Merger Agreement are omitted pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

 

Cautionary Note Regarding Forward-Looking Statements

 

The information in this Current Report on Form 8-K, including Exhibit 99.1, may contain “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements furnished pursuant to this Item 8.01 and the accompanying Exhibit 99.1 are not historical facts are forward-looking statements that reflect management’s current expectations, assumptions, and estimates of future performance and economic conditions, and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “could,” “continue,” “anticipate” “optimistic,” “forecast” “intend,” “estimate,” “preliminary,” “project,” “seek,” “plan,” “looks to,” “on condition,” “target,” “potential,” “guidance,” “outlook” or “trend,” or other comparable terminology, or by a general discussion of strategy or goals or other future events, circumstances, or effects. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 (particularly in Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations), and other risks and uncertainties listed from time to time in our other filings with the SEC. There may be other factors of which the Company is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. In addition, there is uncertainty about the spread of the COVID-19 virus and the impact it may have on our operations, the demand for our products or services, global supply chains and economic activity in general. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statement. Further information relating to factors that may impact our results and forward-looking statements are disclosed in our filings with the SEC. The forward-looking statements contained in this report are made as of the date of this report, and we disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

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SIGNATURE

 

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: July 7, 2020 COMSOVEREIGN HOLDING CORP.
     
  By: /s/ Daniel L. Hodges
    Daniel L. Hodges
    Chairman and Chief Executive Officer

 

 

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EX-4.1 2 ea123910ex4-1_comsovereign.htm FORM OF 9% SENIOR CONVERTIBLE DEBENTURES

Exhibit 4.1

 

SENIOR CONVERTIBLE DEBENTURE

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

COMSovereign Holding Corp.

 

9% Senior Convertible Debenture

 

Issuance Date:  ___________, 2020 Principal Amount: U.S. $[_________]

 

 

FOR VALUE RECEIVED, COMSOVEREIGN HOLDING CORP., a Nevada corporation (the “Company”), hereby promises to pay to the order of [____________] or its registered assigns (“Holder”) the amount set out above as the Principal Amount (the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption, conversion or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on the outstanding Principal at the applicable Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This 9% Senior Convertible Debenture (this “Debenture”) is one of an issue of 9% Senior Convertible Debentures issued pursuant one or more subscription agreements having terms substantially identical to the Subscription Agreement (as defined below) (collectively, the “Other Debentures” and together with this Debenture, the “Debentures”). Certain capitalized terms used herein and in the Conversion Notice in Exhibit I are defined in Section 23. All other capitalized terms not defined herein shall have the meaning given to such terms in the Subscription Agreement.

 

1. INTEREST.

 

(a) Interest Rate. So long as no Event of Default shall have occurred and be continuing, Interest on this Debenture shall accrue at a rate equal to nine percent (9%) simple interest per annum. If an Event of Default shall have occurred and be continuing, the Interest Rate shall automatically be increased to a rate equal to fifteen percent (15%) simple interest per annum during the period of such Event of Default, until such Event of Default is later cured.

 

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(b) Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the applicable interest rate per annum, payable in one lump sum on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, par value $0.0001 per share (the “Common Stock”), of the Company at the then-applicable Conversion Price (as defined in Section 3 below)  (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof.  

 

(c) Notice of Company’s Election to Pay Interest in Cash or Kind. Subject to the terms and conditions herein, the decision whether to pay interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company. At least ten (10) days prior to each Interest Payment Date, the Company shall deliver to the Holder a written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in such notice that the election contained in such notice shall apply to future Interest Payment Dates until revised by a subsequent notice. During any the period between the delivery of any such notice and the applicable Interest Payment Date, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash.

 

(d) Interest Calculations. Interest shall be calculated on the basis of the actual number of days elapsed and a 365-day year, and shall accrue daily commencing on the Issuance Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Payment of interest in shares of Common Stock shall otherwise occur pursuant to Section 3 herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion Shares within the time period required by Section 3 herein. Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture maintained pursuant to Section 3(b)(ii). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Subscription Agreements.

 

(e) Prepayment. Except as otherwise set forth in this Debenture (including Section 2(a)), the Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder.

 

2. OPTIONAL REDEMPTION.

 

(a) Optional Redemption Upon Liquidation Event.  The Company may not consummate or effect a Liquidation Event unless the Company provides to the Holder of this Debenture at least 20 days’ prior written notice of such proposed Liquidation Event and the opportunity to demand, at the option of the Holder, the redemption of this Debenture at a redemption price equal to the Optional Redemption Amount (such redemption, an “Optional Redemption”).  In the event of any voluntary or involuntary Liquidation Event, if the Holder of this Debenture shall have elected pursuant to this Section 2 to have this Debenture redeemed, in whole or in part, the Holder shall be entitled to be paid out of the assets of the Company on or prior to the date of such Liquidation Event and before any payment shall be made to the holders of capital stock of the Company by reason of their ownership thereof, an amount equal to the Optional Redemption Amount with respect to the principal amount of this Debenture to be redeemed.  If upon any Liquidation Event, the assets of the Company available for distribution shall be insufficient to pay the Holder and the holders of Other Debentures who have properly elected the redemption of their Other Debentures the full amount to which they shall be entitled under this Section 2(a), the Holder and such holders of Other Debentures shall share ratably in any distribution of the assets available for distribution in proportion to the respective principal amounts of Debentures to be redeemed.

 

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(b) Notice of Redemption.  The Company shall send notice to the Holder of a proposed Liquidation Event at least twenty (20) days prior to the date the Company consummates or effects such proposed Liquidation Event advising the Holder of the Holder’s right (and providing the form of optional redemption notice to the Company (a “Redemption Demand”) to be provided by the Holder to the Company to secure such right) to demand the redemption of this Debenture on or prior to the date of consummation or effectiveness of such proposed Liquidation Event, and the Holder shall have a minimum of fifteen (15) days to deliver to the Company the  completed Redemption Demand and thereby notify the Company of the Holder’s election to require the Company to redeem this Debenture in whole or in part.   

 

(c) Failure to Effect Liquidation Event.   If the Company provides notice of a proposed Liquidation Event, the Company shall have no duty or obligation to consummate, complete or effect such proposed Liquidation Event, and if the Company fails to consummate, complete or effect such proposed Liquidation Event any Redemption Demand received by the Company in respect of such proposed Liquidation Event shall be void and unenforceable and the Company shall have no obligation to redeem this Debenture pursuant thereto.

 

(d) Right to Rescind. If any portion of the payment pursuant to an Optional Redemption shall not be paid by the Company on the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption Amount remains unpaid after the applicable due date, the Holder may elect, by written notice to the Company given at any time thereafter and prior to payment of the Optional Redemption Amount, to rescind and invalidate such Optional Redemption, ab initio, and, thereafter, due to the Company’s failure to honor the Optional Redemption, the Company shall have no further right to effect such Optional Redemption.

 

3. CONVERSION OF DEBENTURES. This Debenture shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock, on the terms and conditions set forth in this Section 3.

 

(a) Optional Conversion. At any time after the Issuance Date, the Holder shall be entitled, at its option, to convert the unpaid Principal of and all accrued and unpaid Interest on this Debenture into that number of shares of Common Stock equal to the quotient of (A) the Conversion Amount (as defined below) divided by (B) the Conversion Price. For the purposes of this Section 3(a), the “Conversion Price” shall be equal to $1.00, as adjusted after the Issuance Date in accordance with Section 5.

 

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(b) Mechanics of Conversion.

 

(i) Conversion; Issuance of Shares. To convert this Debenture pursuant to Section 3(a) above into shares of Common Stock on any date (a “Conversion Date”), the Holder shall deliver (whether via facsimile or otherwise) a copy of a properly and fully-completed and executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. On or before the second Business Day following the date of receipt of such Conversion Notice, the Company shall transmit by facsimile or email (by attachment in PDF format) an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business Day following the date of receipt of a Conversion Notice, the Company shall instruct the Transfer Agent to issue and deliver (via reputable overnight courier) to the Holder of a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, with the following legend and the legends required applicable law:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

(ii) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Debenture and the principal amount of the Debentures held by such holders (the “Registered Debentures”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Debentures shall treat each Person whose name is recorded in the Register as the owner of a Debenture for all purposes (including, without limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered Debenture may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Debenture by the holder thereof and subject to the holder’s compliance with Section 11, the Company shall record the information contained therein in the Register and issue one or more new Registered Debentures in the same aggregate principal amount as the principal amount of the surrendered Registered Debenture to the designated assignee or transferee pursuant to Section 12, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of all or part of any Registered Debenture within two (2) Business Days of its receipt of such a request, then the Register shall be automatically updated to reflect such assignment, transfer or sale (as the case may be). The Holder and the Company shall maintain records showing the Principal and Interest converted and/or paid (as the case may be) and the dates of such conversion and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Debenture upon conversion.

 

(iii) No Fractional Shares; Transfer Taxes. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance and delivery of Common upon any conversion.

 

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4. RIGHTS UPON EVENT OF DEFAULT.

 

(a) Event of Default. Each of the following events shall constitute an “Event of Default”:

 

(i) any default in the payment of (A) the principal amount of this Debenture or (B) interest, premium, liquidated damages and other amounts owing to the Holder on this Debenture, as and when the same shall become due and payable (whether on an Interest Payment Date, an Optional Redemption Date, a Conversion Date or on the Maturity Date or by acceleration or otherwise), which default is not cured within five (5) Business Days;

 

(ii) other than as specifically set forth in clauses (i) and (ii) of this Section 4(a), the Company’s failure to perform or observe any covenant or agreement set forth in this Debenture in any material respect, but only if such failure remains uncured for a period of at least five (5) days;

 

(iii) other than as specifically set forth in another clause of this Section 4(a), the Company breaches any material representation or warranty, or fails to perform or breaches or observe any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of thirty (30) days after actual knowledge of the Company of such breach;

 

(iv) liquidation proceedings shall be instituted by or against the Company and, if instituted, shall not be dismissed within sixty (60) days of their initiation;

 

(v) bankruptcy, insolvency, reorganization or other proceedings for the relief of debtors shall be instituted against the Company and shall not be dismissed within sixty (60) days of their initiation;

 

(vi) the commencement by the Company of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or the consent by the Company to the entry of a decree, order, judgment or other similar document in respect of the Company in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by the Company in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company in furtherance of any such action;

 

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(vii) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law; or (ii) a decree, order, judgment or other similar document adjudging the Company as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal, state or foreign law; or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;

 

(viii) a final judgment or judgments for the payment of money aggregating in excess of $2,500,000 are rendered against the Company and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay;

 

(ix) the Company fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $2,500,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $2,500,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder; or

 

(x) any Event of Default (as defined in the Other Debentures) occurs with respect to any Other Debentures.

 

(b) Notice of an Event of Default. Upon the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, the Company shall within two (2) Business Days deliver written notice thereof via facsimile and overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may, by notice to the Company, declare this Debenture to be forthwith due and payable, whereupon the Principal and all accrued and unpaid Interest thereon, plus all costs of enforcement and collection (including court costs and reasonable attorney’s fees), shall immediately become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company. No course of dealing on the part of the Holder nor any delay or failure on the part of the Holder to exercise any right shall operate as waiver of such right or otherwise prejudice such Holder’s rights, power and remedies.

 

5. ADJUSTMENT OF CONVERSION PRICE.

 

(a) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 5(a) shall become effective immediately after the effective date of such subdivision or combination.

 

(b) Not applicable this section.

 

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(c) Pro Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Debenture, then, in each such case, at the sole option of the Holder, the Holder shall be provided an opportunity to convert this Debenture into Common Stock pursuant to Section 3 hereof immediately prior to the dividend or other distribution.

 

(d) Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each share of Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction. For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Debenture and the other Transaction Documents in accordance with the provisions of this Section 5(d) and shall, at the option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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(e) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

(f) Notice to the Holder.

 

(i) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(ii) Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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6. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to protect the rights of the Holder of this Debenture. Without limiting the generality of the foregoing, so long as any of the Debentures remain outstanding, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Debenture above the Conversion Price then in effect and (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of this Debenture, including without limitation complying with Section 7(b) hereof.

 

7. RESERVATION OF AUTHORIZED SHARES.

 

(a) Reservation. The Company shall at all times reserve and keep available out of its authorized but unissued shares Common Stock, solely for the purpose of effecting the conversion of this Debenture, no less than one hundred ten percent (110%) of the maximum number of shares issuable on conversion of this Debenture (the “Required Reserve Amount”).

 

(b) Insufficient Authorized Shares. If, notwithstanding Section 7(a), and not in limitation thereof, at any time while any of the Debentures remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action within its power necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Debentures then outstanding, including without limitation using its best efforts to secure necessary Board of Directors and stockholder approvals, as further described below, to appropriately amend the Company’s Certificate of Incorporation to provide for such increase. Without limiting the generality of the foregoing sentence, if not earlier approved by written consent of the stockholders, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy (70) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock; in connection with any such meeting, the Company shall provide each stockholders with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such proposal.

 

8. COVENANTS. Until all of the Debentures have been converted or otherwise satisfied in accordance with their terms:

 

(a) Rank. All payments due under this Debenture shall rank pari passu with all Other Debentures.

 

(b) No Impairment. The Company shall not enter into any agreement that would impair, interfere with or conflict with the Company’s obligations hereunder.

 

(c) Assets of Company. The Company shall not sell, lease, transfer or otherwise dispose of (including, without limitation, through licensing or partnering arrangements) any material assets of the Company, other than in the ordinary course of business.

 

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9. DISTRIBUTION PARTICIPATION. In addition to any adjustments pursuant to Section 5, if while this Debenture remains outstanding, the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Debenture, then, in each such case, upon conversion of this Debenture entirely into Common Stock pursuant to Section 3(a), the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein as if the Holder had held, as of immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution, the number of shares of Common Stock held immediately after such conversion.

 

10. AMENDING THE TERMS OF THIS DEBENTURE. No provision of this Debenture may be amended other than by an instrument in writing signed by the Company and the Required Holders which hold this Debenture and the Other Debentures then outstanding, and any amendment to any provision of this Debenture made in conformity with the provisions of this Section 11 shall be binding on all Holders, provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of the Debentures then outstanding or (2) imposes any obligation or liability on any Holder without such Holder’s prior written consent (which may be granted or withheld in such Holder’s sole discretion). No waiver of any provision of this Debenture shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided that the Required Holders which hold this Debenture and the Other Debentures then outstanding may waive any provision of this Debenture, and any waiver of any provision of this Debenture made in conformity with the provisions of this Section 11 shall be binding on all Holders, provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Debentures then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Holder without such Holder’s prior written consent (which may be granted or withheld in such Holder’s sole discretion). No amendment to or waiver of any provision of this Debenture shall amend or waive any provision of any other Transaction Document.

 

11. TRANSFER. The holder understands that except as provided in the Registration Rights Agreement: (i) the Debentures and the shares of Common Stock issued upon conversion of the Debentures (the “Conversion Shares”) have not been and are not being registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the holder shall have delivered to the Company (if requested by the Company) an opinion of counsel to such holder, in a form reasonably acceptable to the Company, to the effect that such Debentures or shares of Common Stock to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such holder provides the Company with reasonable assurance and documentation as may be requested by the Company or its legal counsel that such securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Debentures or the Conversion Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Debentures under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

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12. REISSUANCE OF THIS DEBENTURE.

 

(a) Transfer. If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 12(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.

 

(b) Lost, Stolen or Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal.

 

(c) Debenture Exchangeable for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 12(d) and in principal amounts of at least $1,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

 

(d) Issuance of New Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued and unpaid Interest on the Principal of this Debenture, from the Issuance Date.

 

13. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture at law or in equity (including a decree of specific performance and/or other injunctive relief); provided, the Holder shall not be entitled to any duplication or multiplication of damages. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Debenture (including, without limitation, compliance with Section 5).

 

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14. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Debenture is placed in the hands of an attorney for collection or enforcement of the debt evidenced hereby or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements.

 

15. CONSTRUCTION; HEADINGS. This Debenture shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.

 

16. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

17. DISPUTE RESOLUTION. If the Holder and the Company are unable to agree as to the arithmetic calculation of the Conversion Price the Holder and the Company will confer in good faith to resolve such disagreement and the Company shall promptly issue upon conversion of this Debenture at the number of shares of Common Stock that are uncontested. Thereafter, the Company and Holder will confer in good faith to attempt to reach agreement regarding the Conversion Price with the Required Holders; if the Required Holders and the Company agree in writing upon a Conversion Price, that agreement will be binding on Holder and all holders of the Other Debentures.

 

18. NOTICES; PAYMENTS.

 

(a) Notices. Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with the Subscription Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly, but in any event within ten (10) calendar days, upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record with respect to any dividend or distribution upon the Common Stock.

 

(b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Debenture, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing, provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

 

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19. CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Debenture have been paid or converted in full, this Debenture shall automatically be deemed canceled, shall be surrendered promptly, but in any event within ten (10) calendar days, to the Company by the Holder for cancellation and shall not be reissued.

 

20. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture.

 

21. NEGATIVE COVENANTS. As long as any portion of this Debenture remains outstanding, unless the holders of 51% in principal amount of the then outstanding Debentures shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

(a) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

(b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $2,500,000 for all officers and directors during the term of this Debenture; or

 

(c) enter into any agreement with respect to any of the foregoing.

 

22. GOVERNING LAW. This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. In the event that any provision of this Debenture is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Debenture. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

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23. CERTAIN DEFINITIONS. For purposes of this Debenture and the Conversion Notice in Exhibit I, the following terms shall have the following meanings:

 

(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(b) “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(c) “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(d) “Conversion Amount” means the sum of the outstanding and unpaid Principal plus all accrued and unpaid Interest thereon plus, if any, other unpaid amounts due under this Debenture.

 

(e) “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Debenture, provided that such securities have not been amended since the date of this Debenture to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

(f) “GAAP” means United States generally accepted accounting principles, consistently applied.

 

(g) “Interest Rate” means nine percent (9%) per annum, as may be adjusted from time to time in accordance with Section 2.

 

(h) “Lien(s)” shall mean any lien, claim, charge, pledge, security interest, deed of trust, mortgage or other encumbrance of any kind or other arrangement having the practical effect of the foregoing.

 

(i) “Liquidation Event” shall mean:

 

(i) the liquidation, dissolution or winding up of the Company; or

 

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(ii) a merger or consolidation in which (A) the Company is a constituent party or (B) a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (y) the surviving or resulting corporation or (z) if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this clause (ii), all shares of Common Stock issuable upon exercise of options or warrants outstanding immediately prior to such merger or consolidation or upon conversion of convertible securities outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

 

(ii) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly-owned subsidiary of the Company; or

 

(iv) Any other any transaction or series of related transactions in which the Company’s stockholders of record as constituted immediately prior to such transaction or series of related transactions will, immediately after such transaction or series of related transactions (by virtue of securities issued in such transaction or series of related transactions) fail to hold at least 50% of the voting power of the resulting or surviving corporation following such transaction or series of related transactions.

 

(j) “Maturity Date” shall mean September 30, 2020.

 

(k) “Optional Redemption Amount” means the aggregate principal amount then outstanding under this Debenture to be redeemed pursuant to Section 2; plus (i) all accrued and unpaid interest due under this Debenture with respect to such principal amount as of the date of payment of the Option Redemption Amount; plus (ii) all other costs, fees and charges due and payable under this Debenture.

 

(l) Not applicable this section.

 

(m) “Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, and (c) Liens incurred with the prior written consent of the Required Holders.

 

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(n) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(o) Not applicable this section.

 

(p) “Required Holders” means holders of Debentures having principal amounts in the aggregate that are at least equal to seventy-five percent (75%) of the aggregate principal amounts of all Debentures then outstanding.

 

(q) “SEC” means the United States Securities and Exchange Commission or the successor thereto.

 

(r) “Subscription Agreement” means that certain subscription agreement by and between the Company and the initial holder of this Debenture pursuant to which the Company issued this Debenture, as may be amended from time to time.

 

(s) “Subsidiaries” shall refer to all of the direct and indirect subsidiaries of the Company.

 

(t) “Transaction Documents” means, collectively, this Debenture, the Other Debentures, the Warrants, the Registration Rights Agreement and the Subscription Agreement.

 

(u) “Warrants” means the stock purchase warrants issued pursuant to the Subscription Agreement.

 

24. MAXIMUM PAYMENTS. Nothing contained in this Debenture shall, or shall be deemed to, establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges under this Debenture exceeds the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

 

25. SURRENDER OR ACKNOWLEDGEMENT AND CERTIFICATION. Upon payment in full or conversion of this Debenture, Holder shall surrender the original physical copy of this Debenture for cancellation; alternatively, if the Holder promptly requests in connection with such payment or conversion, the Holder may deliver to the Company a signed acknowledgement of payment in full and a certification that the Holder has cancelled or destroyed the Debenture in a form reasonably acceptable to the Company.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.

 

 

COMSovereign Holding Corp.,
  a Nevada corporation
     
  By:  
    Daniel Hodges
    Chief Executive Officer

 

 

 

 

 

 

EX-4.2 3 ea123910ex4-2_comsovereign.htm FORM OF JULY WARRANTS TO PURCHASE COMMON STOCK

Exhibit 4.2

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THAT ACT.

 

WARRANT TO PURCHASE

SHARES OF COMMON STOCK OF

COMSOVEREIGN HOLDING CORP.

 

This certifies that ______________or any party to whom this Warrant is assigned in accordance with its terms is entitled to subscribe for and purchase ____ shares of the Common Stock of COMSovereign Holding Corp., a Nevada corporation, on the terms and conditions of this Warrant.

 

1. Definitions. As used in this Warrant, the term:

 

1.1 “Business Day” means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated to be closed by law or by executive order.

 

1.2 “Common Stock” means the Common Stock, par value $.0001 per share, of the Corporation.

 

1.3 “Corporation” means COMSovereign Holding Corp., a Nevada corporation, or its successor.

 

1.4 “Expiration Date” means the earlier of (i) December 31, 2022 or (ii) the second anniversary of the consummation by the Company of an IPO.

 

1.5 “Holder” means ______________or any party to whom this Warrant is assigned in accordance with its terms.

 

1.6 “IPO” means the initial public offering of the Corporation’s Common Stock pursuant to a registration statement filed on Form S-1 or any successor form thereto that is declared effective by the Securities and Exchange Commission in connection with which the Common Stock will be uplisted to a national stock exchange.

 

1.7 “1933 Act” means the Securities Act of 1933, as amended.

 

1.8 “Warrant” means this Warrant and any warrants delivered in substitution or exchange for this Warrant in accordance with the provisions of this Warrant.

 

1.9 “Warrant Price” means $1.00 per share of Common Stock, as such amount may be adjusted pursuant to Section 4 hereof. 

 

2. Exercise of Warrant.  (a)  At any time before the Expiration Date, the Holder may exercise the purchase rights represented by this Warrant, in whole or in part, by surrendering this Warrant (with a duly executed subscription in the form attached) at the Corporation’s principal corporate office (located on the date hereof in Tucson, Arizona) and by paying the Corporation, by check payable to the Corporation, the aggregate Warrant Price for the shares of Common Stock being purchased.

 

 

 

(b) In lieu of exercising this Warrant pursuant to Section 1(a) above, the Holder may elect to exercise this Warrant on a “cashless” basis and to receive, without the payment by the Holder of any additional consideration, shares of Common Stock equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Corporation (together with a duly executed subscription in the form attached), in which event the Corporation shall issue to the Holder hereof a number of shares of Common Stock computed using the following formula:

 

X =  Y (A-B)

A

 

Where:  X =  The number of shares of Common Stock to be issued to the Holder pursuant to this net exercise;

 

Y =  The number of shares of Common Stock in respect of which the net issue election is made;

 

A =  The fair market value of one share of the Common Stock at the time the net issue election is made;

 

B =  The Warrant Price (as adjusted to the date of the net issuance).

 

For purposes of this Warrant, the “fair market value” of one share of Common Stock as of a particular date shall be determined as follows:  (i) if traded on a securities exchange or through an interdealer quotation system such as the OTC Bulletin Board, the value shall be deemed to be the average of the closing sale prices of the Common Stock on such exchange or quotation system over the ten (10) day period ending three (3) days prior to the net exercise election; (ii) if traded over-the-counter, the value shall be deemed to be the average of the closing sale price over the ten (10) day period ending three (3) days prior to the net exercise.  If there is no reported sale price for the Common Stock, the fair market value of the Common Stock shall be the value as determined in good faith by the Board of Directors of the Corporation.

 

2.1 Delivery of Certificates. Within ten (10) days after each exercise of the purchase rights represented by this Warrant, the Corporation shall deliver a certificate for the shares of Common Stock so purchased to the Holder and, unless this Warrant has been fully exercised or expired, a new Warrant representing the balance of the shares of Common Stock subject to this Warrant.

 

2.2 Effect of Exercise. The person entitled to receive the shares of Common Stock issuable upon any exercise of the purchase rights represented by this Warrant shall be treated for all purposes as the holder of such shares of record as of the close of business on the date of exercise.

 

2.3 Issue Taxes. The Corporation shall pay all issue and other taxes that may be payable in respect of any issue or delivery to the Holder of shares of Common Stock upon exercise of this Warrant.

 

3. Stock Fully Paid; Reservation of Shares. The Corporation covenants and agrees that all securities that it may issue upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens and charges. The Corporation further covenants and agrees that, during the period within which the Holder may exercise the rights represented by this Warrant, the Corporation shall at all times have authorized and reserved for issuance enough shares of its Common Stock or other securities for the full exercise of the rights represented by this Warrant. The Corporation shall not, by an amendment to its Articles of Incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant.

 

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4. Adjustments. The Warrant Price and the number of shares of Common Stock that the Corporation must issue upon exercise of this Warrant shall be subject to adjustment in accordance with Sections 4.1 through 4.3.

 

4.1 Adjustment to Warrant Price for Combinations or Subdivisions of Common Stock. If the Corporation at any time or from time to time after the date on which the Warrant Price is fixed at a set amount in U.S. dollars (1) declares or pays, without consideration, any dividend on the Common Stock payable in Common Stock; (2) creates any right to acquire Common Stock for no consideration; (3) subdivides the outstanding shares of Common Stock (by stock split, reclassification or otherwise); or (4) combines or consolidates the outstanding shares of Common Stock, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Corporation shall proportionately increase or decrease the Warrant Price, as appropriate.

 

4.2 Adjustments for Reclassification and Reorganization. If the Common Stock issuable upon exercise of this Warrant changes into shares of any other class or classes of security or into any other property for any reason other than a subdivision or combination of shares provided for in Section 4.1, including without limitation any reorganization, reclassification, merger or consolidation, the Corporation shall take all steps necessary to give the Holder the right, by exercising this Warrant, to purchase the kind and amount of securities or other property receivable upon any such change by the owner of the number of shares of Common Stock subject to this Warrant immediately before the change.

 

4.3 Spin Offs. If the Corporation spins off any subsidiary by distributing to the Corporation’s shareholders as a dividend or otherwise any stock or other securities of the subsidiary, the Corporation shall reserve until the Expiration Date enough of such shares or other securities for delivery to the Holders upon any exercise of the rights represented by this Warrant to the same extent as if the Holders owned of record all Common Stock or other securities subject to this Warrant on the record date for the distribution of the subsidiary’s shares or other securities.

 

4.4 Adjustment to Warrant Price for Stock Issuances.  If the Corporation, at any time while this Warrant is outstanding, shall issue shares of Common Stock, or any securities of the Corporation that entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock (each, a “Common Stock Equivalent”), entitling any person or entity to acquire shares of Common Stock, at a price per share less than the then applicable Warrant Price (the “Lower Shares Price”) (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights issued in connection with such issuance, be entitled to receive shares of Common Stock at a price less than the then applicable Warrant Price, such issuance shall be deemed to have occurred for the lowest price possible under such instrument or agreement and shall be deemed to be lower than the then applicable Warrant Price), then, the then applicable Warrant Price shall be reduced to equal the Lower Shares Price, such adjustment to be made at the time such Common Stock or Common Stock Equivalents are issued; provided, however, that no adjustment shall be made pursuant to this Section 4.4 as a result of the conversion, exercise or exchange, as the case may be, of Common Stock Equivalents outstanding on the date hereof (but will apply to any amendments, resets, modifications, and reissuances thereof and as a result of any changes, resets or adjustments to a conversion, exercise or exchange price thereunder whether or not as a result of any amendment, modification or reissuance), upon the issuance of Common Stock or Common Stock Equivalents to employees or consultants of the Company as compensation upon approval of the Board of Directors of the Corporation, or upon the issuance of Common Stock pursuant to any agreements or other obligations in existence on the date hereof (but will apply to any amendments, resets, modifications, and reissuances thereof and as a result of any changes, resets or adjustments to a conversion, exercise or exchange price thereunder whether or not as a result of any amendment, modification or reissuance). Notwithstanding anything to the contrary set forth herein, the Warrant Price shall never be increased as a result of the Lower Shares Price.

 

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4.5 Certificates as to Adjustments. Upon each adjustment or readjustment required by this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with this Section, cause independent public accountants selected by the Corporation to verify such computation and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.

 

5. Fractional Shares. The Corporation shall not issue any fractional shares in connection with any exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Corporation shall purchase such fraction for an amount in cash equal to the same fraction of the Warrant Price of such share of Common Stock on the date of exercise of this Warrant.

 

6. Dissolution or Liquidation. If the Corporation dissolves, liquidates or winds up its business before the exercise or expiration of this Warrant, the Holder shall be entitled, upon exercising this Warrant, to receive in lieu of the shares of Common Stock or any other securities receivable upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to it upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock or other securities, had the Holder been the holder of record on the record date for the determination of those entitled to receive any such liquidating distribution or, if no record is taken, upon the date of such liquidating distribution. If any such dissolution, liquidation or winding up results in a cash distribution or distribution of property which the Corporation’s Board of Directors determines in good faith to have a cash value in excess of the Warrant Price provided by this Warrant, then the Holder may, at its option, exercise this Warrant without paying the aggregate Warrant Price and, in such case, the Corporation shall, in making settlement to Holder, deduct from the amount payable to Holder an amount equal to such aggregate Warrant Price.

 

7. Transfer and Exchange.

 

7.1 Transfer. Subject to Section 7.3, the Holder may transfer all or part of this Warrant at any time on the books of the Corporation at its principal office upon surrender of this Warrant, properly endorsed. Upon such surrender, the Corporation shall issue and deliver to the transferee a new Warrant or Warrants representing the Warrants so transferred. Upon any partial transfer, the Corporation shall issue and deliver to the Holder a new Warrant or Warrants with respect to the Warrants not so transferred.

 

7.2 Exchange. The Holder may exchange this Warrant at any time at the principal office of the Corporation for Warrants in such denominations as the Holder may designate in writing. No such exchanges will increase the total number of shares of Common Stock or other securities that are subject to this Warrant.

 

7.3 Securities Act of 1933. By accepting this Warrant, the Holder agrees that this Warrant and the shares of the Common Stock issuable upon exercise of this Warrant may not be offered or sold except in compliance with the 1933 Act, and then only with the recipient’s agreement to comply with this Section 7 with respect to any resale or other disposition of such securities. The Corporation may make a notation on its records in order to implement such restriction on transferability.

 

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8. Loss or Mutilation. Upon the Corporation’s receipt of reasonably satisfactory evidence of the ownership and the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) of a reasonably satisfactory indemnity or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Corporation shall execute and deliver a new Warrant to the Holder.

 

9. Successors. All the covenants and provisions of this Warrant shall bind and inure to the benefit of the Holder and the Corporation and their respective successors and assigns.

 

10. Notices. All notices and other communications given pursuant to this Warrant shall be in writing and shall be deemed to have been given when personally delivered or when mailed by prepaid registered, certified or express mail, return receipt requested. Notices should be addressed as follows:

 

(a)If to Holder, then to the address of the Holder on file in the books and records of the Company.

 

(b)If to the Corporation, then to:

 

COMSovereign Holding Corp.

5000 Quorum Drive STE 400

Dallas, TX 75254

Attention: Kevin M. Sherlock, General Counsel

 

Such addresses for notices may be changed by any party by notice to the other party pursuant to this Section 10.

 

11. Covenants of the Company.

 

11.1 Financial Information.  Commencing with the year ending December 31, 2020, the Company shall deliver to the Holder annual and quarterly unaudited financial statements.  The annual statements shall be delivered within 90 days of year-end.  Unaudited quarterly financial statements shall be delivered within 45 days of the end of each calendar quarter. Delivery in this case includes required Form 10K and 10Q filings performed on the EDGAR system.

 

11.2. Notices of Record Date and Certain other Events. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall mail to the Holder, at least 20 days prior to the date on which any such record is to be taken for the purpose of such dividend or distribution, a notice specifying such date. In the event of any voluntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder, at least 20 days prior to the date of the occurrence of any such event, a notice specifying such date. In the event the Company authorizes or approves, enters into any agreement contemplating, or solicits stockholder approval for any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another entity in which the Company is not the surviving corporation, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another entity, the Company shall mail to the Holder, at least 20 days prior to the date of the occurrence of such event, a notice specifying such date. Notwithstanding the foregoing, the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

 

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12. Amendment. This Warrant may be amended only by an instrument in writing signed by the Corporation and the Holder.

 

13. Construction of Warrant. This Warrant shall be construed as a whole and in accordance with its fair meaning. A reference in this Warrant to any section shall be deemed to include a reference to every section the number of which begins with the number of the section to which reference is made. This Warrant has been negotiated by both parties and its language shall not be construed for or against any party.

 

14. Law Governing. This Warrant is executed, delivered and to be performed in the State of New York and shall be construed and enforced in accordance with and governed by the New York law without regard to any conflicts of law or choice of forum provisions.

 

Dated as of _______________, 2020

 

  COMSOVEREIGN HOLDING CORP.
     
  By:                                       
    Daniel Hodges
    Chief Executive Officer

 

 

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EX-10.2 4 ea123910ex10-2_comsovereign.htm EMPLOYMENT AGREEMENT DATED AS OF JUNE 7, 2020 BETWEEN MOHAN TAMMISETTI AND COMSOVEREIGN HOLDING CORP.

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 6th day of July 2020, is by and between COMSovereign Holding Corp., a Nevada corporation (“CSHC” or the “Company”), and Mohan Tammisetti, an individual resident of the Commonwealth of Virginia (the “Employee”). CSHC and the Employee are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

WITNESSETH

 

WHEREAS, CSHC has entered into that Agreement and Plan of Merger and Reorganization, dated on or around the date hereof (the “Merger Agreement”), pursuant to which CSHC shall acquire all of the ownership interest of Virtual Network Communications Inc., a Virginia corporation (“VNC”), from the owners thereof (collectively, “Sellers”);

 

WHEREAS, the Employee will receive substantial economic benefit as a result of CSHC and Sellers closing the transactions contemplated by the Merger Agreement;

 

WHEREAS, the Closing (as defined in the Merger Agreement) is contingent upon the Employee and CSHC entering into this Agreement, and both the Employee and CSHC wish to enter into this Agreement in order to meet such condition of the Merger Agreement;

 

WHEREAS, CSHC and its subsidiaries and affiliates design, build and support infrastructures, equipment, and solutions for the technology and telecommunications industries (the “Business”);

 

WHEREAS, CSHC has developed and will develop relationships with Customers, Prospective Customers, Vendors, suppliers and shippers as well as a reputation in the technology and communications industries, which are and will become of great importance and value to CSHC in connection with its Business, and the loss of or injury to the Business will result in substantial and irreparable damage to CSHC;

 

WHEREAS, CSHC has acquired and/or developed certain trade secrets and Confidential Information, as more fully described below, and has expended significant time and expense in acquiring or developing its trade secrets and Confidential Information; and expends significant time and expense on an ongoing basis in supporting its employees, including the Employee; and

 

WHEREAS, in the course of the Employee’s employment by CSHC, the Employee may receive, be taught or otherwise have access to items and information associated with the Business such as sales, purchasing, transportation, documentation, marketing and trading techniques, information and materials, customer and supplier lists or information, correspondence, records, financial information, pricing information, computer systems, computer software applications, business plans and other information which is confidential and proprietary.

 

NOW, THEREFORE, in consideration of the forgoing, the mutual covenants and agreements contained herein and in the Merger Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties hereby agree as follows:

 

1. Material Inducement. Each party recognizes and acknowledges the fact that execution hereof by CSHC and the Employee is a material inducement to the Employee and CSHC to perform their obligations to close under the Merger Agreement and each party has agreed to its or his obligations hereunder as a condition precedent to the obligation of CSHC and VNC to close under the Merger Agreement without duress after ample opportunity to consult with its or his attorney.

 

 
 

 

2. Employment. CSHC shall employ the Employee, and the Employee shall accept such employment with CSHC, upon the terms and conditions set forth in this Agreement for the period beginning at 11:59 PM Eastern Standard Time on the Closing Date (as defined in the Merger Agreement) (the “Effective Date”) and ending as provided in Section 6 hereof (the “Employment Period”). In the event that the Closing Date does not occur, this Agreement will be of no force or effect.

 

3. Position and Duties.

 

(a) During the Employment Period, the Employee shall (i) serve CSHC in the capacity of Senior Vice President & Chief Engineer of Wireless Technologies, (ii) be based in the Chantilly, Virginia area, and (iii) have such duties, responsibilities and authorities consistent with his position and as CSHC’s CEO or his or her designee may from time to time confer and direct (collectively, the “Duties”).

 

(b) The Employee shall devote his full business time, effort and energy to the affairs of CSHC and the discharge of the Duties. Notwithstanding the foregoing, the Employee shall be permitted to (a) with the prior written consent of the Board of Directors of CSHC (which consent will not be unreasonably withheld or delayed) act or serve as a director, trustee, committee member, or principal of any type of non-competitive business, civic, or charitable organization and (b) purchase or own less than five percent (5%) of the publicly traded securities of any corporation; provided that such ownership represents a passive investment and that the Employee is not a controlling person of, or a member of a group that controls, such corporation; provided further that the activities described in clauses (a) and (b) do not interfere with the performance of the Employee’s duties and responsibilities to CSHC as provided hereunder.

 

4. Base Compensation. CSHC shall pay the Employee an annual base salary in the amount of not less than $150,000.00, calculated and paid in accordance with CSHC’s standard practices and policies in effect from time to time; provided, however, that CSHC may reduce the Employee’s annual base salary by up to 25% without the prior consent of the Employee only if and for so long as such reduction is implemented in connection with a contemporaneous and substantially similar (or greater) reduction in annual base salaries affecting other executives of CSHC with responsibilities substantially similar to the Employee (a “Global Salary Reduction”), with Employee being entitled to receive on a non-discriminatory basis substantially equivalent catch-up payments, bonuses, equity awards, consulting payments or other amounts as may be paid to any other executive as part of, in connection with, as compensation for, or following a Global Salary Reduction. The Employee’s annual base salary, as may be adjusted from time to time, is hereinafter referred to as the “Base Salary.

 

5. Additional Benefits.

 

(a) Initial Option Grant.  Automatically upon the Effective Date, CSHC is issuing to Employee a stock option (the “Option”) to purchase 100,000 shares of CSHC’s common stock, par value $0.001 per share. CSHC confirms to Employee that the grant of the Option has been approved by CSHC’s Board of Directors in connection with the approval of this Agreement and the consummation of the Merger, but effective subject to the occurrence of the Effective Date. The Option shall (i) have an exercise price equal to the fair market value of such shares on the Effective Date, (ii) have a term of five years, and (iii) with (x) 50,000 of the shares covered by the Option to vest completely after six months of continued employment with CSHC and (y) the remaining 50,000 shares covered by the Option to vest completely after an additional six months of continued employment with CSHC.  The Option shall be subject to the terms of CSHC’s 2020 Long-Term Incentive Plan (the “Plan”) under which it is granted and the terms of the award agreement evidencing such award (the “Option Agreement”), a copy of which has been delivered in final form by CSHC and the Employee concurrently with this Agreement. Employee acknowledges that the grant of the Option shall at all times be subject to the terms and conditions of the Plan and Option Agreement.  The Option Agreement will provide for the Option: (x) to accelerate in full on a single trigger basis automatically upon a change of control of the Company; and (y) to accelerate in full if Employee is terminated without Cause or resigns for Good Reason with the Employee to then have a one (1) year post-separation extended exercise period (vs. 90 days) in such circumstances.

 

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(b) Expenses. CSHC shall reimburse the Employee for all reasonable expenses incurred by him in the course of performing the Duties, to the extent consistent with the policies established by CSHC from time to time with respect to travel and other business expenses, subject to CSHC’s requirements with respect to reporting and documentation of such expenses. The Employee’s right to reimbursement for expenses hereunder shall be subject to the following additional rules: (i) the amount of expenses eligible for reimbursement during any calendar year shall not affect the expenses eligible for reimbursement in any other calendar year, (ii) reimbursement shall be made not later than December 31 of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement is not subject to liquidation or exchange for any other benefit.

 

(c) Benefits. The Employee shall be entitled to participate in such benefit plans as CSHC provides to its employees from time to time in accordance with CSHC policies, except to the extent that such plans are duplicative of benefits otherwise provided to the Employee under this Agreement (e.g., a severance pay plan). Such participation will be (x) at the same level as other executives of CSHC, and (y) subject to the terms and conditions of such plans, and any other restrictions or limitations imposed by law. Employee shall also be entitled to fringe benefits and perquisites consistent with the practices of CSHC and governing benefit plan requirements (including plan eligibility provisions), and to the extent CSHC provides similar benefits or perquisites (or both) to similarly situated executives of CSHC.

 

(d) Vacation and Other Leave.  During the Employment Period, the Employee’s annual rate of vacation accrual shall be four (4) weeks of paid vacation per calendar year (prorated for partial years), with such vacation to accrue and be subject to CSHC’s vacation policies in effect from time to time, including any policy which may limit vacation accruals and/or disallow the carryover from year to year of accrued but unused vacation.  The Employee shall also be entitled to all other holiday and leave pay generally available to other executives of CSHC.

 

6. Term.

 

(a) Subject to earlier termination pursuant to this Section 6, the Employment Period shall continue from the Closing Date for an initial term of two (2) years, and shall automatically renew annually thereafter for subsequent one (1) year terms, unless either CSHC or the Employee provides written notice of non-renewal to the other Party not later than sixty (60) days prior to the last day of the then-current term.

 

(b) Notwithstanding the foregoing, the Employment Period shall earlier terminate under the following circumstances: (i) the Employee’s death or “Permanent Disability” (defined as the expiration of a continuous period of 180 days during which the Employee is unable to perform all of the Duties due to physical or mental incapacity); (ii) the Employee is terminated for Cause (as defined below) by CSHC at any time upon notice to the Employee setting forth in reasonable detail the nature of Cause (and provided such Cause is not capable or cure or if capable of cure is not cured by the Employee as provided in such definition); (iii) the Employee resigns for Good Reason (as defined below) in accordance with the timing requirements specified below; (iv) the Employee is terminated by CSHC without Cause at any time upon notice to the Employee; or (v) the Agreement is terminated by the Employee without Good Reason upon thirty (30) days’ prior written notice to CSHC (provided that CSHC may elect to waive such notice period or any portion thereof; but in that event, CSHC shall pay the Base Salary for that portion of the notice period so waived).

 

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(c) For purposes of this Agreement, “Cause” shall mean, as determined by the Board of Directors of CSHC in its reasonable judgment, (i) the willful failure or refusal by the Employee to perform his lawful Duties (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) which, if capable of cure, has not been cured within seven (7) business days after written notice of such breach delivered to the Employee by CSHC; (ii) the Employee’s material breach of this Agreement, any other agreement between him and CSHC (including without limitation the Non-Competition Agreement, as defined below) or any material policy of CSHC or its subsidiaries or affiliates applicable to him that has been communicated to him in writing which, if capable of cure, has not been cured within seven (7) business days after written notice of such breach delivered to the Employee by CSHC; (iii) the Employee’s willful misconduct or gross negligence with respect to the performance of the Duties, which, if capable of cure, has not been cured within seven (7) business days following written notice of such violation delivered to the Employee by CSHC; (iv) the Employee’s conviction, or plea of guilty or nolo contendere, with respect to any felony, or any act of fraud, theft, or financial dishonesty with respect to CSHC or any of its subsidiaries, affiliates, customers or business partners, or any other crime involving dishonesty, disloyalty or fraud; or (v) habitual alcohol or substance abuse by the Employee. For purposes of this provision, no act or failure to act on the part of the Employee shall be considered “willful” unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee’s action or omission was in the best interests of CSHC. Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board of Directors of CSHC or on the advice of counsel for CSHC shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of CSHC. Termination of the Employee’s employment shall not be deemed to be for Cause unless and until CSHC delivers to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board of Directors of CSHC finding that the Employee has engaged in the conduct described in any of clauses (i)-(v) above.

 

(d) For purposes of this Agreement, “Good Reason” shall exist upon (i) mutual written agreement by the Employee and CSHC that Good Reason exists; (ii) the relocation of Employee’s office such that the Employee’s daily commute is increased by at least 50 miles round-trip without the prior written consent of the Employee; (iii) reduction of the Employee’s annual base salary without the prior written consent of the Employee (other than a reduction in annual base salary of not more than [25]% that is implemented in connection with a Global Salary Reduction); (iv) any material breach by CSHC of any material provision of this Agreement or of any material provision of any other agreement between the Employee and CSHC (with all compensation, benefit, option, and equity award provisions of this Agreement or any other such other agreement being deemed for these purposes to be material); or (v) a material, adverse change in the Employee’s title, authority, duties or responsibilities without the Employee’s prior written consent (other than temporarily while the Employee is physically or mentally incapacitated or as required by applicable law); provided, however, that in order for employment to terminate for Good Reason pursuant to clauses (ii)-(v), (A) the Employee must provide written notice to CSHC, setting forth in reasonable detail the nature of the condition giving rise to Good Reason, within sixty (60) days of the initial existence of such condition, (B) if capable of cure, the condition must remain uncured for a period of thirty (30) days following such notice and (C) the Employee must terminate his employment, if at all, not later than thirty (30) days after the expiration of such cure period.

 

(e) In the event of any dispute regarding the existence of the Employee’s Permanent Disability hereunder, the matter will be resolved by a physician qualified to practice medicine and who has no prior knowledge of the Employee, which physician shall be selected by CSHC and be reasonably acceptable to the Employee or his representative. For this purpose, the Employee will submit to all appropriate medical examinations and any determination by such a physician will be final and conclusive of the issue for all purposes of this Agreement.

 

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7. Matters Related to Termination.

 

(a) Final Compensation. In the event of termination of the Employee’s employment hereunder, howsoever occurring, CSHC shall pay to the Employee (i) the Base Salary for the final payroll period of the Employee’s employment, through the date of termination and (ii) reimbursement for business expenses incurred by the Employee but not yet paid to the Employee as of the date of termination, provided that the Employee submits all expenses and supporting documentation required within thirty (30) days of the date of termination, and provided further that such expenses are reimbursable under CSHC policies as then in effect (all of the foregoing, “Final Compensation”). All Final Compensation shall be paid to the Employee at the time prescribed by law or applicable CSHC policies for such payment, but in no event more than sixty (60) days following the date of termination.

 

(b) Severance. In the event that the Employee’s employment terminates pursuant to Section 6(b)(iii) or 6(b)(iv) hereof, CSHC will pay to the Employee, in addition to Final Compensation, Base Salary for six (6) months (the “Severance Payments”). Notwithstanding the foregoing, any obligation of CSHC to provide the Severance Payments is conditioned on the Employee’s signing and returning to CSHC a timely and effective separation agreement containing a release of all claims against CSHC and other customary terms (the “Separation Agreement”). The Separation Agreement must become effective, if at all, by the sixtieth (60th) calendar day following the date of termination. The Severance Payments will be in the form of salary continuation, payable in accordance with the normal payroll practices of CSHC. The first payment, which shall be retroactive to the date immediately following the date of termination, will be made on the first regularly scheduled payroll date that follows the expiration of sixty (60) days from the date of termination.

 

(c) Benefits Termination. For the six-month period post-termination during which the Employee receives the Severance Payments, Employee shall be entitled to continued coverage under CSHC’s group health plans pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), which shall be provided to at CSHC’s expense with no cost to the Employee. Following this six-month period, except for any right that the Employee may have under COBRA (and any applicable state or local laws) to continued participation in CSHC’s group health plans at his cost, the Employee’s participation in all employee benefit plans shall terminate in accordance with the terms of the applicable benefit plans. The Employee shall not be eligible to earn vacation or other paid time off following the termination of employment.

 

8. Section 409A. Notwithstanding any other provision herein to the contrary, to the limited extent that any payment to be made to the Employee, whether pursuant to this Agreement or otherwise, is determined to constitute “nonqualified deferred compensation” within the meaning of and subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) such payment shall not be made prior to the date that is the earlier of (i) six months and one day after the Employee’s separation from service with CSHC and affiliate or subsidiary of CSHC and (ii) the Employee’s death; except to the extent of (A) payments that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by CSHC in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended. The terms of this Section 8 shall apply only if the Employee is a “specified employee” (within the meaning of Section 409A) on the date of such separation from service, and shall only apply to the extent the delay of such payment is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall CSHC have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A except to the extent that any act, omission, or delay by CSHC or its representatives or affiliates triggered or gave rise to any loss of benefits to, or excess taxes of, the Employee under this paragraph.

 

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9. Ownership of Works; Infringement Indemnity.

 

(a) Assignment of Works. Employee agrees to promptly make full written disclosure to CSHC, to hold in trust for the sole right and benefit of CSHC, and hereby assigns, transfers, grants and conveys to CSHC, all of his worldwide right, title, ownership and interest in and to any and all designs, trademarks, inventions, original works of authorship, findings, conclusions, data, discoveries, developments, concepts, improvements, trade secrets, techniques, processes, know-how and other work product, whether or not patentable or registrable under copyright or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, in the performance of this Agreement or which result, to any extent, from use of CSHC’s premises or property (collectively, the “Works”), including any and all intellectual property rights inherent in the Works and appurtenant thereto including, without limitation, all patent rights, copyrights, trademarks, know-how and trade secrets (collectively, “Intellectual Property Rights”). Employee further acknowledges and agrees that all original works of authorship which are made by him in the performance of this Agreement and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act and belong solely to CSHC. Employee agrees that all Works developed by Employee during the course of this Agreement, or developed in the future using Works as the basis, are the sole property of CSHC. However, to the extent that any such work may not, by operation of any applicable law, be a work made for hire, Employee hereby assigns, transfers and conveys to CSHC all of his worldwide right, title and interest in and to such Work, including all Intellectual Property Rights therein and appurtenant thereto. Employee hereby waives any and all “moral rights” that he may have in any of the Works under the Berne Convention or any other applicable law, rule or regulation. Employee agrees that he will retain no rights in any of the Works or any of the Intellectual Property Rights in or relating thereto. Employee agrees that CSHC owns the entire right, title, ownership and interest in and to all of the Works and all Intellectual Property Rights in or relating thereto including, without limitation, the right to reproduce the Works, modify the Works, prepare derivative works based upon the Works or the copyright or any other Intellectual Property Rights in or relating thereto, sell or otherwise distribute the Works. Employee warrants that all of the Works and all Intellectual Property Rights in or related thereto are free and clear of all liens, security interests, claims and other encumbrances of any type.

 

(b) Further Assurances. Upon the request and at the expense of CSHC, except as provided below, Employee shall execute and deliver any and all instruments and documents and take such other acts as may be reasonably necessary to document the assignment and transfer described in Section 9(a) above or to enable CSHC to secure its rights in the Works and any Intellectual Property Rights in or relating thereto in any and all jurisdictions, or to apply for, prosecute and enforce patents, trademark registrations, copyrights or other Intellectual Property Rights in any and all jurisdictions with respect to any Works, or to obtain any extension, validation, re-issue, continuance or renewal of any such Intellectual Property Right. Whether any Intellectual Property Rights in or relating to any of the Works will be preserved, maintained, or registered in any jurisdiction shall be at the sole discretion of CSHC.

 

(c) Attorney in Fact. If CSHC is unable, after reasonable effort, to secure Employee’s signature as required in Section 9(b) for any reason whatsoever, Employee hereby irrevocably designates and appoints CSHC and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and in Employee’s behalf and stead to execute and file any such application or applications or other documents and to do all other lawfully permitted acts to further the prosecution and issuance of a patent, copyright or trademark or any other legal protection thereon with the same legal force and effect as if executed by Employee.

 

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10. Covenants.

 

(a) Definitions.

 

(i) The term “CSHC” shall mean CSHC and its subsidiaries, affiliates and related entities. It is understood that any subsidiaries, affiliates or related entities of CSHC are intended third-party beneficiaries of the provisions of this Agreement.

 

(ii) The term “Confidential Information” shall include, but not be limited to: Customer lists and Prospective Customer lists; specific information on Customers and Prospective Customers (including information on purchasing preferences, credit information, and pricing); terms and conditions under which CSHC deals with Vendors and suppliers or prospective Vendors or suppliers; employee and independent contractor lists; CSHC’s sources of supply; CSHC’s billing rates; pricing lists (including item and Customer specific pricing information); names of agents; operations; contractual or personnel data; trade secrets; license agreements; proprietary purchasing and sales methods and techniques; proprietary compositions, ideas and improvements; pricing methods and strategies; computer programs, computer systems, computer data, system documentation, special hardware, product hardware, related software development and computer software design and/or improvements; methods of distribution; market feasibility studies; proposed or existing marketing techniques or plans; sales and sales volumes; purchasing, transportation, documentation, marketing and trading techniques of Customers, potential Customers and/or Vendors; inventions (including Works and Intellectual Property Rights as defined above); future CSHC business plans; project files; design systems; information on current and potential Vendors including, but not limited to, their identity, pricing, and purchasing information not generally known; personal information about CSHC’s executives, officers and directors; correspondence, and letters, notes, notebooks, reports, flowcharts, proposals, processes and/or any and all other confidential or proprietary information belonging to CSHC or relating to CSHC’s business and/or affairs; and (ii) any information that is of value or significance to CSHC that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, including information not generally known to the competitors of CSHC nor intended by CSHC for general dissemination. Confidential Information shall not include any: (a) information known generally to the public (other than as a result of unauthorized disclosure by the Employee); (b) information that became available from a third party source and such source is not bound by a confidentiality agreement; (c) any information not otherwise considered by the Board of Directors of CSHC to be Confidential Information; (d) information which is subsequently independently conceived or developed by Employee without use or reference to Confidential Information; or (e) information which is generally applicable business or industry know-how or acumen of Employee’s which does not embody and is not predicated upon the Confidential Information.

 

(iii) The term “Customer” shall mean any person or entity which has purchased goods, products or services from CSHC, entered into any contract for products or services with CSHC, and/or entered into any contract for the distribution of any products or services with CSHC within the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such goods, products or services must be substantially related to the Business.

 

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(iv) The phrase “directly or indirectly” shall include the Employee either on his/her own account, or as a partner, owner, promoter, joint venturer, employee, agent, consultant, advisor, manager, executive, independent contractor, officer, director, stockholder, or otherwise, of an entity.

 

(v) The term “Non-Compete Period” shall mean the period beginning on the date hereof and ending on the date that is the later of (a) with respect to the legacy business of VNC prior to the date hereof, five (5) years from the date hereof and (b) with respect to the business of CSHC, twenty-four (24) months immediately following the termination of the Employee’s employment with CSHC for whatever reason.

 

(vi) The term “Prospective Customer” shall mean any person or entity which has expressed material interest in purchasing goods, products or services from CSHC, expressed material interest in entering into any contract for products or services with CSHC, and/or expressed material interest in entering into any contract for the distribution of any products or services with CSHC within the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such goods, products or services must be substantially related to the Business.

 

(vii) The term “Restricted Area” shall include a fifty-mile radius of any office or facility of CSHC, its affiliates or subsidiaries.

 

(viii) The term “Restricted Business” shall mean any business that competes with CSHC in the Business, as such business now exists or as it may exist at the time of the termination of the Employee’s employment with CSHC for whatever reason.

 

(ix) The term “Vendor” shall mean any supplier, person, or entity from which CSHC has purchased products or services during the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such products or services must be substantially related to the Business and provided that the Employee interfaced directly with such Vendor.

 

(b) Non-Competition. During the Non-Compete Period, in the Restricted Area, the Employee shall not, directly or indirectly, engage in, promote, finance, own, operate, develop, sell or manage or assist in or carry on in any Restricted Business, provided, however, that the Employee may at any time own securities of any competitor corporation whose securities are publicly traded on a recognized exchange so long as the aggregate holdings of the Employee in any one such corporation shall constitute not more than 5% of the voting stock of such corporation.

 

(c) Non-Solicitation of Employees or Independent Contractors. During the Non-Compete Period, the Employee shall not, directly or indirectly, solicit or attempt to induce any employee of CSHC or independent contractor engaged and/or utilized by CSHC in any employment or contractor capacity to terminate his/her employment with, or engagement by, CSHC. Likewise, during the Non-Compete Period, the Employee shall not, directly or indirectly, hire or attempt to hire for another entity or person any employee of CSHC or independent contractor engaged and/or utilized by CSHC in any capacity.

 

(d) Non-Solicitation of Customers, Prospective Customers, or Vendors. During the Non-Compete Period, the Employee shall not, directly or indirectly, sell, design, build, or support network infrastructures competitive with any solutions of CSHC for the technology and telecommunications industries to any Customer, Prospective Customer, or Vendor of CSHC through any entity other than CSHC. The Employee acknowledges and agrees that CSHC has substantial relationships with its Customers, Vendors and Prospective Customers, which CSHC expends significant time and resources in acquiring and maintaining, and that CSHC has Confidential Information pertaining to its business and its Customer, Vendors and Prospective Customers, and that CSHC’s Confidential Information and relationships with its Customers, Vendors and Prospective Customers constitute significant and valuable assets of CSHC.

 

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(e) Non-Disclosure of Confidential Information. During and after employment under this Agreement, including but not limited to the Non-Compete Period, the Employee shall not, directly or indirectly, without the prior written consent of the Board of Directors of CSHC, or a person duly authorized thereby, other than a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employee as an employee of CSHC, as may be required by law or in response to a court order or a request by a regulatory or administrative body, or as may be necessary to enforce any agreement between CSHC and Employee, disclose or use for the benefit of himself/herself or any other person, corporation, partnership, joint venture, association, or other business organization, any of the trade secrets or Confidential Information of CSHC. If the Employee is legally required to disclose any Confidential Information or trade secrets, to the extent practicable, the Employee will provide CSHC with written notice. Notice shall be provided in accordance with Section 15 below.

 

(f) Need for Restrictions. The Employee acknowledges and agrees that each of the restrictive covenants contained in this Section 10 is reasonable and necessary to protect the legitimate business interests of CSHC, including, without limitation, the need to protect CSHC’s trade secrets and Confidential Information and the need to protect its relationships with its Customers, Prospective Customers, Vendors, and agents. The Employee also acknowledges and agrees, as set forth in Subsection 10(g) below, that CSHC may obtain a temporary, preliminary, and/or permanent injunction to restrain any violations of, or otherwise enforce, the restrictive covenants contained in Section 10.

 

(g) Breach of Restrictive Covenants. In the event of a breach or threatened breach by the Employee of any restrictive covenant set forth in Section 10, the Employee agrees that such a breach or threatened breach would cause irreparable injury to CSHC, and that, if CSHC shall bring legal proceedings against the Employee to enforce any restrictive covenant, CSHC shall be entitled to seek all available civil remedies, at law or in equity, including, without limitation, an injunction without posting a bond. In any action resulting from a breach of this Agreement, the prevailing party shall be entitled to recover his or its attorneys' fees and costs.

 

(h) Successors and Assigns. CSHC and its successors and assigns may enforce these restrictive covenants.

 

(i) Severability. If any portion of any covenant in this Section 10 or its application is construed to be invalid, illegal, or unenforceable, then the other portions and their application shall not be affected thereby and shall be enforceable without regard thereto. If any of the Covenants is determined to be unenforceable because of its scope, duration, geographical area or similar factor, then the court making such determination shall have the power to reduce or limit such scope, duration, area or other factor, and such Covenant shall then be enforceable in its reduced or limited form. All provisions of this Section 10 shall survive the term of this Agreement and Employee’s employment with CSHC.

 

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11. Return of CSHC’s Property. All of CSHC’s and its subsidiaries’ and affiliates’ products, Customer correspondence, internal memoranda, designs, sales brochures, training manuals, project files, price lists, Customer and Vendor lists, prospectus reports, Customer or Vendor information, sales literature, territory printouts, call books, notebooks, textbooks, e-mails and Internet access, and all other like information or products, including all copies, duplications, replications and derivatives of such information or products, acquired by the Employee while in the employ of CSHC, whether prepared by the Employee or coming into the Employee’s possession, shall be the exclusive property of CSHC and shall be returned immediately to CSHC upon the expiration or termination of this Agreement for any reason or upon request by the CEO of CSHC or the Board of Directors of CSHC. The Employee also shall return immediately return any CSHC issued property including, but not limited to, laptops, computers, thumb drives, removable media devices, flash drives, smartphones, cellular phones, iPads and other devices upon the expiration or termination of this Agreement for any reason or upon request by the President of CSHC or the Board. The Employee’s obligations under this Section 11 shall exist whether or not any of these items or materials contain Confidential Information or trade secrets. The parties hereto shall comply with all applicable laws and regulations regarding retention of and access to this Agreement and all books, documents and records in connection therewith. The Employee shall provide CSHC with a signed certificate evidencing that all such property has been returned, and that no such property or Confidential Information or trade secret has been retained by the Employee in any form.

 

12. Employee and CSHC Representations. The Employee hereby represents and warrants to CSHC that (i) the execution, delivery and performance of this Agreement by the Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound, and (ii) upon the execution and delivery of this Agreement by CSHC, this Agreement shall be a valid and binding obligation of the Employee, enforceable in accordance with its terms. CSHC hereby represents and warrants to the Employee that (i) the execution, delivery and performance of this Agreement by CSHC does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which CSHC is a party or by which it is bound and (ii) upon the execution and delivery of this Agreement by the Employee, this Agreement shall be a valid and binding obligation of CSHC, enforceable in accordance with its terms.

 

13. Dispute Resolution.

 

(a) Mediation/Arbitration. As a material condition of your employment at CSHC, you agree that any controversy or claim arising out of or relating to your employment relationship with CSHC Company or the termination of that relationship, must be submitted for non-binding mediation before a third-party neutral and, if necessary, for final and binding resolution by a private and impartial arbitrator, to be jointly selected by you and CSHC.

 

(b) Claims Covered. This agreement to submit to mediation and, if necessary arbitration, covers any dispute concerning the arbitrability of any such controversy or claim; and (i) includes, but is not limited to, any claim that could be asserted in court or before an administrative agency or claims for which the employee has an alleged cause of action, including without limitation claims for breach of any contract or covenant, express or implied; tort claims; claims for discrimination (including, but not limited to, discrimination based on sex, pregnancy, race, national or ethnic origin, age, religion, creed, marital status, sexual orientation, mental or physical disability or medical condition or other characteristics protected by statute); claims for wrongful discharge; violations of the Family and Medical Leave Act (FMLA); violations of confidentiality or breaches of trade secrets; and/or claims for violation of any federal, state or other governmental law, statute, regulation or ordinance, and whether based on statute or common law; and (ii) all those claims whether made against CSHC, any of its subsidiary or affiliated entities or its individual officers or directors in an official or personal capacity.

 

(c) Claims Not Covered. Claims covered by this Agreement do not include: (i) a claim for workers' compensation benefits; (ii) a claim for unemployment compensation benefits; (iii) a claim under the National Labor Relations Act (NLRA), as amended; and (iv) a claim by CSHC for injunctive or other equitable relief, including without limitation claims for unfair competition and the use or unauthorized disclosure of trade secrets or confidential information, for which CSHC may seek and obtain relief from a court of competent jurisdiction.

 

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(d) Internal Efforts. As a prerequisite for submitting an employment dispute to mediation and, if necessary, arbitration, both you and CSHC agree to make good faith efforts at resolving any dispute internally on an informal basis through CSHC management channels appropriate to that particular dispute. Only when those internal efforts fail may an employment dispute be submitted to mediation and, if necessary, final and binding arbitration under the terms of the procedure below.

 

(e) Nonbinding Mediation. If efforts at informal resolution fail, disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party. Mediation shall be conducted and administered by the American Arbitration Association (AAA) under its Employment Mediation Rules, which are incorporated into this procedure by reference. Such mediation shall be conducted on a confidential basis.

 

(f) Binding Arbitration. If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final binding confidential arbitration under the Procedure. The arbitration will be conducted under the Employment Dispute Resolution Rules of the AAA. The arbitrator shall have the authority to allow for appropriate discovery and exchange of information before a hearing, including, but not limited to, production of documents, information requests, depositions and subpoenas.

 

(g) Procedure. Any conflict between the rules and procedures set forth in the AAA rules and those set forth in this Agreement shall be resolved in favor of those in this Agreement. The burden of proof at an arbitration shall at all times be on the party seeking relief. In reaching a decision, the arbitrator shall apply the governing substantive law applicable to the claims, causes of action and defenses asserted by the parties as applicable. The arbitrator shall have the power to award all remedies that could be awarded by a court or administrative agency in accordance with the governing and applicable substantive law, including, without limitation, Title VII, the Age Discrimination in Employment Act, the Family and Medical Leave Act.

 

(h) Time. The aggrieved party must give written notice of any claim to the other party as soon as possible after the aggrieved first knew or should have known of the facts giving rise to the claim. The written notice shall be provided pursuant to Section 15 below, and shall describe the nature of all claims asserted and the facts upon which those claims are based.

 

(i) Location. Mediation or arbitration conducted under this Agreement shall take place in Fairfax, Virginia unless an alternative location is chosen by the mutual agreement of the Parties. The arbitrator shall render a decision and award within 30 days after the close of the arbitration hearing or at any later time on which the Parties may agree. The award shall be in writing and signed and dated by the arbitrator and shall contain express findings of fact and the basis for the award.

 

(j) Cost. The Parties agree to share equally the AAA administrative fees, mediator’s fees and expenses, and the arbitrator's fees and expenses. Each Party shall be solely responsible for its own costs and attorneys’ fees.

 

14. Survival. The provisions of Sections 7 through 24, along with any other provisions necessary or desirable to accomplish the purposes of such sections, shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. The obligation of CSHC to make payments to the Employee under Section 7(b) hereof, and the Employee’s right to retain the same, are expressly conditioned upon the Employee’s continued full performance of his obligations hereunder and under the Merger Agreement. Upon termination by either the Employee or CSHC, all rights, duties and obligations of the Employee and CSHC to each other shall cease, except as otherwise expressly provided in this Agreement and the Merger Agreement.

 

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15. Notices. All notices, requests, demands, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if and when: (i) delivered personally, (ii) three (3) business days after being mailed by first class certified mail, return receipt requested, postage prepaid, or (iii) one (1) business day after being sent by a nationally recognized overnight courier service, delivery charges prepaid, or (iv) one (1) business day after being sent by email or facsimile to the other Party at the addresses stated herein or to such other address of which either Party may give notice to the other in accordance with this Section.

 

  If to CSHC: General Counsel
    ComSovereign Holding Corp.
    5000 Quorum Drive STE 400
    Dallas, TX 75254
    Attn: Kevin M. Sherlock,
    General Counsel
    Email: KSherlock@COMSovereign.com
     
  With a copy to: Pryor Cashman LLP
    7 Times Square
    New York, New York  10036
    Attention:  Eric M. Hellige
    Facsimile:  (212) 798-6380
    Email:  ehellige@pryorcashman.com
     
  If to the Employee: Mohan Tammisetti
    25643 South Village Drive
    South Riding VA 20152
    Email: mtammisetti@gmail.com

 

16. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

17. Complete Agreement. This Agreement embodies the complete agreement and understanding among the Parties with respect to the specific subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof. With deemed effect immediately prior to the Effective Time of the Merger (as defined in the Merger Agreement), any existing employment or consulting agreement between the Employee and VNC automatically will be terminated and of no further force or effect.

 

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18. Representation. Employee irrevocably confirms, agrees, and acknowledges for the benefit of Orrick (which is an express and intended third party beneficiary hereof) that: (a) Orrick, Herrington & Sutcliffe LLP (“Orrick”) is counsel to solely VNC in connection with the Merger Agreement and related matters; (b) Orrick has reviewed this Agreement, the Merger Agreement, and various other agreements, instruments and matters (collectively “Merger Matters”) at the request of, and for the sole benefit of, VNC; (c) that Orrick has not represented or advised Employee in his personal capacity in connection with this Agreement, the Merger Agreement, any options or equity awards or matters tied to the Merger, or any other Merger Matters; and (d) Employee has had (whether or not he has elected to do so) the opportunity to engage and consult counsel of his choosing in connection with this Agreement, the Merger, the Merger Agreement, and any other Merger Matters or any other agreements, matters, or transactions..

 

19. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by the Employee, CSHC and their respective heirs, successors and permitted assigns. The Employee may not assign his rights or delegate his obligations hereunder. CSHC may assign all or any part of this Agreement to any third party that shall (i) acquire CSHC, or any parent of CSHC, in a merger, (ii) acquire a majority of the capital stock of CSHC, or any parent of CSHC, or (iii) purchase all or substantially all of CSHC’s assets (or all or substantially all of the assets of the portion of CSHC’s business that the Employee’s employment was most associated with), provided, however, that in each case CSHC shall provide the Employee with written notice thereof.

 

20. Key Man Insurance. While the Employee is employed by CSHC or any of its subsidiaries, CSHC may at any time effect insurance on the Employee’s life and/or health in such amounts and in such form as CSHC may in its sole discretion decide. Except as provided under the applicable terms of a policy or other arrangement, the Employee will not have any interest in such insurance, but shall, if CSHC requests, submit to such medical examinations, supply such information and execute such documents as may be required in connection with, or so as to enable CSHC to effect, such insurance.

 

21. Choice of Law; Jurisdiction. This Agreement shall be governed, construed and enforced in accordance with the laws of the Commonwealth of Virginia.

 

22. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the express, prior, written consent of CSHC and the Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

23. Counterparts. This Agreement may be executed and delivered in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument representing the agreement of the parties hereto.

 

24. Electronic Document. A copy of this Agreement or signature page hereto signed and transmitted by facsimile machine, as an attachment to an e-mail or by DocuSign or other electronic means (collectively an “Electronic Document”), shall be treated as an original document. The signature of any party thereon, for purposes hereof, is to be considered an original signature, and the Electronic Document transmitted is to be considered to have the same binding effect as an original signature on an original document. No party shall raise the use of an Electronic Document or the fact that a signature was transmitted through the use of a facsimile machine, e-mail or other electronic means as a defense to the enforcement of this Agreement or any amendment or other document executed in compliance with this Agreement.

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

 

  COMSOVEREIGN HOLDING CORP.:
     
  By: /s/ Daniel L. Hodges
  Name: Daniel L. Hodges
  Title: Chief Executive Officer
     
  EMPLOYEE:
   
  /s/Mohan Tammisetti
  Mohan Tammisetti

 

 

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EX-10.3 5 ea123910ex10-3_comsovereign.htm EMPLOYMENT AGREEMENT DATED AS OF JUNE 7, 2020 BETWEEN KIETH KACZMAREK AND COMSOVEREIGN HOLDING CORP.

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 6th day of July 2020, is by and between COMSovereign Holding Corp., a Nevada corporation (“CSHC” or the “Company”), and Keith Kaczmarek, an individual resident of the State of Florida (the “Employee”). CSHC and the Employee are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

WITNESSETH

 

WHEREAS, CSHC has entered into that Agreement and Plan of Merger and Reorganization, dated on or around the date hereof (the “Merger Agreement”), pursuant to which CSHC shall acquire all of the ownership interest of Virtual Network Communications Inc., a Virginia corporation (“VNC”), from the owners thereof (collectively, “Sellers”);

 

WHEREAS, the Employee will receive substantial economic benefit as a result of CSHC and Sellers closing the transactions contemplated by the Merger Agreement;

 

WHEREAS, the Closing (as defined in the Merger Agreement) is contingent upon the Employee and CSHC entering into this Agreement, and both the Employee and CSHC wish to enter into this Agreement in order to meet such condition of the Merger Agreement;

 

WHEREAS, CSHC and its subsidiaries and affiliates design, build and support infrastructures, equipment, and solutions for the technology and telecommunications industries (the “Business”);

 

WHEREAS, CSHC has developed and will develop relationships with Customers, Prospective Customers, Vendors, suppliers and shippers as well as a reputation in the technology and communications industries, which are and will become of great importance and value to CSHC in connection with its Business, and the loss of or injury to the Business will result in substantial and irreparable damage to CSHC;

 

WHEREAS, CSHC has acquired and/or developed certain trade secrets and Confidential Information, as more fully described below, and has expended significant time and expense in acquiring or developing its trade secrets and Confidential Information; and expends significant time and expense on an ongoing basis in supporting its employees, including the Employee; and

 

WHEREAS, in the course of the Employee’s employment by CSHC, the Employee may receive, be taught or otherwise have access to items and information associated with the Business such as sales, purchasing, transportation, documentation, marketing and trading techniques, information and materials, customer and supplier lists or information, correspondence, records, financial information, pricing information, computer systems, computer software applications, business plans and other information which is confidential and proprietary.

 

NOW, THEREFORE, in consideration of the forgoing, the mutual covenants and agreements contained herein and in the Merger Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties hereby agree as follows:

 

1. Material Inducement. Each party recognizes and acknowledges the fact that execution hereof by CSHC and the Employee is a material inducement to the Employee and CSHC to perform their obligations to close under the Merger Agreement and each party has agreed to its or his obligations hereunder as a condition precedent to the obligation of CSHC and VNC to close under the Merger Agreement without duress after ample opportunity to consult with its or his attorney.

 

 

 

 

2.  Employment. CSHC shall employ the Employee, and the Employee shall accept such employment with CSHC, upon the terms and conditions set forth in this Agreement for the period beginning at 11:59 PM Eastern Standard Time on the Closing Date (as defined in the Merger Agreement) (the “Effective Date”) and ending as provided in Section 6 hereof (the “Employment Period”). In the event that the Closing Date does not occur, this Agreement will be of no force or effect.

 

3. Position and Duties.

 

(a) During the Employment Period, the Employee shall (i) serve CSHC in the capacity of Senior Vice President Business Development, (ii) be based in the Chantilly, Virginia area, and (iii) have such duties, responsibilities and authorities consistent with his position and as CSHC’s CEO or his or her designee may from time to time confer and direct (collectively, the “Duties”).

 

(b) The Employee shall devote his full business time, effort and energy to the affairs of CSHC and the discharge of the Duties. Notwithstanding the foregoing, the Employee shall be permitted to (a) with the prior written consent of the Board of Directors of CSHC (which consent will not be unreasonably withheld or delayed) act or serve as a director, trustee, committee member, or principal of any type of non-competitive business, civic, or charitable organization and (b) purchase or own less than five percent (5%) of the publicly traded securities of any corporation; provided that such ownership represents a passive investment and that the Employee is not a controlling person of, or a member of a group that controls, such corporation; provided further that the activities described in clauses (a) and (b) do not interfere with the performance of the Employee’s duties and responsibilities to CSHC as provided hereunder.

 

4. Base Compensation. CSHC shall pay the Employee an annual base salary in the amount of not less than $150,000.00, calculated and paid in accordance with CSHC’s standard practices and policies in effect from time to time; provided, however, that CSHC may reduce the Employee’s annual base salary by up to 25% without the prior consent of the Employee only if and for so long as such reduction is implemented in connection with a contemporaneous and substantially similar (or greater) reduction in annual base salaries affecting other executives of CSHC with responsibilities substantially similar to the Employee (a “Global Salary Reduction”), with Employee being entitled to receive on a non-discriminatory basis substantially equivalent catch-up payments, bonuses, equity awards, consulting payments or other amounts as may be paid to any other executive as part of, in connection with, as compensation for, or following a Global Salary Reduction. The Employee’s annual base salary, as may be adjusted from time to time, is hereinafter referred to as the “Base Salary.

 

5. Additional Benefits.

 

(a) Initial Option Grant.  Automatically upon the Effective Date, CSHC is issuing to Employee a stock option (the “Option”) to purchase 100,000 shares of CSHC’s common stock, par value $0.001 per share. CSHC confirms to Employee that the grant of the Option has been approved by CSHC’s Board of Directors in connection with the approval of this Agreement and the consummation of the Merger, but effective subject to the occurrence of the Effective Date. The Option shall (i) have an exercise price equal to the fair market value of such shares on the Effective Date, (ii) have a term of five years, and (iii) with (x) 50,000 of the shares covered by the Option to vest completely after six months of continued employment with CSHC and (y) the remaining 50,000 shares covered by the Option to vest completely after an additional six months of continued employment with CSHC.  The Option shall be subject to the terms of CSHC’s 2020 Long-Term Incentive Plan (the “Plan”) under which it is granted and the terms of the award agreement evidencing such award (the “Option Agreement”), a copy of which has been delivered in final form by CSHC and the Employee concurrently with this Agreement. Employee acknowledges that the grant of the Option shall at all times be subject to the terms and conditions of the Plan and Option Agreement.  The Option Agreement will provide for the Option: (x) to accelerate in full on a single trigger basis automatically upon a change of control of the Company; and (y) to accelerate in full if Employee is terminated without Cause or resigns for Good Reason with the Employee to then have a one (1) year post-separation extended exercise period (vs. 90 days) in such circumstances.

 

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(b) Expenses. CSHC shall reimburse the Employee for all reasonable expenses incurred by him in the course of performing the Duties, to the extent consistent with the policies established by CSHC from time to time with respect to travel and other business expenses, subject to CSHC’s requirements with respect to reporting and documentation of such expenses. The Employee’s right to reimbursement for expenses hereunder shall be subject to the following additional rules: (i) the amount of expenses eligible for reimbursement during any calendar year shall not affect the expenses eligible for reimbursement in any other calendar year, (ii) reimbursement shall be made not later than December 31 of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement is not subject to liquidation or exchange for any other benefit.

 

(c) Benefits. The Employee shall be entitled to participate in such benefit plans as CSHC provides to its employees from time to time in accordance with CSHC policies, except to the extent that such plans are duplicative of benefits otherwise provided to the Employee under this Agreement (e.g., a severance pay plan). Such participation will be (x) at the same level as other executives of CSHC, and (y) subject to the terms and conditions of such plans, and any other restrictions or limitations imposed by law. Employee shall also be entitled to fringe benefits and perquisites consistent with the practices of CSHC and governing benefit plan requirements (including plan eligibility provisions), and to the extent CSHC provides similar benefits or perquisites (or both) to similarly situated executives of CSHC.

 

(d) Vacation and Other Leave.  During the Employment Period, the Employee’s annual rate of vacation accrual shall be four (4) weeks of paid vacation per calendar year (prorated for partial years), with such vacation to accrue and be subject to CSHC’s vacation policies in effect from time to time, including any policy which may limit vacation accruals and/or disallow the carryover from year to year of accrued but unused vacation.  The Employee shall also be entitled to all other holiday and leave pay generally available to other executives of CSHC.

 

6. Term.

 

(a) Subject to earlier termination pursuant to this Section 6, the Employment Period shall continue from the Closing Date for an initial term of two (2) years, and shall automatically renew annually thereafter for subsequent one (1) year terms, unless either CSHC or the Employee provides written notice of non-renewal to the other Party not later than sixty (60) days prior to the last day of the then-current term.

 

(b) Notwithstanding the foregoing, the Employment Period shall earlier terminate under the following circumstances: (i) the Employee’s death or “Permanent Disability” (defined as the expiration of a continuous period of 180 days during which the Employee is unable to perform all of the Duties due to physical or mental incapacity); (ii) the Employee is terminated for Cause (as defined below) by CSHC at any time upon notice to the Employee setting forth in reasonable detail the nature of Cause (and provided such Cause is not capable or cure or if capable of cure is not cured by the Employee as provided in such definition); (iii) the Employee resigns for Good Reason (as defined below) in accordance with the timing requirements specified below; (iv) the Employee is terminated by CSHC without Cause at any time upon notice to the Employee; or (v) the Agreement is terminated by the Employee without Good Reason upon thirty (30) days’ prior written notice to CSHC (provided that CSHC may elect to waive such notice period or any portion thereof; but in that event, CSHC shall pay the Base Salary for that portion of the notice period so waived).

 

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(c) For purposes of this Agreement, “Cause” shall mean, as determined by the Board of Directors of CSHC in its reasonable judgment, (i) the willful failure or refusal by the Employee to perform his lawful Duties (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) which, if capable of cure, has not been cured within seven (7) business days after written notice of such breach delivered to the Employee by CSHC; (ii) the Employee’s material breach of this Agreement, any other agreement between him and CSHC (including without limitation the Non-Competition Agreement, as defined below) or any material policy of CSHC or its subsidiaries or affiliates applicable to him that has been communicated to him in writing which, if capable of cure, has not been cured within seven (7) business days after written notice of such breach delivered to the Employee by CSHC; (iii) the Employee’s willful misconduct or gross negligence with respect to the performance of the Duties, which, if capable of cure, has not been cured within seven (7) business days following written notice of such violation delivered to the Employee by CSHC; (iv) the Employee’s conviction, or plea of guilty or nolo contendere, with respect to any felony, or any act of fraud, theft, or financial dishonesty with respect to CSHC or any of its subsidiaries, affiliates, customers or business partners, or any other crime involving dishonesty, disloyalty or fraud; or (v) habitual alcohol or substance abuse by the Employee. For purposes of this provision, no act or failure to act on the part of the Employee shall be considered “willful” unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee’s action or omission was in the best interests of CSHC. Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board of Directors of CSHC or on the advice of counsel for CSHC shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of CSHC. Termination of the Employee’s employment shall not be deemed to be for Cause unless and until CSHC delivers to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board of Directors of CSHC finding that the Employee has engaged in the conduct described in any of clauses (i)-(v) above.

 

(d) For purposes of this Agreement, “Good Reason” shall exist upon (i) mutual written agreement by the Employee and CSHC that Good Reason exists; (ii) the relocation of Employee’s office such that the Employee’s daily commute is increased by at least 50 miles round-trip without the prior written consent of the Employee; (iii) reduction of the Employee’s annual base salary without the prior written consent of the Employee (other than a reduction in annual base salary of not more than [25]% that is implemented in connection with a Global Salary Reduction); (iv) any material breach by CSHC of any material provision of this Agreement or of any material provision of any other agreement between the Employee and CSHC (with all compensation, benefit, option, and equity award provisions of this Agreement or any other such other agreement being deemed for these purposes to be material); or (v) a material, adverse change in the Employee’s title, authority, duties or responsibilities without the Employee’s prior written consent (other than temporarily while the Employee is physically or mentally incapacitated or as required by applicable law); provided, however, that in order for employment to terminate for Good Reason pursuant to clauses (ii)-(v), (A) the Employee must provide written notice to CSHC, setting forth in reasonable detail the nature of the condition giving rise to Good Reason, within sixty (60) days of the initial existence of such condition, (B) if capable of cure, the condition must remain uncured for a period of thirty (30) days following such notice and (C) the Employee must terminate his employment, if at all, not later than thirty (30) days after the expiration of such cure period.

 

(e) In the event of any dispute regarding the existence of the Employee’s Permanent Disability hereunder, the matter will be resolved by a physician qualified to practice medicine and who has no prior knowledge of the Employee, which physician shall be selected by CSHC and be reasonably acceptable to the Employee or his representative. For this purpose, the Employee will submit to all appropriate medical examinations and any determination by such a physician will be final and conclusive of the issue for all purposes of this Agreement.

 

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7. Matters Related to Termination.

 

(a) Final Compensation. In the event of termination of the Employee’s employment hereunder, howsoever occurring, CSHC shall pay to the Employee (i) the Base Salary for the final payroll period of the Employee’s employment, through the date of termination and (ii) reimbursement for business expenses incurred by the Employee but not yet paid to the Employee as of the date of termination, provided that the Employee submits all expenses and supporting documentation required within thirty (30) days of the date of termination, and provided further that such expenses are reimbursable under CSHC policies as then in effect (all of the foregoing, “Final Compensation”). All Final Compensation shall be paid to the Employee at the time prescribed by law or applicable CSHC policies for such payment, but in no event more than sixty (60) days following the date of termination.

 

(b) Severance. In the event that the Employee’s employment terminates pursuant to Section 6(b)(iii) or 6(b)(iv) hereof, CSHC will pay to the Employee, in addition to Final Compensation, Base Salary for six (6) months (the “Severance Payments”). Notwithstanding the foregoing, any obligation of CSHC to provide the Severance Payments is conditioned on the Employee’s signing and returning to CSHC a timely and effective separation agreement containing a release of all claims against CSHC and other customary terms (the “Separation Agreement”). The Separation Agreement must become effective, if at all, by the sixtieth (60th) calendar day following the date of termination. The Severance Payments will be in the form of salary continuation, payable in accordance with the normal payroll practices of CSHC. The first payment, which shall be retroactive to the date immediately following the date of termination, will be made on the first regularly scheduled payroll date that follows the expiration of sixty (60) days from the date of termination.

 

(c) Benefits Termination. For the six-month period post-termination during which the Employee receives the Severance Payments, Employee shall be entitled to continued coverage under CSHC’s group health plans pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), which shall be provided to at CSHC’s expense with no cost to the Employee. Following this six-month period, except for any right that the Employee may have under COBRA (and any applicable state or local laws) to continued participation in CSHC’s group health plans at his cost, the Employee’s participation in all employee benefit plans shall terminate in accordance with the terms of the applicable benefit plans. The Employee shall not be eligible to earn vacation or other paid time off following the termination of employment.

 

8. Section 409A. Notwithstanding any other provision herein to the contrary, to the limited extent that any payment to be made to the Employee, whether pursuant to this Agreement or otherwise, is determined to constitute “nonqualified deferred compensation” within the meaning of and subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) such payment shall not be made prior to the date that is the earlier of (i) six months and one day after the Employee’s separation from service with CSHC and affiliate or subsidiary of CSHC and (ii) the Employee’s death; except to the extent of (A) payments that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by CSHC in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended. The terms of this Section 8 shall apply only if the Employee is a “specified employee” (within the meaning of Section 409A) on the date of such separation from service, and shall only apply to the extent the delay of such payment is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall CSHC have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A except to the extent that any act, omission, or delay by CSHC or its representatives or affiliates triggered or gave rise to any loss of benefits to, or excess taxes of, the Employee under this paragraph.

 

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9. Ownership of Works; Infringement Indemnity.

 

(a) Assignment of Works. Employee agrees to promptly make full written disclosure to CSHC, to hold in trust for the sole right and benefit of CSHC, and hereby assigns, transfers, grants and conveys to CSHC, all of his worldwide right, title, ownership and interest in and to any and all designs, trademarks, inventions, original works of authorship, findings, conclusions, data, discoveries, developments, concepts, improvements, trade secrets, techniques, processes, know-how and other work product, whether or not patentable or registrable under copyright or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, in the performance of this Agreement or which result, to any extent, from use of CSHC’s premises or property (collectively, the “Works”), including any and all intellectual property rights inherent in the Works and appurtenant thereto including, without limitation, all patent rights, copyrights, trademarks, know-how and trade secrets (collectively, “Intellectual Property Rights”). Employee further acknowledges and agrees that all original works of authorship which are made by him in the performance of this Agreement and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act and belong solely to CSHC. Employee agrees that all Works developed by Employee during the course of this Agreement, or developed in the future using Works as the basis, are the sole property of CSHC. However, to the extent that any such work may not, by operation of any applicable law, be a work made for hire, Employee hereby assigns, transfers and conveys to CSHC all of his worldwide right, title and interest in and to such Work, including all Intellectual Property Rights therein and appurtenant thereto. Employee hereby waives any and all “moral rights” that he may have in any of the Works under the Berne Convention or any other applicable law, rule or regulation. Employee agrees that he will retain no rights in any of the Works or any of the Intellectual Property Rights in or relating thereto. Employee agrees that CSHC owns the entire right, title, ownership and interest in and to all of the Works and all Intellectual Property Rights in or relating thereto including, without limitation, the right to reproduce the Works, modify the Works, prepare derivative works based upon the Works or the copyright or any other Intellectual Property Rights in or relating thereto, sell or otherwise distribute the Works. Employee warrants that all of the Works and all Intellectual Property Rights in or related thereto are free and clear of all liens, security interests, claims and other encumbrances of any type.

 

(b) Further Assurances. Upon the request and at the expense of CSHC, except as provided below, Employee shall execute and deliver any and all instruments and documents and take such other acts as may be reasonably necessary to document the assignment and transfer described in Section 9(a) above or to enable CSHC to secure its rights in the Works and any Intellectual Property Rights in or relating thereto in any and all jurisdictions, or to apply for, prosecute and enforce patents, trademark registrations, copyrights or other Intellectual Property Rights in any and all jurisdictions with respect to any Works, or to obtain any extension, validation, re-issue, continuance or renewal of any such Intellectual Property Right. Whether any Intellectual Property Rights in or relating to any of the Works will be preserved, maintained, or registered in any jurisdiction shall be at the sole discretion of CSHC.

 

(c) Attorney in Fact. If CSHC is unable, after reasonable effort, to secure Employee’s signature as required in Section 9(b) for any reason whatsoever, Employee hereby irrevocably designates and appoints CSHC and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and in Employee’s behalf and stead to execute and file any such application or applications or other documents and to do all other lawfully permitted acts to further the prosecution and issuance of a patent, copyright or trademark or any other legal protection thereon with the same legal force and effect as if executed by Employee. 

 

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10. Covenants.

 

(a) Definitions.

 

(i) The term “CSHC” shall mean CSHC and its subsidiaries, affiliates and related entities. It is understood that any subsidiaries, affiliates or related entities of CSHC are intended third-party beneficiaries of the provisions of this Agreement.

 

(ii) The term “Confidential Information” shall include, but not be limited to: Customer lists and Prospective Customer lists; specific information on Customers and Prospective Customers (including information on purchasing preferences, credit information, and pricing); terms and conditions under which CSHC deals with Vendors and suppliers or prospective Vendors or suppliers; employee and independent contractor lists; CSHC’s sources of supply; CSHC’s billing rates; pricing lists (including item and Customer specific pricing information); names of agents; operations; contractual or personnel data; trade secrets; license agreements; proprietary purchasing and sales methods and techniques; proprietary compositions, ideas and improvements; pricing methods and strategies; computer programs, computer systems, computer data, system documentation, special hardware, product hardware, related software development and computer software design and/or improvements; methods of distribution; market feasibility studies; proposed or existing marketing techniques or plans; sales and sales volumes; purchasing, transportation, documentation, marketing and trading techniques of Customers, potential Customers and/or Vendors; inventions (including Works and Intellectual Property Rights as defined above); future CSHC business plans; project files; design systems; information on current and potential Vendors including, but not limited to, their identity, pricing, and purchasing information not generally known; personal information about CSHC’s executives, officers and directors; correspondence, and letters, notes, notebooks, reports, flowcharts, proposals, processes and/or any and all other confidential or proprietary information belonging to CSHC or relating to CSHC’s business and/or affairs; and (ii) any information that is of value or significance to CSHC that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, including information not generally known to the competitors of CSHC nor intended by CSHC for general dissemination. Confidential Information shall not include any: (a) information known generally to the public (other than as a result of unauthorized disclosure by the Employee); (b) information that became available from a third party source and such source is not bound by a confidentiality agreement; (c) any information not otherwise considered by the Board of Directors of CSHC to be Confidential Information; (d) information which is subsequently independently conceived or developed by Employee without use or reference to Confidential Information; or (e) information which is generally applicable business or industry know-how or acumen of Employee’s which does not embody and is not predicated upon the Confidential Information.

 

(iii) The term “Customer” shall mean any person or entity which has purchased goods, products or services from CSHC, entered into any contract for products or services with CSHC, and/or entered into any contract for the distribution of any products or services with CSHC within the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such goods, products or services must be substantially related to the Business.

 

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(iv) The phrase “directly or indirectly” shall include the Employee either on his/her own account, or as a partner, owner, promoter, joint venturer, employee, agent, consultant, advisor, manager, executive, independent contractor, officer, director, stockholder, or otherwise, of an entity.

 

(v) The term “Non-Compete Period” shall mean the period beginning on the date hereof and ending on the date that is the later of (a) with respect to the legacy business of VNC prior to the date hereof, five (5) years from the date hereof and (b) with respect to the business of CSHC, twenty-four (24) months immediately following the termination of the Employee’s employment with CSHC for whatever reason.

 

(vi) The term “Prospective Customer” shall mean any person or entity which has expressed material interest in purchasing goods, products or services from CSHC, expressed material interest in entering into any contract for products or services with CSHC, and/or expressed material interest in entering into any contract for the distribution of any products or services with CSHC within the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such goods, products or services must be substantially related to the Business.

 

(vii) The term “Restricted Area” shall include a fifty-mile radius of any office or facility of CSHC, its affiliates or subsidiaries.

 

(viii) The term “Restricted Business” shall mean any business that competes with CSHC in the Business, as such business now exists or as it may exist at the time of the termination of the Employee’s employment with CSHC for whatever reason.

 

(ix) The term “Vendor” shall mean any supplier, person, or entity from which CSHC has purchased products or services during the one (1) year immediately preceding the termination of the Employee’s employment with CSHC for whatever reason; provided that such products or services must be substantially related to the Business and provided that the Employee interfaced directly with such Vendor.

 

(b) Non-Competition. During the Non-Compete Period, in the Restricted Area, the Employee shall not, directly or indirectly, engage in, promote, finance, own, operate, develop, sell or manage or assist in or carry on in any Restricted Business, provided, however, that the Employee may at any time own securities of any competitor corporation whose securities are publicly traded on a recognized exchange so long as the aggregate holdings of the Employee in any one such corporation shall constitute not more than 5% of the voting stock of such corporation.

 

(c) Non-Solicitation of Employees or Independent Contractors. During the Non-Compete Period, the Employee shall not, directly or indirectly, solicit or attempt to induce any employee of CSHC or independent contractor engaged and/or utilized by CSHC in any employment or contractor capacity to terminate his/her employment with, or engagement by, CSHC. Likewise, during the Non-Compete Period, the Employee shall not, directly or indirectly, hire or attempt to hire for another entity or person any employee of CSHC or independent contractor engaged and/or utilized by CSHC in any capacity.

 

(d) Non-Solicitation of Customers, Prospective Customers, or Vendors. During the Non-Compete Period, the Employee shall not, directly or indirectly, sell, design, build, or support network infrastructures competitive with any solutions of CSHC for the technology and telecommunications industries to any Customer, Prospective Customer, or Vendor of CSHC through any entity other than CSHC. The Employee acknowledges and agrees that CSHC has substantial relationships with its Customers, Vendors and Prospective Customers, which CSHC expends significant time and resources in acquiring and maintaining, and that CSHC has Confidential Information pertaining to its business and its Customer, Vendors and Prospective Customers, and that CSHC’s Confidential Information and relationships with its Customers, Vendors and Prospective Customers constitute significant and valuable assets of CSHC.

 

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(e) Non-Disclosure of Confidential Information. During and after employment under this Agreement, including but not limited to the Non-Compete Period, the Employee shall not, directly or indirectly, without the prior written consent of the Board of Directors of CSHC, or a person duly authorized thereby, other than a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employee as an employee of CSHC, as may be required by law or in response to a court order or a request by a regulatory or administrative body, or as may be necessary to enforce any agreement between CSHC and Employee, disclose or use for the benefit of himself/herself or any other person, corporation, partnership, joint venture, association, or other business organization, any of the trade secrets or Confidential Information of CSHC. If the Employee is legally required to disclose any Confidential Information or trade secrets, to the extent practicable, the Employee will provide CSHC with written notice. Notice shall be provided in accordance with Section 15 below.

 

(f) Need for Restrictions. The Employee acknowledges and agrees that each of the restrictive covenants contained in this Section 10 is reasonable and necessary to protect the legitimate business interests of CSHC, including, without limitation, the need to protect CSHC’s trade secrets and Confidential Information and the need to protect its relationships with its Customers, Prospective Customers, Vendors, and agents. The Employee also acknowledges and agrees, as set forth in Subsection 10(g) below, that CSHC may obtain a temporary, preliminary, and/or permanent injunction to restrain any violations of, or otherwise enforce, the restrictive covenants contained in Section 10.

 

(g) Breach of Restrictive Covenants. In the event of a breach or threatened breach by the Employee of any restrictive covenant set forth in Section 10, the Employee agrees that such a breach or threatened breach would cause irreparable injury to CSHC, and that, if CSHC shall bring legal proceedings against the Employee to enforce any restrictive covenant, CSHC shall be entitled to seek all available civil remedies, at law or in equity, including, without limitation, an injunction without posting a bond. In any action resulting from a breach of this Agreement, the prevailing party shall be entitled to recover his or its attorneys' fees and costs.

 

(h) Successors and Assigns. CSHC and its successors and assigns may enforce these restrictive covenants.

 

(i) Severability. If any portion of any covenant in this Section 10 or its application is construed to be invalid, illegal, or unenforceable, then the other portions and their application shall not be affected thereby and shall be enforceable without regard thereto. If any of the Covenants is determined to be unenforceable because of its scope, duration, geographical area or similar factor, then the court making such determination shall have the power to reduce or limit such scope, duration, area or other factor, and such Covenant shall then be enforceable in its reduced or limited form. All provisions of this Section 10 shall survive the term of this Agreement and Employee’s employment with CSHC.

 

11. Return of CSHC’s Property. All of CSHC’s and its subsidiaries’ and affiliates’ products, Customer correspondence, internal memoranda, designs, sales brochures, training manuals, project files, price lists, Customer and Vendor lists, prospectus reports, Customer or Vendor information, sales literature, territory printouts, call books, notebooks, textbooks, e-mails and Internet access, and all other like information or products, including all copies, duplications, replications and derivatives of such information or products, acquired by the Employee while in the employ of CSHC, whether prepared by the Employee or coming into the Employee’s possession, shall be the exclusive property of CSHC and shall be returned immediately to CSHC upon the expiration or termination of this Agreement for any reason or upon request by the CEO of CSHC or the Board of Directors of CSHC. The Employee also shall return immediately return any CSHC issued property including, but not limited to, laptops, computers, thumb drives, removable media devices, flash drives, smartphones, cellular phones, iPads and other devices upon the expiration or termination of this Agreement for any reason or upon request by the President of CSHC or the Board. The Employee’s obligations under this Section 11 shall exist whether or not any of these items or materials contain Confidential Information or trade secrets. The parties hereto shall comply with all applicable laws and regulations regarding retention of and access to this Agreement and all books, documents and records in connection therewith. The Employee shall provide CSHC with a signed certificate evidencing that all such property has been returned, and that no such property or Confidential Information or trade secret has been retained by the Employee in any form.

 

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12. Employee and CSHC Representations. The Employee hereby represents and warrants to CSHC that (i) the execution, delivery and performance of this Agreement by the Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound, and (ii) upon the execution and delivery of this Agreement by CSHC, this Agreement shall be a valid and binding obligation of the Employee, enforceable in accordance with its terms. CSHC hereby represents and warrants to the Employee that (i) the execution, delivery and performance of this Agreement by CSHC does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which CSHC is a party or by which it is bound and (ii) upon the execution and delivery of this Agreement by the Employee, this Agreement shall be a valid and binding obligation of CSHC, enforceable in accordance with its terms.

 

13. Dispute Resolution.

 

(a) Mediation/Arbitration. As a material condition of your employment at CSHC, you agree that any controversy or claim arising out of or relating to your employment relationship with CSHC Company or the termination of that relationship, must be submitted for non-binding mediation before a third-party neutral and, if necessary, for final and binding resolution by a private and impartial arbitrator, to be jointly selected by you and CSHC.

 

(b) Claims Covered. This agreement to submit to mediation and, if necessary arbitration, covers any dispute concerning the arbitrability of any such controversy or claim; and (i) includes, but is not limited to, any claim that could be asserted in court or before an administrative agency or claims for which the employee has an alleged cause of action, including without limitation claims for breach of any contract or covenant, express or implied; tort claims; claims for discrimination (including, but not limited to, discrimination based on sex, pregnancy, race, national or ethnic origin, age, religion, creed, marital status, sexual orientation, mental or physical disability or medical condition or other characteristics protected by statute); claims for wrongful discharge; violations of the Family and Medical Leave Act (FMLA); violations of confidentiality or breaches of trade secrets; and/or claims for violation of any federal, state or other governmental law, statute, regulation or ordinance, and whether based on statute or common law; and (ii) all those claims whether made against CSHC, any of its subsidiary or affiliated entities or its individual officers or directors in an official or personal capacity.

 

(c) Claims Not Covered. Claims covered by this Agreement do not include: (i) a claim for workers' compensation benefits; (ii) a claim for unemployment compensation benefits; (iii) a claim under the National Labor Relations Act (NLRA), as amended; and (iv) a claim by CSHC for injunctive or other equitable relief, including without limitation claims for unfair competition and the use or unauthorized disclosure of trade secrets or confidential information, for which CSHC may seek and obtain relief from a court of competent jurisdiction.

 

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(d) Internal Efforts. As a prerequisite for submitting an employment dispute to mediation and, if necessary, arbitration, both you and CSHC agree to make good faith efforts at resolving any dispute internally on an informal basis through CSHC management channels appropriate to that particular dispute. Only when those internal efforts fail may an employment dispute be submitted to mediation and, if necessary, final and binding arbitration under the terms of the procedure below.

 

(e) Nonbinding Mediation. If efforts at informal resolution fail, disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party. Mediation shall be conducted and administered by the American Arbitration Association (AAA) under its Employment Mediation Rules, which are incorporated into this procedure by reference. Such mediation shall be conducted on a confidential basis.

 

(f) Binding Arbitration. If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final binding confidential arbitration under the Procedure. The arbitration will be conducted under the Employment Dispute Resolution Rules of the AAA. The arbitrator shall have the authority to allow for appropriate discovery and exchange of information before a hearing, including, but not limited to, production of documents, information requests, depositions and subpoenas.

 

(g) Procedure. Any conflict between the rules and procedures set forth in the AAA rules and those set forth in this Agreement shall be resolved in favor of those in this Agreement. The burden of proof at an arbitration shall at all times be on the party seeking relief. In reaching a decision, the arbitrator shall apply the governing substantive law applicable to the claims, causes of action and defenses asserted by the parties as applicable. The arbitrator shall have the power to award all remedies that could be awarded by a court or administrative agency in accordance with the governing and applicable substantive law, including, without limitation, Title VII, the Age Discrimination in Employment Act, the Family and Medical Leave Act.

 

(h) Time. The aggrieved party must give written notice of any claim to the other party as soon as possible after the aggrieved first knew or should have known of the facts giving rise to the claim. The written notice shall be provided pursuant to Section 15 below, and shall describe the nature of all claims asserted and the facts upon which those claims are based.

 

(i) Location. Mediation or arbitration conducted under this Agreement shall take place in Fairfax, Virginia unless an alternative location is chosen by the mutual agreement of the Parties. The arbitrator shall render a decision and award within 30 days after the close of the arbitration hearing or at any later time on which the Parties may agree. The award shall be in writing and signed and dated by the arbitrator and shall contain express findings of fact and the basis for the award.

 

(j) Cost. The Parties agree to share equally the AAA administrative fees, mediator’s fees and expenses, and the arbitrator's fees and expenses. Each Party shall be solely responsible for its own costs and attorneys’ fees.

 

14. Survival. The provisions of Sections 7 through 24, along with any other provisions necessary or desirable to accomplish the purposes of such sections, shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. The obligation of CSHC to make payments to the Employee under Section 7(b) hereof, and the Employee’s right to retain the same, are expressly conditioned upon the Employee’s continued full performance of his obligations hereunder and under the Merger Agreement. Upon termination by either the Employee or CSHC, all rights, duties and obligations of the Employee and CSHC to each other shall cease, except as otherwise expressly provided in this Agreement and the Merger Agreement.

 

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15. Notices. All notices, requests, demands, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if and when: (i) delivered personally, (ii) three (3) business days after being mailed by first class certified mail, return receipt requested, postage prepaid, or (iii) one (1) business day after being sent by a nationally recognized overnight courier service, delivery charges prepaid, or (iv) one (1) business day after being sent by email or facsimile to the other Party at the addresses stated herein or to such other address of which either Party may give notice to the other in accordance with this Section.

 

If to CSHC: 

General Counsel

ComSovereign Holding Corp.

5000 Quorum Drive STE 400

Dallas, TX 75254

Attn: Kevin M. Sherlock,

General Counsel

Email: KSherlock@COMSovereign.com

 

With a copy to:  

Pryor Cashman LLP

7 Times Square

New York, New York 10036

Attention: Eric M. Hellige

Facsimile: (212) 798-6380

Email: ehellige@pryorcashman.com

 

If to the Employee:

Keith Kaczmarek

3855 South Atlantic Ave, #1203A

Daytona Beach Shores, FL 32118

Email: kk@kacz1.com

 

16. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

17. Complete Agreement. This Agreement embodies the complete agreement and understanding among the Parties with respect to the specific subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof. With deemed effect immediately prior to the Effective Time of the Merger (as defined in the Merger Agreement), any existing employment or consulting agreement between the Employee and VNC automatically will be terminated and of no further force or effect.

 

18. Representation. Employee irrevocably confirms, agrees, and acknowledges for the benefit of Orrick (which is an express and intended third party beneficiary hereof) that: (a) Orrick, Herrington & Sutcliffe LLP (“Orrick”) is counsel to solely VNC in connection with the Merger Agreement and related matters; (b) Orrick has reviewed this Agreement, the Merger Agreement, and various other agreements, instruments and matters (collectively “Merger Matters”) at the request of, and for the sole benefit of, VNC; (c) that Orrick has not represented or advised Employee in his personal capacity in connection with this Agreement, the Merger Agreement, any options or equity awards or matters tied to the Merger, or any other Merger Matters; and (d) Employee has had (whether or not he has elected to do so) the opportunity to engage and consult counsel of his choosing in connection with this Agreement, the Merger, the Merger Agreement, and any other Merger Matters or any other agreements, matters, or transactions..

 

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19. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by the Employee, CSHC and their respective heirs, successors and permitted assigns. The Employee may not assign his rights or delegate his obligations hereunder. CSHC may assign all or any part of this Agreement to any third party that shall (i) acquire CSHC, or any parent of CSHC, in a merger, (ii) acquire a majority of the capital stock of CSHC, or any parent of CSHC, or (iii) purchase all or substantially all of CSHC’s assets (or all or substantially all of the assets of the portion of CSHC’s business that the Employee’s employment was most associated with), provided, however, that in each case CSHC shall provide the Employee with written notice thereof.

 

20.  Key Man Insurance. While the Employee is employed by CSHC or any of its subsidiaries, CSHC may at any time effect insurance on the Employee’s life and/or health in such amounts and in such form as CSHC may in its sole discretion decide. Except as provided under the applicable terms of a policy or other arrangement, the Employee will not have any interest in such insurance, but shall, if CSHC requests, submit to such medical examinations, supply such information and execute such documents as may be required in connection with, or so as to enable CSHC to effect, such insurance.

 

21. Choice of Law; Jurisdiction. This Agreement shall be governed, construed and enforced in accordance with the laws of the Commonwealth of Virginia.

 

22. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the express, prior, written consent of CSHC and the Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

23. Counterparts. This Agreement may be executed and delivered in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument representing the agreement of the parties hereto.

 

24. Electronic Document. A copy of this Agreement or signature page hereto signed and transmitted by facsimile machine, as an attachment to an e-mail or by DocuSign or other electronic means (collectively an “Electronic Document”), shall be treated as an original document. The signature of any party thereon, for purposes hereof, is to be considered an original signature, and the Electronic Document transmitted is to be considered to have the same binding effect as an original signature on an original document. No party shall raise the use of an Electronic Document or the fact that a signature was transmitted through the use of a facsimile machine, e-mail or other electronic means as a defense to the enforcement of this Agreement or any amendment or other document executed in compliance with this Agreement.

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. 

 

 

COMSOVEREIGN HOLDING CORP.:

     
  By: /s/ Daniel L. Hodges
  Name:  Daniel L. Hodges
  Title: Chief Executive Officer
     
  EMPLOYEE:
   
  /s/ Keith Kaczmarek
  Keith Kaczmarek

 

 

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EX-99.1 6 ea123910ex99-1_comsovereign.htm PRESS RELEASE, DATED JULY 7, 2020, ANNOUNCING THE COMPANYS COMPLETION OF THE ACQUISITION OF VIRTUAL NETWORK COMMUNICATIONS INC.

Exhibit 99.1

 

 

COMSovereign Holding Corp. Extends 4G LTE/5G Networking Solution Portfolio with Closing of Virtual Network Communications, Inc. Acquisition

 

- Addition of Virtualized Network Core and Advanced Radio Technology Can Dramatically Reduce Costs of Telecom Backbone for Tier-One Global Commercial and Government Customers -

 

DALLAS, TX – July 7, 2020 – COMSovereign Holding Corp. (OTCQB: COMS) (“COMSovereign” or the “Company”), a U.S.-based pure-play developer of 5G connectivity and data transmission systems, announced today that it has completed the acquisition of Virtual Network Communications, Inc. (“VNC”), a developer of fixed and mobile broadband communications solutions for public and private wireless networks operated by commercial, enterprise, government and defense customers.

 

Terms of the transaction include total consideration of approximately $19 million consisting of $3 million in cash - provided primarily by management members - and the issuance of common stock. The closing of this latest acquisition significantly expands COMSovereign’s IP and product portfolio to include telecom network access systems including both 4G LTE/Advanced and 5G capable radio equipment. Additionally, VNC has virtualized and patented an entire LTE Advanced network core solution that has the potential to dramatically reduce the costs of traditional telecom network backbone equipment. VNC has also developed and is currently selling a rapidly deployable LTE network system that is both man-portable and can be combined with the tethered aerostats and drone systems produced by COMSovereign’s Drone Aviation subsidiary to provide telecom network access in nearly any location in minimum time.

 

Chairman and CEO of COMSovereign Holding Corp., Dan Hodges, stated, “Supported by the direct investment of our senior management team, we have completed the acquisition of VNC. VNC’s proprietary virtualized core technology significantly advances our ability to provide network operators with a complete range of wireless technologies from the network edge to backhaul. This enables operators to quickly accelerate their strategic 4G LTE and 5G network modernization and upgrade programs. We look forward to working with the talented team at VNC to capitalize on the many synergies we see between our technologies and customers across commercial, government and military sectors.”

 

“VNC was founded on the vision that today’s radio networks would need to fundamentally change if they were to truly address the realities of the modern, data-driven world. Whether it’s access of devices for the Internet of Things or the proliferation of over-the-top streaming video services, yesterday’s network architectures must evolve if they are to succeed in the future,” said Mohan Tammisetti, founder & CEO of Virtual Network Communications, Inc. “We are excited to leverage the innovative technology and deep expertise of COMSovereign as we continue to work together with our growing list of customers to revolutionize the concept of the wireless radio network.”

 

 

 

Virtual Network Communications produces deployable broadband communications equipment and services designed to support advanced wireless networks. Its systems can provide mission critical communications including instant deployable Micro LTE solutions suitable for rapid deployment of Tactical LTE networks, LTE small cell technology, Customer Premises Equipment (CPE) for fixed broadband LTE installations and advanced, low altitude/high altitude airborne LTE communications.

 

For more information about COMSovereign, please visit www.COMSovereign.com and connect with us on Facebook and Twitter.

 

About COMSovereign Holding Corp.

COMSovereign Holding Corp. (OTCQB: COMS) has assembled a portfolio of communications technology companies with combined capabilities and the objective of enabling connectivity across the entire data transmission spectrum. Through strategic acquisitions and organic research and development efforts, COMSovereign is seeking to become a U.S.-based pure-play communications provider able to provide LTE Advanced and 5G-NR telecom solutions to network operators and enterprises. For more information about COMSovereign, please visit www.COMSovereign.com or view the reports that it files with or furnishes to the Securities and Exchange Commission (the “SEC”) at www.sec.gov, including the Risk Factors included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as information in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

About Virtual Network Communications, Inc.

Virtual Network Communications, Inc. designs, develops, manufactures, markets, and supports a line of network products for wireless network operators, mobile virtual network operators (MVNO), cable TV system operators, and government and business enterprises that enable new sources of revenue and reduce capital and operating expenses. Our vision is to reinvent how wireless networks service mission critical communications for Public Safety, Homeland Security, Department of Defense and commercial Private Network users. We envision the future of expansive virtualized MICRO networks, without expensive Terrestrial based Radio Towers and Building installations.

 

Forward-Looking Statements

Certain statements in this press release that are not historical facts are forward-looking statements that reflect management’s current expectations, assumptions, and estimates of future performance and economic conditions, and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “believe,” “expects,” “may,” “looks to,” “will,” “should,” “plan,” “intend,” “on condition,” “target,” “see,” “potential,” “estimates,” “preliminary,” or “anticipates” or the negative thereof or comparable terminology, or by discussion of strategy or goals or other future events, circumstances, or effects. Moreover, forward-looking statements in this release include, but are not limited to, the impact of the current COVID-19 pandemic, which may limit access to the Company’s facilities, customers, management, support staff and professional advisors, and to develop and deliver advanced voice and data communications systems. The Company’s forward-looking statements could be affected by many factors, including, but not limited to, the Company’s ability to integrate the operations of VNC, demand for the Company’s products and services, economic conditions in the U.S. and worldwide, and the Company’s ability to recruit and retain management, technical, and sales personnel. Further information relating to factors that may impact the Company’s results and forward-looking statements are disclosed in the Company’s filings with the SEC. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

 

Contacts:

Investor Relations for COMSovereign Holding Corp.: or Dave Gentry
Steve Gersten RedChip Companies Inc.
813-334-9745 407-491-4498
investors@comsovereign.com Dave@redchip.com

 

and

 

Media Relations for COMSovereign Holding Corp.:

Michael Glickman

MWGCO, Inc.

917-397-2272

mike@mwgco.net

 

 

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