EXCHANGE AGREEMENT
EXCHANGE
AGREEMENT
EXCHANGE
AGREEMENT,
dated
as of August 17, 2007 (this “Agreement”),
between Advanced Communications Technologies, Inc. (the “Company”)
and
the stockholders identified on Schedule
1
hereto
(each a “Stockholder”
and,
collectively, the “Stockholders”).
The
Company and each Stockholder may each be referred to herein as a “Party”
or,
collectively, as the “Parties.”
Certain capitalized terms that are used but not otherwise defined in this
Agreement are defined in Article IV.
WHEREAS,
the
Company is entering into a Stock Purchase Agreement (the “Purchase
Agreement”)
on the
date hereof with ACT-DE, LLC (the “Investor”)
whereby the Investor will purchase preferred stock of the Company to be
designated as Series C Convertible Preferred Stock, par value $0.01 per share
(the “Series
C Shares”);
WHEREAS,
the
Investor’s purchase of the Series C Shares (the “Investor
Transaction”)
is
conditioned upon the Company entering into the transactions set forth herein;
WHEREAS,
the
Stockholders hold all of the issued and outstanding shares of (i) Series A
Convertible Preferred Stock of the Company, par value $0.01 per share (the
“Series
A Preferred Stock”),
(ii)
Series A-1 Convertible Preferred Stock of the Company, par value $0.01 per
share
(the “Series
A-1 Preferred Stock”)
and
(iii) Series B Convertible Preferred Stock of the Company, par value $0.01
per
share (the “Series
B Preferred Stock”,
and
collectively with the Series A Preferred Stock and the Series A-1 Preferred
Stock, the “Transferred
Shares”);
and
WHEREAS,
pursuant
to the terms hereof, the Stockholders desire to exchange, in the manner set
forth on Schedule
1,
all of
the Transferred Shares for 8,412.206667 shares (the “Series
A-2 Shares”)
of
Series A-2 Convertible Preferred Stock of the Company, par value $0.01 per
share, having the rights and privileges set forth in the certificate of
designation attached as Exhibit
A
(the
“Exchange
Shares”).
NOW,
THEREFORE,
in
consideration of the mutual promises and agreements set forth herein, the
Parties agree as follows:
ARTICLE
I
EXCHANGE
AND OTHER TRANSACTIONS
1.1. Exchange
of Shares.
Effective immediately upon the consummation of the Investor Transaction, and
subject to all of the terms and conditions hereof, (i) each Stockholder hereby
assigns and transfers to the Company, free and clear of any Liens, all of the
Transferred Shares owned by such Stockholder as set forth on Schedule
1
hereto,
and (ii) in exchange therefor, the Company hereby agrees to issue to each
Stockholder, free and clear of any Liens, and each Stockholder hereby agrees
to
accept from the Company, the number of Exchange Shares set forth opposite such
Stockholder’s name on Schedule
1
hereto.
All such Transferred Shares are hereby cancelled and shall no longer be issued
and outstanding shares of the Company.
1.2. Consent.
The
Stockholder hereby (i) consents to the Investor Transaction, and (ii) waives
any
and all rights the Stockholder may have against the Company or the Investor
with
respect to the Investor Transaction or otherwise.
ARTICLE
II
REPRESENTATIONS
& WARRANTIES OF THE COMPANY
In
order
to induce the Stockholders to enter into this Agreement and to accept the
Exchange Shares, the Company hereby represents and warrants to the Stockholders
that as of the date hereof:
2.1. Organization
and Good Standing.
The
Company is duly organized and existing in good standing in its jurisdiction
of
incorporation and is duly qualified as a foreign corporation and authorized
to
do business in all other jurisdictions in which the nature of its business
or
property makes such qualification necessary. The Company has the corporate
power
to own its properties and to carry on its business as now conducted and as
proposed to be conducted.
2.2. Authorization.
The
execution, delivery and performance by the Company of this Agreement, and the
issuance and exchange by the Company of the Exchange Shares hereunder, (a)
is
within the Company’s corporate power and authority, (b) has been duly authorized
by all necessary corporate proceedings, (c) does not conflict with or result
in
any breach of any provision of the Articles of Incorporation or Bylaws of the
Company or any agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound or the creation of any
Lien
upon any of the property, and (d) does not require any filing, consent or
approval pursuant to the Charter or bylaws of the Company or any law or
regulation (including, without limitation, any applicable environmental
restrictive transfer law or regulation) or order, judgment, writ, injunction,
license, permit, agreement or instrument.
2.3. Enforceability.
The
execution and delivery by the Company of this Agreement, and the issuance and
exchange by the Company of the Exchange Shares hereunder, will result in legally
binding obligations of the Company, enforceable against the Company in
accordance with the terms and provisions hereof, except to the extent that
(a)
such enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of
creditors’ rights and (b) the availability of the remedy of specific performance
or injunctive or other equitable relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
2.4. Capitalization.
As of
the Closing Date, and after giving effect to the Investor Transaction and the
designation, exchange and issuance of the Exchange Shares, the authorized
capital of the Company consists of (i) 5,000,000,000 shares of Common Stock,
no
par value per share (the “Common
Stock”),
of
which 4,997,711,570 shares are issued and outstanding on the date hereof, (ii)
25,000 shares of Preferred Stock, $0.01 par value per share, of which (A) no
shares of Preferred Stock designated as Series A Preferred Stock, $0.01 par
value per share, are issued and outstanding on the date hereof, (B) no shares
of
Preferred Stock designated as Series A-1 Preferred Stock, $0.01 par value per
share, are issued and outstanding on the date hereof, (C) no shares of Preferred
Stock designated as Series B Preferred Stock, $0.01 par value per share, are
issued and outstanding on the date hereof, (D) 8,412.206667 shares of Preferred
Stock designated as Series A-2 Preferred Stock, $0.01 par value per share,
are
issued and outstanding on the date hereof, (E) 1,000 shares of Preferred Stock
designated as Series C Preferred Stock, $0.01 par value per share, are issued
and outstanding on the date hereof and (F) 1,000 shares of Preferred Stock
designated as Series D Preferred Stock, $0.01 par value per share, are issued
and outstanding on the date hereof. Except for this Agreement and as described
in the accompanying Disclosure Statement (a) there are no outstanding or
authorized subscriptions, warrants, options or other agreements or rights of
any
kind to purchase or otherwise receive or be issued, or securities or obligations
of any kind convertible into, any capital stock or any other security of the
Company and (b) there are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company.
2
2.5 Holding
Period for Exchange Shares. The
Company agrees that, assuming (A) no change in facts and circumstances and
no
contrary law or any rule, regulation or instruction of or from the U.S.
Securities and Exchange Commission (the “SEC”),
(B)
that the Stockholder is not, at any relevant time, an “affiliate” of the Company
as defined in Securities Act Rule 144(a)(1), (C) the Stockholder’s holding
period for the shares of Series A Preferred Stock as of the date of the exchange
contemplated hereby, as determined pursuant to Securities Act Rule 144(d),
is at
least two years, and (D) that the Stockholder provides a written representation
to the Company and its counsel that it is not an affiliate of the Company and
has not been an affiliate of the Company during the preceding 3 months, as
well
as other representations customarily given in connection with the removal of
restrictive legends under Rule 144(k), the Company will rely upon the opinion
provided to it by Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx, LLC contemporaneous with
consummation of the transactions contemplated hereby, that the holding period
for the Series A-2 Shares issued to each Stockholder in exchange for such
Stockholder’s Transferred Shares will include the holding period for such
Transferred Shares, and that the Company may issue such Series A-2 Shares
without restrictive legend. Based on such reliance, the Company will instruct
its transfer agent to issue the Series A-2 shares without restrictive legend.
Furthermore, assuming (i) no change in relevant facts and circumstances and
no
contrary law or rule, regulation or instruction of or from the SEC, (ii) that
the Stockholder is not, at any relevant time, an “affiliate” of the Company as
defined in Securities Act Rule 144(a)(1) and (iii) that the Stockholder provides
a written representation at the time of such conversion that it is not an
affiliate of the Company and has not been an affiliate within the preceding
three month period, as well as other representations customarily given in
connection with the removal of restrictive legends under Rule 144(k), the
Company will rely on the opinion provided to it by Xxxxxx Xxxxxxx Xxxxxx &
Xxxxxxx, LLC contemporaneous with consummation of the transactions contemplated
hereby that no restrictive legend would be required on shares of the Company’s
Common Stock, no par value (the “Common
Stock”),
issued upon conversion of those Series A-2 Shares previously issued to the
Stockholders in exchange for their shares of Series A Preferred Stock.
2.6 Charter
Amendment to Increase Authorized Common Stock.
Promptly following the date hereof, the Company shall use all reasonable
commercial efforts to cause the Articles of Incorporation of the Company to
be
amended in order to increase the authorized number of shares of Common Stock
to
an amount reasonably sufficient for the conversion of Series A-2 Preferred
Stock
into Common Stock at the Series A-2 Conversion Rate (as defined in the
Certificate of Designations of the Series A-2 Preferred Stock), including the
recommendation and submission of a proposal to the stockholders of the Company
for the approval of such amendment.
ARTICLE
III
REPRESENTATIONS
& WARRANTIES OF THE STOCKHOLDER
As
a
material inducement for the Company to enter into this Agreement and consummate
the transactions contemplated hereby, each Stockholder hereby represents,
warrants and acknowledges to the Company on the date hereof as
follows:
3.1. Organization
and Good Standing.
In the
case of a Stockholder that is not a natural Person, (i) such Stockholder is
duly
organized and existing in good standing in its jurisdiction of incorporation
or
formation, and (ii) such Stockholder has the corporate, limited liability
company, or partnership power to own its properties and to carry on its business
as now conducted and as proposed to be conducted.
3.2. Authorization.
In the
case of a Stockholder that is not a natural Person, the execution, delivery
and
performance by such Stockholder of this Agreement (a) is within such
Stockholder’s corporate, limited liability company, or partnership power and
authority, (b) has been duly authorized by all necessary corporate, limited
liability company, or partnership or other proceedings, (c) does not conflict
with or result in any breach of any provision of or the creation of any Lien
upon any of the property of such Person, and (d) does not require any filing,
consent or approval pursuant to the Charter or bylaws of such Person or any
law,
regulation, order, judgment, writ, injunction, license, permit, agreement or
instrument. In the case of a Stockholder that is a natural Person, such
Stockholder has the legal capacity to execute and deliver this Agreement, to
perform his or her obligations under this Agreement, and to consummate the
transactions to which he or she is a party.
3
3.3. Enforceability.
The
execution and delivery by the Stockholder of this Agreement will result in
legally binding obligations of the Stockholder, enforceable against such
Stockholder in accordance with the terms and provisions hereof, except to the
extent that (a) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the
enforcement of creditors’ rights and (b) the availability of the remedy of
specific performance or injunctive or other equitable relief is subject to
the
discretion of the court before which any proceeding therefor may be
brought.
3.4. Title
to Shares.
The
Stockholder has, and upon the consummation of the transactions contemplated
hereby, the Company will have, sole record and beneficial ownership of the
number of shares of the Transferred Shares set forth opposite such Stockholder’s
name on Schedule
1
hereto,
free and clear of any Liens.
3.5. Transferability.
The
Stockholder (i) understands that the Exchange Shares have not been registered
under the Securities Act and cannot be sold unless subsequently registered
under
the Securities Act or an exemption from such registration is available, (ii)
is
aware that the Exchange Securities may not be sold pursuant to Rule 144 adopted
under the Securities Act unless certain conditions thereunder are met, and
(iii)
acknowledges that any transfer of Exchange Shares (or any common stock issued
upon the conversion thereof) shall be subject, shall be subject, at the
Company’s discretion, to the Company’s receipt of an opinion of counsel,
reasonably acceptable to the Company and its transfer agent in form and
substance and as to the identity of such counsel, that such transfer may occur
without registration under the Securities Act.
3.6. Accredited
Investor Status.
The
Stockholder is an “accredited investor” as such term is described on
Exhibit
B
hereto
and defined in Rule 501 under the Securities Act.
3.7. Affiliate
Status.
The
Stockholder is not an “Affiliate” of the Company and has not been an “Affiliate”
of the Company at any time during the three months preceding the date hereof.
As
used in this Agreement “Affiliate” is any person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company, and for the purpose of this definition control
means the right or power to direct or substantially influence the business
affairs or actions of the referent person, whether through the ownership of
voting securities, contract rights or otherwise
3.8. Information
and Reliance.
(a) The
Stockholder acknowledges, agrees and confirms that (i) except as set forth
in
Article II of this Agreement, neither the Company nor any of its Affiliates,
representatives or agents makes, or has made or given, any oral or written
representations, warranties, certifications or opinions of any kind, express
or
implied, with respect to (A) the Company, any of its Affiliates or any of its
or
their business, financial condition, risks or prospects, (B) the Exchange
Shares, (C) the accuracy or completeness of any information provided to the
Stockholder related to the Company, its Affiliates, or the Exchange Shares
or
(D) any other matters relating to the Company, its Affiliates, or the Exchange
Shares, (ii) in making its decision to accept the Exchange Shares, it has relied
solely on (A) its own independent review, investigation and analysis of the
business, financial condition, risks and prospects of the Company and its
Affiliates and (B) the representations and warranties of the Company set forth
in Article II of this Agreement, and (iii) it shall have no recourse against
the
Company or any of its Affiliates, representatives and agents with respect to
any
claims, damages or losses arising from or related to the Exchange Shares or
its
purchase thereof pursuant to this Agreement (other than in the case of a breach
of the Company’s representations and warranties set forth in Article II of this
Agreement). Except as set forth in Article II of this Agreement, the
Stockholder, on behalf of itself and its Affiliates, representatives and agents,
expressly disclaims any and all representations, warranties, certifications
or
opinions of any kind or nature expressed or implied (including, but not limited
to, any relating to the business, financial condition, risks or prospects of
the
Company or any of its Affiliates).
4
(b) The
Stockholder acknowledges that the Company does not currently have a sufficient
number of shares of authorized but unissued shares of its Common Stock for
the
conversion of the Transferred Shares into Common Stock and will not have a
sufficient number of authorized but unissued shares of Common Stock for the
Conversion of the Exchange Shares into Common Stock.
ARTICLE
IV
RELEASE
4.1. In
exchange for the Exchange Shares, each Stockholder does hereby, on behalf of
such Stockholder and such Stockholder’s agents, representatives, attorneys,
assigns, heirs, executors and administrators (collectively, such Stockholder’s
“Stockholder
Parties”)
RELEASE AND FOREVER DISCHARGE the Company and its Subsidiaries and their
respective Affiliates, parents, joint ventures, officers, directors,
shareholders, interest holders, members, managers, employees, consultants,
representatives, successors and assigns, heirs, executors and administrators
(collectively, the “Company Parties”)
from
all causes of action, suits, debts, claims and demands whatsoever known or
unknown, at law, in equity or otherwise, which such Stockholder or any of its
Stockholder Parties ever had, now has, or hereafter may have, arising from
or
relating in any way to such Stockholder’s status as a stockholder, investor,
lender or debtor of the Company on or prior to the date hereof, any agreement
between such Stockholder and the Company or any Affiliate of the Company entered
into prior to the date hereof, the Stockholder’s purchase of any portion of the
Company’s capital stock prior to the date hereof, any claims for reasonable
attorneys’ fees and costs, and including, without limitation, any claims
relating to fees, penalties, liquidated damages, and indemnification for losses,
liabilities and expenses and any claims or rights under the Investment Agreement
dated May 28, 2004, and the related Registration Rights Agreement, but not
including such claims to payments and other rights provided to such Stockholder
Party under this Agreement. The release contained in this Section 4.1 is
effective without regard to the legal nature of the claims raised and without
regard to whether any such claims are based upon tort, equity, or implied or
express contract. Except as specifically provided herein, it is expressly
understood and agreed that this release shall operate as a clear and unequivocal
waiver by each Stockholder of any such claim whatsoever.
4.2. Each
Stockholder, on behalf of itself and its Stockholder Parties, agrees never
to
bring (or cause or permit to be brought) any action or proceeding against the
Company or any other Company Party regarding the Stockholder’s status as
stockholder, investor, lender or debtor of the Company on or prior to the date
hereof, agreements with the Company or any Affiliate of the Company that relate
to the Stockholder’s status as a stockholder, investor, lender or debtor of the
Company entered into prior to the date hereof, or any claim released pursuant
to
Section 4.1. The Stockholder agrees that in the event that any claim, suit
or
action released pursuant to Section 4.1 shall be commenced by it or any of
such
Stockholder’s Stockholder Parties against the Company or any other Company
Party, the release contained in Section 4.1 shall constitute a complete defense
to any such claim, suit or action so instituted.
5
4.3. Each
Stockholder hereby covenants and agrees, on behalf of such Stockholder and
its
Stockholder Parties, that neither such Stockholder nor any of such Stockholder’s
Stockholder Parties will encourage any Person to file a lawsuit, claim or
complaint against the Company or any other Company Party relating to the claims
released pursuant to Section 4.1. Each Stockholder hereby covenants and agrees,
on behalf of such Stockholder and its Stockholder Parties, that neither such
Stockholder nor any of its Stockholder Parties will assist any Person who files
or has filed a lawsuit, claim, or complaint against the Company or any other
Company Party relating to the claims released pursuant to Section 4.1 unless
such Stockholder or any of its Stockholder Parties is required to render such
assistance pursuant to a lawful subpoena or other legal obligation. If any
Stockholder or any of such Stockholder’s Stockholder Parties is served with any
such legal subpoena or becomes subject to any such legal obligation, such
Stockholder shall provide prompt written notice to the Company thereof and
enclose a copy of the subpoena and any other documents describing the legal
obligation with such written notice.
4.4. The
Parties agree and acknowledge that the release of any asserted or unasserted
claims against the Company and the other Company Parties pursuant to Section
4.1
are not and shall not be construed to be an admission of any violation of any
Federal, state or local statute or regulation, or of any duty owed by the
Company or any of the other Company Parties to the Stockholders.
4.5. Each
Stockholder acknowledges that there is a risk that after signing this Agreement
it may discover losses or claims that are released under this Agreement, but
that are presently unknown to it. Each Stockholder assumes this risk and
understands that this release shall apply to any such losses and claims. Each
Stockholder understands that this Agreement includes a full and final release
covering all known and unknown, suspected or unsuspected injuries, debts, claims
or damages which have arisen or may have arisen from any matters, acts,
omissions or dealings released in Section 4.1 above. Each Stockholder
acknowledges that by accepting the Exchange Shares and other benefits set forth
in this Agreement, it assumes and waives the risk that the facts and the law
may
be other than as such Stockholder understands them to be.
4.6. Each
Stockholder certifies and acknowledges that such Stockholder:
(i) has
read
the terms of this Agreement and the release provided hereunder, and that such
Stockholder understands its terms and effects, including the fact that such
Stockholder has agreed to RELEASE AND FOREVER DISCHARGE the Company and all
other Company Parties from any legal action or other liability of any type
related in any way to the matters released pursuant to Section 4.1;
(ii) has
signed this Agreement voluntarily and knowingly in exchange for the
consideration described herein, which such Stockholder acknowledges is adequate
and satisfactory to such Stockholder; and
(iii) has
been
and is hereby advised in writing to consult with an attorney prior to signing
this Agreement.
6
ARTICLE
V
DEFINITIONS
5.1. Defined
Terms.
As used
herein, the following terms have the following respective meanings:
Affiliate.
Affiliate shall mean, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person and shall include (a) any Person who is a director or
beneficial holder of at least 10% of the then outstanding capital stock (or
partnership interests or other shares of beneficial interest) of such Person
and
Family Members of any such Person, (b) any Person of which such Person or an
Affiliate (as defined in clause (a) above) of such Person directly or
indirectly, either beneficially owns at least 10% of the then outstanding
capital stock (or partnership interests or other shares of beneficial interest)
or constitutes at least a 10% equity participant, (c) any Person of which an
Affiliate (as defined in clause (a) above) of such Person is a partner,
director, officer or executive employee, and (d) in the case of a specified
Person who is an individual, Family Members of such Person.
Business
Day.
Business Day shall mean any day on which banking institutions in New York,
New
York are open for the transaction of banking business.
Charter.
Charter
shall include the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement, limited liability company
operating agreement, or articles or other organizational document of any Person
other than an individual, each as from time to time amended, restated or
otherwise modified.
Commission.
Commission shall mean the Securities and Exchange Commission.
Family Members.
Family
Members shall mean, with respect to any individual, any Related Person or Family
Trust of such individual.
Family Trust.
Family
Trust shall mean, with respect to any individual, any trust created for the
benefit of one or more of such individual’s Related Persons and controlled by
such individual
Lien.
Lien
shall mean any encumbrance, mortgage, pledge, lien, charge or other security
interest of any kind upon any property or assets of any character, or upon
the
income or profits therefrom.
Person.
Person
shall mean an individual, partnership, corporation, association, limited
liability company, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision
thereof.
Related Persons.
Related
Persons shall mean, with respect to any individual, such individual’s parents,
spouse, children and grandchildren.
Securities
Act.
Securities Act shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
5.2. Terms
Defined Elsewhere in this Agreement.
For
purposes of this Agreement, the following terms have meanings set forth in
the
sections indicated:
7
|
Term
|
Section
|
|
Agreement
|
Preamble
|
|
Company
|
Preamble
|
|
Company
Parties
|
4.1
|
|
Exchange
Shares
|
Recitals
|
|
Investor
|
Recitals
|
|
Investor
Transaction
|
Recitals
|
|
Party
|
Preamble
|
|
Purchase
Agreement
|
Recitals
|
|
Series
A Preferred Stock
|
Recitals
|
|
Series
A-1 Preferred Stock
|
Recitals
|
|
Series
A-2 Exchange Shares
|
Recitals
|
|
Series
A-2 Shares
|
Recitals
|
|
Series
B Preferred Stock
|
Recitals
|
|
Series
C Shares
|
Recitals
|
|
Stockholder
|
Preamble
|
|
Stockholder
Parties
|
4.1
|
|
Transferred
Shares
|
Recitals
|
ARTICLE
VI
CERTAIN
COVENANTS
6.1. Confidential
Information.
Any and
all confidential or proprietary information disclosed or made available by
the
Company to each Stockholder in connection with or as a result of the
negotiations leading to the execution of this Agreement, or in furtherance
thereof, shall remain confidential and the property of the Company and shall
not
be disclosed by such Stockholder and its employees, advisors, and agents, except
to the extent that such Party must disclose such information to comply with
applicable law. Each Stockholder agrees not to divulge or disclose or use for
its benefit or purposes any information with respect to the Company unless
such
information has already become public. The information intended to be protected
hereby shall include, but not be limited to, financial information, customers,
sales representatives, and anything else having an economic or pecuniary benefit
to the Company.
6.2. Further
Assurances.
Each
Party hereto will cooperate with the other Parties hereto and execute such
further instruments and documents as any Party shall reasonably request to
carry
out the transactions contemplated by this Agreement.
8
ARTICLE
VII
GENERAL
7.1. Term.
This
Agreement shall immediately expire if the Investor Transaction has not been
consummated prior to the close of business on August 31, 2007.
7.2. Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the Party to be notified;
(b)
when sent by confirmed facsimile if sent during normal business hours of the
recipient; if not, then on the next business day; (c) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (d) one Business Day after deposit with a nationally recognized
overnight courier; specifying next day delivery; with written verification
of
receipt. All communications are to be sent to the addresses set forth
below:
If
to any
Stockholder, to such Stockholder’s address set forth on Schedule
1.
If
to the
Company, to:
Advanced
Communications Technologies, Inc.
000
Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx
Facsimile:
000.000.0000
with
copies to:
Xxxxxx
Xxxxxxx Xxxxxx & Xxxxxxx, LLC
Two
Liberty Place
00
Xxxxx
00xx
Xxxxxx -
00xx
Xxxxx
Xxxxxxxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxx, Esq.
Facsimile:
215.851.8472
H.I.G.
Capital, LLC
000
Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx,
XX 00000
Attention:
Xxxx Xxxxx and Xxxxxxx Xxxxx
Facsimile:
267.207.2733
and
Xxxxxxx
XxXxxxxxx LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx X. Xxxxxxxx, Esq.
Fax:
000.000.0000
7.3. Expenses.
The
Company shall pay all transfer and sales taxes payable in connection with the
exchange of his, her or its Exchange Shares. All expenses of the preparation,
execution and consummation of this Agreement and of the transactions
contemplated hereby, including, without limitation, attorneys’, accountants’ and
outside advisers’ fees and disbursements, shall be borne by the Party incurring
such expenses.
9
7.4. Waivers;
Amendments.
(a) No
failure or delay by any Party in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No waiver of any provision of this
Agreement or consent to any departure by any Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No provision of this Agreement
may
be waived, amended or otherwise modified except pursuant to an agreement or
agreements in writing entered into by all of the Parties.
7.5. Successors
and Assigns.
Neither
this Agreement nor any of the rights, interests or obligations hereunder may
be
assigned by any of the Parties, in whole or in part (whether by operation of
law
or otherwise), without the prior written consent of the other Parties, and
any
attempt to make any such assignment without such consent shall be null and
void.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to
the benefit of and be enforceable by the Parties and their respective successors
and assigns. Nothing in this Agreement, expressed or implied, shall be construed
to confer upon any Person (other than the Parties) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
7.6. Survival.
All
covenants, agreements, representations and warranties made by the Parties herein
and in the other instruments delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the other Parties
and
shall survive the execution and delivery of this Agreement.
7.7. Counterparts;
Integration.
This
Agreement may be executed in counterparts (and by different parties hereto
on
different counterparts), each of which shall constitute an original, but all
of
which when taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page of this Agreement by facsimile shall
be
effective as delivery of a manually executed counterpart of this Agreement.
This
Agreement constitutes the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter
hereof.
7.8. Severability.
Any
provision of this Agreement held to be invalid, illegal or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
7.9. Governing
Law; Jurisdiction.
(a)
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY
CONFLICTS OF LAW PROVISION THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANY
OTHER JURISDICTION).
(b) Each
of
the Parties hereby irrevocably and unconditionally submits, for itself and
its
property, to the nonexclusive jurisdiction of the Supreme Court of the State
of
New York sitting in New York County and of the United States District Court
of
the Southern District of New York, and any appellate court from any thereof,
in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the Parties hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or,
to
the extent permitted by law, in such Federal court. Each of the Parties agrees
that a final judgment in any such action or proceeding shall be conclusive
and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
10
7.10. WAIVER
OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
7.11. Headings.
Article
and Section headings used herein are for convenience of reference only, are
not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
11
IN
WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered as of the date
and
year first above written.
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx X Xxxxxx
Title:
President and Chief Executive Officer
YA
GLOBAL INVESTMENTS, L.P.
f/k/a
Cornell Capital Partners, L.P.
By:
Yorkville Advisors, LLC, its Investment Manager
By:/s/
Xxxx Xxxxx
Name:
Xxxx Xxxxx
Title:
Senior Managing Director
/s/
Xxxxxx Xxxxxxx
Xxxxxx
Xxxxxxx
/s/
Xxxxx X. Xxxxx
Xxxxx
X.
Xxxxx
/s/Xxxx
Xxxxx Xxxxxx-Xxxxx
Xxxx
Xxxxx Xxxxxx-Xxxxx
/s/
Xxxxxxx Xxxxx
Xxxxxxx
Xxxxx
/s/Xxxxx
X Xxxxxx
Xxxxx
X
Xxxxxx
/s/
Xxxx X Xxxxxxx
Xxxx
X
Xxxxxxx
/s/
Xxxxxx X Xxxxxx
Xxxxxx
X
Xxxxxx
/s/
Xxxxxxx Xxx
Xxxxxxx
Xxx
12
/s/
Xxxxxx Xxxxxxx
Xxxxxx
Xxxxxxx
/s/
Xxxxxxx Xxxx KT Capital, L.P.
Managing
Member
13
Schedule
1
|
Stockholders
|
Exchange
Shares
|
Address
|
Transferred
Shares
|
|
YA
Global Investments, L.P.
|
4,908.87
|
2,040
|
|
|
Xxxxxx
Xxxxxxx
|
519.44
|
187
|
|
|
Xxxxx
X. Xxxxx
|
905.56
|
326
|
|
|
Xxxx
Xxxxx Xxxxxx-Xxxxx
|
1,247.78
|
449.2
|
|
|
Xxxxxxx
Xxxxx
|
11.11
|
4
|
|
|
Xxxxx
X Xxxxxx
|
104.17
|
50
|
|
|
Xxxx
X Xxxxxxx
|
156.25
|
75
|
|
|
Xxxxxx
X Xxxxxx
|
312.50
|
150
|
|
|
Xxxxxxx
Xxx
|
31.25
|
15
|
|
|
Xxxxxx
Xxxxxxx
|
104.17
|
50
|
|
|
KT
Capital, L.P.
|
111.11
|
40
|
14
Exhibit
A
See
attached
CERTIFICATE
OF DESIGNATION OF THE SERIES A-2 PREFERRED STOCK
(PAR
VALUE $0.01 PER SHARE)
OF
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.
The
undersigned, a duly authorized officer of Advanced Communications Technologies,
Inc., a Florida corporation (the “Company”),
in
accordance with the provisions of Section 607.0602 of the Florida Business
Corporation Act, does hereby certify that the following resolution was duly
adopted by the Board of Directors by unanimous written consent pursuant to
Section 607.0821 of the Florida Business Corporation Act on August 16,
2007:
RESOLVED,
that the Board has determined that it is in the best interests of the Company
to
provide for the designation and issuance of Series A-2 Convertible Preferred
Stock, par value of $0.01 per share (the “Series
A-2 Preferred Stock”),
to
consist of up to 8,413 shares, and hereby fixes the powers, designations,
preferences and relative other special rights of the shares of such Series
A-2
Preferred Stock as follows:
SECTION 1
DESIGNATION
AND RANK
1.1 Designation.
This
resolution shall provide for a series of preferred stock, the designation of
which shall be “Series
A-2 Convertible Preferred Stock”,
par
value $0.01 per share. The number of authorized shares constituting the Series
A-2 Preferred Stock is 8,413.
1.2 Rank.
With
respect to the distribution of the assets of the Company upon Liquidation (as
defined below), the Series A-2 Preferred Stock shall be (i) junior and
subordinate to the Company’s Series C Convertible Preferred Stock, par value
$0.01 per share (“Series
C Preferred Stock”),
Series D Convertible Preferred Stock, par value $0.01 per share (the
“Series
D Preferred Stock”)
and to
any other series of preferred stock designated by the Board of Directors after
the date hereof as senior to the Series A-2 Preferred Stock(collectively, the
“Senior
Stock”),
and
(ii) pari passu with the common stock of the Company, par value $0.01 per share
(the “Common
Stock”).
SECTION 2
DIVIDEND
RIGHTS
2.1 So
long
as any shares of Series A-2 Preferred Stock remain outstanding, no dividend
or
distribution whatsoever (other than distributions in connection with a
Liquidation as set forth below) shall be paid or declared in respect of the
Common Stock unless and until each of the then outstanding shares of Series
A-2
Preferred Stock has been paid aggregate dividends equal to $1.00 per share.
In
the event that the Company thereafter pays or declares any dividend on the
Common Stock, then the holders of Series A-2 Preferred Stock shall be entitled
to receive, on a pari passu basis with the holders of Common Stock, dividends
as
if such holders’ Series A-2 Preferred Stock were converted into to Common Stock
at the Series A-2 Conversion Rate (as defined below) immediately prior to the
declaration of such dividend (assuming for these purposes that the number of
authorized shares of Common Stock had been increased to an amount sufficient
for
the conversion of the Series A-2 Preferred Stock).
SECTION 3
LIQUIDATION
RIGHTS
3.1 Liquidation
Preference.
(a) Upon
any
Liquidation (as defined below), subject to the rights of the Senior Stock,
the
holders of Series A-2 Preferred Stock shall be entitled to receive out of the
assets of the Company, whether such assets are capital, surplus or earnings,
on
a pari passu basis with the holders of Common Stock, an amount per share of
Series A-2 Preferred Stock equal to the Assumed Conversion Amount. Thereafter,
no further distributions shall be made to the holders of Series A-2 Preferred
Stock in respect of such shares.
(b) For
purposes hereof:
(i) “Liquidation”
means
(A) a liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, (B) a consolidation or merger of the Company with or into any
other person(s), entity or entities in which less than a majority of the
outstanding voting power of the surviving person(s), entity or entities is
held
by persons or entities who were stockholders of the Company prior to such event
or (C) a sale or other disposition (whether in a single transaction or a series
of related transactions) of substantially all of the assets of the
Company.
(ii) “Assumed
Conversion Amount”
means
the total amount of proceeds that would be payable to the holder of a share
of
Series A-2 Preferred Stock on a Liquidation if immediately prior to such
Liquidation each outstanding share of Series A-2 Preferred Stock were converted
into a number of shares of Common Stock at the then current Series A-2
Conversion Rate (assuming for these purposes that the number of authorized
shares of Common Stock has been increased to an amount sufficient for the
conversion of the Series A-2 Preferred Stock).
SECTION 4
CONVERSION
4.1 Charter
Amendment.
Promptly following the date hereof, the Company shall use all reasonable
commercial efforts to cause the Articles of Incorporation of the Company (the
“Charter
Amendment”)
to be
amended in order to increase the authorized number of shares of Common Stock
to
an amount reasonably sufficient for the conversion of Series A-2 Preferred
Stock
into Common Stock at the Series A-2 Conversion Rate (as defined below),
including the recommendation and submission of a proposal to the stockholders
of
the Company for the approval of such amendment.
4.2 Automatic
Conversion.
Immediately upon the approval of the Charter Amendment and the effective filing
thereof with the Florida Department of State, each share of Series A-2 Preferred
Stock shall be automatically converted into 1,000,000 shares of Common (the
“Series
A-2 Conversion Rate”)
without any further action on the part of the Company or the holder
thereof.
4.3 General.
(a) Adjustments.
The
Series A-2 Conversion Rate as described in Section 4.2 above shall be adjusted
from time to time in the event of any stock split involving the Common Stock,
reclassification of the Common Stock or recapitalization involving Common Stock.
The holders of the Series A-2 Preferred Stock shall thereafter be entitled
to
receive, and (if applicable) provision shall be made therefor in any agreement
or other instrument relating to such stock split, reclassification or
recapitalization, upon conversion of the Series A-2 Preferred Stock, the kind
and number of shares of Common Stock or other securities or property (including
cash) to which such holders of Series A-2 Preferred Stock would have been
entitled if they had held the number of shares of Common Stock into which the
Series A-2 Preferred Stock was convertible immediately prior to such
reclassification or recapitalization; and in any such case appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the Series
A-2 Preferred Stock, to the end that the provisions set forth herein shall
thereafter be applicable, in the reasonable discretion of the Board, in relation
to any shares, other securities, or property thereafter receivable upon
conversion of the Series A-2 Preferred Stock. An adjustment made pursuant to
this subparagraph shall become effective at the time at which such stock split,
reclassification or recapitalization becomes effective.
(b) Procedures
for Conversion.
The
holder of any shares of Series A-2 Preferred Stock shall, upon any conversion
of
such Series A-2 Preferred Stock in accordance with this Section 4, surrender
certificates representing the Series A-2 Preferred Stock to the Company, at
its
principal office, and specify the name or names in which such holder wishes
the
certificate or certificates for shares of Common Stock to be issued. In case
such holder shall specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes (if transfer is
to
a person or entity other than the holder thereof) payable upon the issuance
of
shares of Common Stock in such name or names. As promptly as practicable, and,
if applicable, after payment of all transfer taxes (if transfer is to a person
or entity other than the holder thereof), the Company shall deliver or cause
to
be delivered certificates representing the number of validly issued, fully
paid
and nonassessable shares of Common Stock to which the holder of the Series
A-2
Preferred Stock so converted shall be entitled. Upon the automatic conversion
of
shares of Series A-2 Preferred Stock pursuant to Section 4.2 above, such shares
shall cease to constitute shares of Series A-2 Preferred Stock and shall
represent only a right to receive shares of Common Stock into which they have
been converted.
SECTION 5
VOTING
RIGHTS
5.1 Series
A-2 Voting Rights.
The
holder of each share of Series A-2 Preferred Stock will be entitled to vote
on
all matters submitted to the stockholders of the Company. Each share of Series
A-2 Preferred Stock will entitle the holder thereof to such number of votes
per
share equal to the Series A-2 Conversion Rate as of the record date of such
vote
(determined assuming that the Charter Amendment has been duly approved and
effectively filed). Except as otherwise provided herein or as required by
applicable law, the holders of shares of Series A-2 Preferred Stock shall have
the right to vote together with the holders of Common Stock and other shares
of
the Company's common and preferred stock that, by their terms, vote with the
Common Stock, as a single class, and not by separate class or series, on all
matters submitted to a vote or consent of shareholders. The Series A-2 Preferred
Stock shall have no right to vote as a separate class except as required by,
and
cannot be waived under, the Florida Business Corporation Act.
SECTION 6
MISCELLANEOUS
6.1 Headings
of Subdivisions.
The
headings of the various Sections hereof are for convenience of reference only
and shall not affect the interpretation of any of the provisions
hereof.
6.2 Severability
of Provisions.
If any
right, preference or limitation of the Series A-2 Preferred Stock set forth
herein (as this resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other rights, preferences and limitations set forth in this
resolution (as so amended), which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, the Company has caused this Certificate of Designation to
be
signed, under penalties of perjury, by Xxxxx Xxxxxx, its President.
|
Dated:
August 16, 2007
|
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.
|
|
By:
____________________________________
|
|
Exhibit
B
An
"accredited investor" generally is defined under Regulation D as any person
or
entity that, at the time of purchase of the Shares is:
|
(1)
|
a
bank or savings and loan association or other institution; a broker
or
dealer; an insurance company; and investment company registered under
the
Investment Company Act of 1940 or a business development company;
a Small
Business Investment Company licensed by the United States Small Business
Administration; a plan established and maintained by a state, its
political subdivision or any agency or instrumentality of a state
or its
political subdivision for the benefit of its employees, if such plan
has
total assets in excess of $5,000,000; an employee benefit plan within
the
meaning of the Employee Retirement Income Securities Act of 1974,
as
amended, if the investment decision is made by a plan fiduciary that
is
either a bank, savings and loan association, insurance company or
registered investment adviser, or if the employee benefit plan has
total
assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons who are accredited
investors;
|
|
(2)
|
a
private business development
company;
|
|
(3)
|
an
organization described in Section 501(c)(3) of the Internal Revenue
Service Code, a corporation, or a Massachusetts or similar business
trust
or partnership, not formed for the specific purpose of acquiring
the
securities offered, with total assets in excess of
$5,000,000;
|
|
(4)
|
a
director, executive officer or general partner of the issuer of the
securities being offered or sold, or any director, executive officer
or
general partner of a general partner of that
issuer;
|
|
(5)
|
a
natural person whose individual net worth, or joint net worth with
that
person's spouse, at the time of his or her purchase exceeds $1,000,000.
Net worth includes personal assets such as homes, vehicles, etc.;
|
|
(6)
|
a
natural person who had an individual income in excess of $200,000
in each
of the two most recent years, or joint income with that person's
spouse in
excess of $300,000 in each of those years, and who has a reasonable
expectation of reaching the same income level in the current year;
|
|
(7)
|
Any
trust, with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person;
and
|
|
(8)
|
an
entity (e.g. a corporation or LLC) in which all of the equity owners
are
accredited investors.
|
For
a
precise legal description of the term "accredited investor," prospective
Stockholders should refer to Rule 501 of Regulation D.
