Following the Closing, as additional consideration for the Avertix Transactions, eligible equity holders of Avertix will be entitled to receive their respective pro rata share of 2,970,000 Avertix Earnout Shares in two equal tranches, each contingent upon New Avertix’s achievement of the applicable stock price milestones during the Earnout Period; provided that, with respect to any holder of a unvested Exchanged Option, an award of restricted stock units for a number of Avertix Earnout Shares otherwise issuable to such holder and subject to the same vesting terms as the unvested Exchanged Option will be issued to such holder in lieu of any Avertix Earnout Shares.
At the Effective Time, a portion of the Sponsor’s Founder Shares, consisting of 1,150,000 Class B ordinary shares of the Company as of the date hereof, will become unvested and subject to vesting and forfeiture, and will thereafter become vested only upon the occurrence of the applicable Triggering Event in the same proportion as the issuance of Avertix Earnout Shares to eligible equity holders of Avertix upon the occurrence of such Triggering Event. The Sponsor Earnout Shares are subject to reduction in connection with certain additional financing permitted under the Business Combination Agreement, and will be forfeited if the applicable Triggering Events do not occur during the Earnout Period.
The foregoing description of the Business Combination Agreement and the Avertix Transactions does not purport to be complete and is qualified in its entirety by the terms and conditions of the Business Combination Agreement, a copy of which is included hereto as Exhibit 2.1 to this Quarterly Report and incorporated herein by reference.
A&R Registration Rights Agreement
At the Closing, the Company, the Sponsor, the executive officers and directors of the Company, and certain equity holders of Avertix will enter into the A&R Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted customary registration rights with respect to shares of New Avertix Common Stock.
The foregoing description of the A&R Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of A&R Registration Rights Agreement, a copy of which is included as Exhibit 10.1 to this Quarterly Report and incorporated herein by reference.
Lock-Up Arrangements
The Sponsor, holders of Placement Units, and Avertix equity holders will be subject the Lock-Up contained in the proposed bylaws of New Avertix, pursuant to which, without the prior written consent of New Avertix’s board of directors, during the period commencing on the date of the Closing and ending on the date that is the one-year anniversary of the Closing, such parties will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, such shares or other equity securities or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of New Avertix Common Stock; provided, however, (a) if at any time 151 days after the Closing, the closing share price of New Avertix Common Stock is greater than or equal to $12.50 over any 20 trading days within any consecutive 30 trading day period, then one-third (1/3) of the Lock-Up Securities shall automatically be released from the Lock-Up, and (b) if at any time 151 days after the Closing, the closing share price of the New Avertix Common Stock is greater than or equal to $15.00 over any 20 trading days within any consecutive 30 trading day period, then an additional one-third (1/3) of the Lock-Up Securities shall be released from the Lock-Up. For clarity, in the event that the Initial Price Target and/or the Second Price Target are not met, then the Lock-up Period shall terminate for all Lock-up Securities on the one-year anniversary of the Closing. The lock-up restrictions contain customary exceptions, including for estate planning transfers, affiliates transfers, certain open market transfers and transfers upon death or by will.
Pursuant to the Letter Agreement Amendment by and between the Company, its officers and directors, and the Sponsor, to be entered into at the Closing and A&R Registration Rights Agreement, the lock-up restrictions for the Sponsor At-Risk Capital Lockup Shares, the Placement Shares and Placement Warrants (each as defined in the Letter Agreement Amendment) will lapse upon the six-month anniversary of the Closing, unless the Initial Price Target or Second Price Target are achieved before such date.
The foregoing description of the Lock-Up, Letter Agreement Amendment and A&R Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of the New Avertix’s bylaws, the form of the Letter Agreement Amendment and the form of A&R Registration Rights Agreement, copies of which are included as Exhibit B to the Business Combination Agreement included as Exhibit 2.1, Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report and incorporated herein by reference.
Stockholder Support Agreement
On May 2, 2023, the Company, Avertix, and Key Avertix Holders entered into the Stockholder Support Agreements, pursuant to which the Key Avertix Holders agreed to, among other things, (i) waive any appraisal rights in connection with the Merger and (ii) consent to and vote in favor of the Business Combination Agreement and the Avertix Transactions.
The foregoing description of the Stockholder Support Agreements is qualified in its entirety by reference to the full text of the form of Stockholder Support Agreement, a copy of which is included as Exhibit 10.3 to this Quarterly Report and incorporated herein by reference.
Sponsor Support Agreement
On May 2, 2023, the Company, the Sponsor, and Avertix entered into the Sponsor Support Agreement, pursuant to which, among other things, the Sponsor has agreed to (i) vote all of its ordinary shares in favor of the proposals being presented at the extraordinary general meeting of Public Shareholders, (ii) waive the anti-dilution or similar protections with respect to the Sponsor’s Founder Shares, consisting of 5,750,000 Class B ordinary shares of the Company as of the date hereof, in connection with the consummation of the Avertix Transactions and (iii) not redeem any of its shares in connection with the vote to approve the Avertix Transactions.
The foregoing description of the Sponsor Support Agreement is qualified in its entirety by reference to the full text of the Sponsor Support Agreement, a copy of which is included as Exhibit 10.4 to this Quarterly Report and incorporated herein by reference.
Extension
On June 2, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”). At the Meeting, the Company’s shareholders of approved an amendment to the Company’s Amended and Restated Memorandum and Articles of Association (the “Charter Amendment”) to (i) extend the date by which the Company must consummate its initial Business Combination from June 7, 2023 to December 7, 2023 (or such earlier date as determined by the Board) (the “Extension”) and (ii) provide for the right of a holder of Class B Ordinary Shares to convert such shares into Class A Ordinary Shares on a one-for-one basis at any time prior to the closing of the Initial Business Combination at the option of a holder of Class B Ordinary Shares (the “Founder Share Amendment Proposal”). The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on June 2, 2023.
In connection with the vote to approve the Extension, holders of 9,942,523 Class A Ordinary Shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.53 per share, for an aggregate redemption amount of approximately $104,708,794.59, with a net amount of funds remaining in the Trust Account following such redemptions of approximately $137,513,654.92.
In connection with the Extension, the Company issued a promissory note in the aggregate principal amount of up to $1,500,000 to the Sponsor, pursuant to which the Sponsor agreed to loan to the Company up to $1,500,000 (the “Extension Funds”) to deposit into the Company’s Trust Account for the Company’s Class A Ordinary Shares, par value $0.0001 (the “Class A Ordinary Shares”), held by the Company’s public shareholders that were not redeemed in connection with the extension of the Company’s termination date from June 7, 2023 to December 7, 2023 (or such earlier date as determined by the board of directors of the Company).
The Company will deposit $250,000 into the Trust Account for each calendar month (commencing on June 7, 2023 and ending on the 7th day of each subsequent month), or portion thereof, that is needed by the Company to complete an initial business combination until December 7, 2023 (or such earlier date as determined by the Board), and such amount will be distributed either to: (i) all of the holders of Public Shares upon the Company’s liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of the initial business combination.
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