Item 1.01 Entry into Definitive Material Agreement
Amendment No. 1 to Merger Agreement
As previously disclosed,
Pursuant to the merger agreement, Merger Sub will merge with and into Pineapple with Pineapple surviving the merger as a wholly owned subsidiary of CSI (the "merger"). As consideration for the merger, CSI will issue shares of its common stock to the Pineapple unit holders and Pineapple unit holders will become the majority owners of CSI's outstanding common stock immediately following the closing of the merger.
On
Pursuant to the amendment, the parties amended the merger agreement to:
? extend the Outside Date fromAugust 31, 2021 toMarch 31, 2022 such that either CSI or Pineapple will have the right to terminate the merger agreement if the merger has not been consummated byMarch 31, 2022 ; ? add conditions to the obligations of CSI and Merger Sub to consummate the merger, which conditions require as of the effective time: ? there shall have been secured binding agreements for no less than$32 million in cash from the Equity Offering (as defined in the merger agreement) payable to the CSI immediately following the effective time of the merger and the conditions to closing of CSI and thePIPE Investors in any definitive agreement relating to the Equity Offering, including the PIPE Agreement, are satisfied (other than those conditions that by their nature or terms are to be satisfied at such closing, but subject to the satisfaction or (to the extent permitted by applicable law) waiver of those conditions and provided that CSI has used its reasonable best efforts to satisfy such conditions of thePIPE Investors and has not intentionally failed to satisfy such conditions); ? other than as set forth in the amendment, there shall be no accrued payable amounts or liabilities toLake Street Solar LLC or Hercules Capital, Inc., or their respective affiliates, on the balance sheet of Pineapple; ? Hercules Capital, Inc. shall have waived Pineapple's obligation to pay upon consummation of the merger$3 million of debt under the Loan and Security Agreement, datedDecember 11, 2020 , by and among Pineapple, Hercules Capital, Inc. and the lenders thereto and extended the maturity date of such debt to the earlier of (1)December 10, 2024 or (2) the date on which CSI or Pineapple receives equity financing (other than pursuant to the PIPE Agreement) in one more transactions in an amount in excess of$25 million in the aggregate; and ? the entire amounts owed by Pineapple under that certain Working Capital Loan and Security Agreement, datedJanuary 8, 2021 , by and amongPineapple Energy LLC , Hercules Capital, Inc., and the lenders party thereto, shall have been extinguished or the maturity date thereof extended to at leastDecember 10, 2024 ; 2 ? provide that CSI may terminate the merger agreement if the PIPE Agreement is terminated by one or morePIPE Investors ; ? permit the net proceeds from the Equity Offering to be used in a specified order of priority for the payment and discharge of certain obligations, indebtedness and expenses; ? change the Milestone under which CSI will be obligated to issue 3.0 million shares of its common stock as Earnout Consideration to provide that if the new closing conditions described above are met, CSI will be obligated to issue 3.0 million shares of its common stock as Earnout Consideration; ? extend the time for CSI to complete the Dispositions from 18 months from the closing date to 24 months from the closing date; ? change the conditions relating to other Milestones under which CSI will be obligated to issue up to 10.0 million shares of its common stock to extend the time for achievement of the Disposition Milestone from on or before the 18 month anniversary of the closing date to on or before the 24 month anniversary of the closing date; and ? add a covenant regarding transaction litigation that requires CSI to notify Pineapple, provide opportunities for Pineapple to participate in the defense of the transaction litigation and obtain Pineapple consent to any settlement of such transaction litigation.
The foregoing description of the amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the amendment, which is attached to this report as Exhibit 2.1, and is incorporated by reference in this Item 1.01.
Concurrent with the execution of the amendment, on
Form of Contingent Value Rights Agreement
The merger agreement provides that at the closing of the merger, CSI will enter into a Contingent Value Rights Agreement (the "CVR agreement") with a person designated by CSI as the Holders' Representative (as defined therein), and the Rights Agent (as defined therein). Pursuant to the CVR agreement, each shareholder of CSI as of the close of the business day immediately preceding the effective time of the merger will receive one contractual non-transferable contingent value right, or CVR, per share of CSI common stock then held by them, which will entitle the CVR holder to a portion of the proceeds of dispositions of CSI's pre-merger assets after the effective time of the merger.
In connection with the amendment, the parties also agreed to a revised form of CVR agreement attached to the amendment as Exhibit A, which supersedes the exhibit attached to the merger agreement.
The principle changes in the
The foregoing description of the form of CVR agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
form of CVR agreement, which is attached to this report as Exhibit 10.1, and is
incorporated by reference in this Item 1.01, as well as the summary of the
previous form of the CVR agreement that was included in the Company's Current
Report on Form 8-K dated
3 Item 8.01 Other Events
On
Item 9.01 Financial Statements and Exhibits
Exhibit No Exhibit Description 2.1 Amendment No. 1 to Merger Agreement by and amongCommunications Systems, Inc. ,Helios Merger Co. ,Pineapple Energy LLC ,Lake Street Solar LLC , andRandall D. Sampson 10.1 Form of Contingent Value Rights Agreement (December 16, 2021 ) 99.1 Press release ofCommunications Systems, Inc. issued onDecember 20, 2021
Additional Information and Where to Find It; Participants in the Solicitation
In connection with the proposed merger transaction between CSI and Pineapple,
CSI filed a Registration Statement on Form S-4 with the with the
CSI URGES INVESTORS, SHAREHOLDERS AND OTHER INTERESTED PERSONS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS, AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
A definitive proxy statement/prospectus will be mailed to CSI shareholders as of
a record date to be established for the special meeting. CSI investors and
shareholders are urged to read the entire definitive proxy statement/prospectus
and other documents that will be filed with the
The Registration Statement, preliminary and definitive proxy
statement/prospectus, any other relevant documents, and all other documents and
reports CSI filed with or furnishes to the
CSI and its directors and executive officers may be considered participants in
the solicitation of proxies by CSI in connection with approval of the proposed
merger and the PIPE Offering. Information regarding the names of such persons
and their respective interests in the transaction, by securities holdings or
otherwise, will be set forth in the definitive proxy statement/prospectus when
it is filed with the
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