Item 1.01 |
Entry into a Material Definitive Agreement |
Merger Agreement
On December 31, 2022, Monterey Capital Acquisition Corporation, a Delaware
corporation (“MCAC”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among MCAC,
ConnectM Technology Solutions, Inc., a Delaware corporation (“ConnectM” or the “Company”), and Chronos Merger
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of MCAC (“Merger Sub”). Pursuant to the terms and conditions
of the Merger Agreement, a business combination between MCAC and ConnectM will be effected through the merger of Merger Sub with and into
ConnectM, with ConnectM surviving the merger as a wholly owned subsidiary of MCAC (as defined in the Merger Agreement) (the “Merger”).
The Board of Directors of MCAC (the “Board”) has unanimously (i) approved and declared advisable the Merger Agreement, the
Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related matters
by the stockholders of MCAC. In addition, in connection with the consummation of the Merger, MCAC will be renamed “ConnectM Technology
Solutions, Inc.”
Treatment of ConnectM Securities
ConnectM Stock. At the Effective Time (as defined in
the Merger Agreement), each share of ConnectM common stock, par value $0.0001 per share (“ConnectM Common Stock”), and ConnectM
preferred stock, par value $0.0001 per share (“ConnectM Preferred Stock”, and together with ConnectM Common Stock, “ConnectM
Stock”) (but excluding shares the holders of which perfect rights of appraisal under Delaware law), will be converted into the right
to receive such number of shares of common stock, par value $0.0001 per share, of MCAC common stock (“MCAC Common Stock”)
as calculated based on the Exchange Ratio as set forth in the Merger Agreement. “Exchange Ratio” is defined in the Merger
Agreement to be the quotient of (a) the merger consideration (the “Merger Consideration”) (as defined below), divided by (b)
the number of shares of ConnectM capital stock outstanding as of immediately prior to the Effective Time, including any shares underlying
outstanding warrants to purchase ConnectM Common Stock and excluding any shares of ConnectM capital stock held in treasury by ConnectM.
The Merger Consideration is 14,500,000 shares of MCAC Common Stock, subject to an upward adjustment depending on the extent to which MCAC's
transaction expenses exceed $8,000,000.
Stock Options. At the Effective Time, each outstanding
option to purchase shares of ConnectM Common Stock will be converted into an option to purchase shares of MCAC Common Stock equal to the
number of shares subject to such option prior to the Effective Time multiplied by the Exchange Ratio, with the per-share exercise price
equal to the exercise price prior to the Effective Time divided by the Exchange Ratio.
Warrants. At
the Effective Time, each outstanding warrant to purchase shares of ConnectM Common Stock will be
converted into a warrant to purchase shares of MCAC Common Stock equal to the number of shares subject to such warrant prior to
the Effective Time multiplied by the Exchange Ratio, with the per-share exercise price equal to the exercise price prior to the Effective
Time divided by the Exchange Ratio.
Representations and Warranties
The Merger Agreement contains customary representations and warranties
of the parties thereto with respect to, among other things, (a) entity organization, good standing and qualification, (b) capital structure,
(c) authorization to enter into the Merger Agreement, (d) compliance with laws and permits, (e) financial statements and internal controls,
(f) absence of certain changes and undisclosed liabilities, (g) litigation, (h) labor and employee matters, (i) environmental matters,
(j) tax matters, (k) real and personal property, (l) intellectual property, (m) insurance, (n) material contracts, (o) brokers and finders,
(p) trade compliance and (q) transactions with affiliates.
Covenants
The Merger Agreement includes customary covenants of the parties with
respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation
of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, covenants providing for
MCAC and ConnectM to use reasonable best efforts to cooperate in the preparation of the Registration Statement and Proxy Statement (as
each such term is defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals
of their respective stockholders including, in the case of MCAC, approvals of the Merger Agreement and the Merger, the restated certificate
of incorporation, the share issuance under the rules of the Nasdaq Stock Market (“Nasdaq”) and the 2023 Equity Incentive Plan
(as defined herein) of the combined company. MCAC has also agreed to include in the Proxy Statement the recommendation of the
Board that stockholders approve all of the proposals to be presented at the special meeting.
Non-Solicitation Restrictions
Each of MCAC and ConnectM has agreed that from the date of the Merger
Agreement to the date of the closing (the “Closing” or “Closing Date”) or, if earlier, the termination of the
Merger Agreement in accordance with its terms, it will not initiate any negotiations with any party, or provide non-public information
or data concerning it or its subsidiaries to any party relating to a Parent Acquisition Proposal, in the case of MCAC, or a Company Acquisition
Proposal, in the case of the Company (as such terms are defined in the Merger Agreement), or enter into any agreement relating to such
a proposal. Each of MCAC and ConnectM has also agreed to use its reasonable best efforts to prevent any of its representatives from doing
the same.
Conditions to Closing
The consummation of the Merger is conditioned upon, among other things,
(i) receipt of the MCAC stockholder approval and ConnectM stockholder approval, (ii) the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any governmental order, statute, rule
or regulation enjoining or prohibiting the consummation of the transactions, (iv) the effectiveness of the Registration Statement under
the Securities Act of 1933, as amended (the “Securities Act”), (v) MCAC having at least $5,000,001 of net tangible assets
(as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
(vi) the common stock of the combined company to be issued pursuant to the Merger Agreement being listed or having been approved for listing
on Nasdaq, (vii) solely with respect to MCAC, (A) the representations and warranties of ConnectM being true and correct to applicable
standards in the Merger Agreement and each of the covenants of ConnectM having been performed or complied with in all material respects,
and (B) since the date of the Merger Agreement there not having been a material adverse effect on ConnectM that is continuing and (viii)
solely with respect to ConnectM, (A) the representations and warranties of MCAC being true and correct to applicable standards in the
Merger Agreement and each of the covenants of MCAC having been performed or complied with in all material respects, (B) since the date
of the Merger Agreement there not having been a material adverse effect on MCAC that is continuing, and (C) the effective resignations
of certain directors and executive officers of MCAC. The Merger Agreement does not include a minimum cash condition.
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Time as follows:
|
(i) |
by mutual written consent of MCAC and ConnectM; |
|
(ii) |
by either MCAC or ConnectM if the Merger is not consummated on or before November 13, 2023 (the “Outside Date”), provided that the failure to consummate the Merger by the Outside Date is not due to a material breach by the party seeking to terminate and which such breach is the proximate cause for the conditions to close not being satisfied; |
|
(iii) |
by either MCAC or ConnectM if the other party has breached any of its covenants or representations and warranties such that closing conditions would not be satisfied at the Closing (subject to a 30-day cure period for breaches that are curable), provided that such right to terminate will not be available to either party if it has breached in any material respect its obligations set forth in the Merger Agreement in any manner that will have proximately contributed to the occurrence of the failure of a condition to the consummation of the Merger; |
|
(iv) |
by either MCAC or ConnectM if a governmental entity shall have issued a law or final, non-appealable governmental order, rule or regulation permanently restraining, enjoining or prohibiting the consummation of the Merger, provided that, the party seeking to terminate cannot have breached its obligations under the Merger Agreement in a manner that has proximately contributed to the governmental action; |
|
(v) |
by either MCAC or ConnectM if MCAC stockholder approval shall not have been obtained by reason of the failure to obtain the required vote upon a vote held at the special meeting or any adjournment thereof; |
|
(vi) |
by written notice from MCAC to ConnectM if the Company Stockholders do not approve the merger agreement within two days following the date of the Merger Agreement; or |
|
(vii) |
by written notice from ConnectM to MCAC if the Board shall have publicly withdrawn, modified, withheld or changed its recommendation to vote in favor of the Merger and other proposals, if such notice is given by ConnectM within 15 business days after such action (or inaction) by the Board. |
In the event the Merger Agreement is terminated in certain of the circumstances
described above, MCAC will be obligated to reimburse ConnectM for up to $1,200,000 of its transaction expenses. MCAC also agreed to extend
the time to complete a business combination by up to an additional six months in accordance with the terms and procedures of its amended
and restated certificate of incorporation (the “Extension”) to the extent necessary to consummate the Closing, provided that
ConnectM transfers to MCAC funds up to $1,840,000 to the extent necessary to effect such extension. MCAC is not obligated to repay such
funds to ConnectM unless at the time the Merger Agreement is terminated all of the conditions to Closing are satisfied or waived by the
applicable party and the reason that the Closing has not occurred is that MCAC has breached its obligations under the Merger Agreement
to consummate the Closing.
The Merger Agreement and other agreements described below have been
included to provide investors with information regarding their respective terms. They are not intended to provide any other factual information
about MCAC, ConnectM or the other parties thereto. In particular, the assertions embodied in the representations and warranties in the
Merger Agreement were made as of a specified date, are modified or qualified by information in one or more confidential disclosure letters
prepared in connection with the execution and delivery of the Merger Agreement, may be subject to a contractual standard of materiality
different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties.
Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts
about MCAC, ConnectM or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with
the other information that MCAC makes publicly available in reports, statements and other documents filed with the SEC. MCAC and ConnectM
investors and security holders are not third-party beneficiaries under the Merger Agreement.
Certain Related Agreements
Sponsor Support Agreement. In connection with the execution
of the Merger Agreement, Monterrey Acquisition Sponsor, LLC (the “Sponsor”) entered into a sponsor support agreement (the
“Sponsor Support Agreement”) with MCAC and ConnectM, pursuant to which to which the Sponsor and the independent directors of MCAC have agreed to waive, subject
to, conditioned upon and effective as of immediately prior to, the Effective Time, the adjustment to the conversion ratio set forth in
MCAC’s amended and restated certificate of incorporation with respect to the MCAC Class B Common Stock and vote all
shares of MCAC Common Stock beneficially owned by them in favor of the Merger. The Sponsor and the independent directors of MCAC have also agreed, that in the event less than all of the holders of MCAC Class B Common
Stock execute the Registration Rights Agreement (as defined below), they will agree to waive certain rights under that certain registration
rights agreement, dated May 10, 2022, by and among MCAC, Sponsor and the independent directors.
Company Stockholder Support Agreement. In connection
with the execution of the Merger Agreement, MCAC entered into a stockholder support agreement (the “Company Stockholder Support
Agreement”) with ConnectM and the Company Stockholders (as defined in the Company Stockholder Support Agreement), pursuant to which
to the Company Stockholders agreed to vote all shares of ConnectM Stock beneficially owned by them in favor of the Merger.
Lock-up Agreements/Transfer Restrictions. In connection
with the execution of the Merger Agreement, MCAC, the Sponsor, and certain Company Stockholders also entered into lock-up agreements, a form of which is attached hereto,
which shall become effective as of the Effective Time (the “Lock-up Agreements”), pursuant to which, subject to certain limited
exceptions, each of the Sponsor and the Company Stockholders has agreed not to transfer any of its shares of MCAC Common Stock during
the period beginning on the Closing Date and ending on the earlier of (A) 180 days after the Closing Date and (B)(x) the date on which
the price of MCAC Common Stock equals or exceeds $16.50 for any 20 trading days within any 30 trading day period following the 150th day
after the Closing Date, or (y) a Change of Control (as defined in the Lock-up Agreements).
2023 Equity Incentive Plan. MCAC has agreed to approve
and adopt an incentive award plan (the “2023 Equity Incentive Plan”), which will be effective as of the Closing and in a form
mutually acceptable to the Board of Directors of MCAC. The 2023 Equity Incentive Plan shall provide for an initial aggregate share reserve
equal to the sum of (a) 10% of the number of shares of MCAC Common Stock outstanding immediately following the Effective Time after giving
effect to the transactions contemplated hereby, plus (b) an annual increase on the first day of each calendar year beginning on the first
January 1 following the Closing and ending on and including January 1 of the tenth calendar year thereafter, equal to the lesser of (i)
4% of the aggregate number of shares of MCAC Common Stock outstanding on the final day of the immediately preceding calendar year and
(ii) such smaller number of shares as is determined by the administrator of the 2023 Equity Incentive Plan.
Amended and Restated Registration Rights Agreement. In
connection with the Closing, MCAC, the Sponsor, certain existing stockholders of MCAC and certain stockholders of ConnectM who will receive
shares of MCAC Common Stock pursuant to the Merger Agreement will enter into an amended and restated registration rights agreement (“Registration
Rights Agreement”) mutually agreeable to MCAC and ConnectM and in substantially the form attached to the Merger Agreement, which
will become effective upon the consummation of the Merger. MCAC has agreed that, prior to the closing, it will request that each holder of Class B Common Stock of MCAC execute an amended and restated
registration rights agreement (“Registration Rights Agreement”) mutually agreeable to MCAC and ConnectM and in substantially
the form attached to the Merger Agreement, among MCAC, certain stockholders of ConnectM and each holder of Class B Common Stock of MCAC.
Forward Purchase Agreement. In
connection with the execution of the Merger Agreement, MCAC and Meteora Special Opportunity Fund (the “Seller”), entered into
an agreement (the “Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase
Transaction”). Pursuant to the terms of the Forward Purchase Agreement, Seller intends to purchase in the open market through a
broker shares of MCAC Class A common stock, par value $0.0001 per share (“Class A Common Stock” or the “Shares”),
after the date of the Forward Purchase Agreement from holders of Shares (other than MCAC or affiliates of MCAC), including from those
who have elected to redeem Shares (such holders, “Redeeming Holders”) pursuant to the redemption rights set forth in MCAC’s
amended and restated certificate of incorporation, dated as of May 10, 2022, in connection with the execution of the Merger Agreement,
up to a maximum of 6,600,000 Shares at a price equal to the estimated redemption price of approximately $10.21 per Share (based on an amount of $93,909,133.78 currently
held in the Trust Account) to be paid to investors who elect to redeem their shares at MCAC’s redemption deadline (the “Initial
Price”); provided that Seller may not beneficially own greater than 9.9% of the issued and outstanding Shares on a post-merger pro
forma basis. Seller has agreed to waive any redemption rights with respect to any Shares in connection with the merger. Such waiver may
reduce the number of Shares redeemed in connection with the merger, which reduction could alter the perception of the potential strength
of the merger. The number of Shares purchased by the Seller, not including the Share Consideration Shares (as defined below), shall be
referred to as the “Recycled Shares.”
The Forward Purchase
Agreement provides that not later than one local business day following the Closing (the “Prepayment Date”) of the merger,
MCAC will pay to Seller, out of funds held in MCAC’s trust account (the “Trust Account”), a cash amount (the “Prepayment
Amount”) equal to (x) the product of the number of Recycled Shares and the Initial Price less (y) an amount equal to 1% of the product
of the number of Recycled Shares and the Initial Price (the “Prepayment Shortfall”). At the written request of Seller, the
Prepayment Amount must be deposited into an escrow account simultaneously with the Closing. In addition to the Prepayment Amount, MCAC
shall pay directly from the Trust Account on the Prepayment Date, an amount equal to the product of 40,000 and the Initial Price (the
“Additional Consideration”), for the purpose of repayment of Seller having actually purchased additional Shares (the “Share
Consideration Shares”) from third parties prior to the Closing. The Additional Consideration shall be free and clear of all obligations
of Seller in connection with signing a definitive agreement for the Forward Purchase Transaction.
From time to time following
the Closing, Seller may sell Recycled Shares at any time and at any sales price, without payment by Seller of any Early Termination Obligation
(as defined in the Forward Purchase Agreement), until such time as the proceeds from the sales equal 100% of the Prepayment Shortfall.
From time to time following
the Closing and prior to the earliest to occur of (a) the third anniversary of the Closing and (b) the date specified by Seller in a written
notice to be delivered to MCAC at Seller’s discretion after the occurrence of any of a (x) Trigger Event (defined below) or (y)
Delisting Event (each as defined in the Forward Purchase Agreement) (in each case, the “Maturity Date”), Seller may, in its
sole discretion, sell some or all of the Shares. On the Maturity Date, the escrow agent shall transfer to the Seller an amount in cash
equal to the product of (x)(i) the number of Shares as set forth in the initial Pricing Date Notice (as defined in the Forward Purchase
Agreement) less (b) the number of Terminated Shares (as defined in the Forward Purchase Agreement) (the “Matured Shares”)
multiplied by (y) the Initial Price and the Seller shall transfer to the escrow agent for the benefit of MCAC the Matured Shares less
the Maturity Shares and the Penalty Shares (each as defined below). On the last trading day of each week following the merger, Seller
will pay to the combined company the product of the number of Shares sold multiplied by the Reset Price. The “Reset Price”
shall initially be the Initial Price and shall be adjusted on the first scheduled trading day of each week commencing with the first week
following the thirtieth day after the Closing to be the lowest of (a) the then-current Reset Price, (b) the Initial Price and (c) the
VWAP Price of the Shares of the prior week, but not lower than $7.50; provided that to the extent that MCAC or the combined company offers
and sells any Shares or securities convertible into Shares at a price lower than the Initial Price, the Reset Price, shall be modified
to equal such reduced price at which such securities may be issued. Seller will retain any sale proceeds in excess of the product of the
number of Shares sold by Seller and the Reset Price.
In the event that the
VWAP Price of the Class A Common Stock falls below $5.00 per share for any 20 trading days during a 30 trading day period beginning 30
days following the closing of the Merger (a “Trigger Event”), then Seller may elect to accelerate the Maturity Date to the
date of such Trigger Event. At the Maturity Date, the combined company is required to purchase from Seller, subject to Seller’s
consent, all of the unsold Shares for consideration equal to an amount, in cash or Shares at the sole discretion of combined company (the
“Maturity Consideration”), equal to (a) in the case of cash, the product of the unsold Shares and $2.00, or $2.50, solely
in the event of a Registration Failure (as defined in the Forward Purchase Agreement), and (b) in the case of Shares, such number of Shares
(the “Maturity Shares”) with a value equal to the product of the unsold Shares and $2.00, or $2.50, solely in the event of
a Registration Failure, divided by the VWAP Price of the Shares for the 10 trading days prior to the Maturity Date; provided that the
Maturity Shares used to pay the Maturity Consideration are freely tradable. If the Maturity Shares are not freely tradable, Seller shall
instead receive such number of Shares equal to the product of (i) three (3) and (ii) 6,600,000 minus the Terminated Shares (as defined
in the Forward Purchase Agreement) (the “Penalty Shares”); provided, however, that if the Penalty Shares are freely tradable
within 45 days after the Maturity Date, Seller shall return to Appreciate such number of Penalty Shares that are valued in excess of Maturity
Consideration based on the 10-day VWAP ending on the date that such Shares satisfied the Share Conditions.
In addition, pursuant
to the terms and conditions of the Forward Purchase Agreement, ConnectM and the combined company agree, from and after December 31, 2022,
not to incur in excess of $25.0 million of indebtedness through and including the 90th day following the Prepayment Date without the prior
written consent of the Seller.
A break-up fee equal to (i) all of Seller’s reasonable and documented
fees and expenses relating to the Forward Purchase Agreement capped at $75,000 plus (ii) $500,000, shall be payable by the combined company
to Seller in the event the Forward Purchase Agreement is terminated by MCAC.
In connection with MCAC’s initial public offering which was consummated
on May 13, 2022, Seller and its affiliates entered into an investment agreement with MCAC and the Sponsor pursuant to which Seller and
its affiliates purchased 792,000 units of MCAC at the initial public offering price of $10.00 per unit and 60,000 shares of Class B common
stock, par value $0.0001 per share, of MCAC (the “Founder Shares”), at a purchase price of approximately $0.009 per Founder
Share.
The foregoing
descriptions of agreements and the transactions and documents contemplated thereby are not complete and are subject to and qualified
in their entirety by reference to the Merger Agreement, Sponsor Support Agreement, Company Stockholder Support Agreement, the form
of Lock-up Agreement, the form of 2023 Equity Incentive Plan, the form of Registration Rights Agreement and the Forward Purchase
Agreement, copies of each of which are filed with this Current Report on Form 8-K as Exhibit 2.1, Exhibit 10.1, Exhibit 10.2,
Exhibit 10.3, Exhibit 10.4, Exhibit 10.5 and Exhibit 10.6 respectively, and the terms of which are incorporated by reference
herein.