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Merger Agreement

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RC78   Monday, 11/20/17 04:41:14 PM
Re: RC78 post# 1109
Post # of 1129 
Merger Agreement

On November 16, 2017, Novume Solutions, Inc., a Delaware corporation (“Novume” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Novume, NeoSystems Holding, LLC, a Delaware limited liability company and wholly owned subsidiary of Novume (“Merger Sub”), NeoSystems HoldCo, Inc., a Virginia corporation (“NeoSystems HoldCo”), NeoSystems LLC, a Virginia limited liability company and a wholly owned subsidiary of NeoSystems HoldCo (“NeoSystems”), Robert W. Wilson, Jr., in his personal capacity, Michael Tinsley, in his personal capacity (Messrs. Wilson and Tinsley, collectively, the “Key Holders”) and Michael Tinsley, in his capacity as the representative of each shareholder of NeoSystems Holdco that has not demanded and perfected appraisal rights under the Virginia Stock Corporation Act (the “Participating Stockholders”). Pursuant to the Merger Agreement, Novume will acquire NeoSystems through a forward merger, whereby NeoSystems HoldCo will merge with and into Merger Sub, with Merger Sub as the surviving entity and the sole holder of NeoSystems (the “Merger”).

The Merger Agreement was approved by the boards of directors of Novume and NeoSystems Holdco, and the sole members of Merger Sub and NeoSystems, respectively. The Merger must be approved by more than two-thirds of the capital stock of NeoSystems Holdco entitled to vote on the Merger, voting as a single group. No vote by the Novume stockholders will be required to consummate the Merger.

The Key Holders have entered into a voting agreement with Merger Sub pursuant which they have agreed to vote all of their shares of NeoSystems HoldCo currently owned of record or beneficially, and any additional shares acquired, (a) in favor of approval of the Merger and (b) against approval or adoption of any Alternative Transaction (as defined below). The Key Holders own, in the aggregate, over two-thirds of the outstanding voting shares of NeoSystems HoldCo.

Upon the consummation of the Merger (the “Closing”), the Participating Stockholders will receive the following: (a) $5 million in cash and (b) an amount of shares of the Company’s Common Stock (the “Common Stock”) equal to $10 million (determined by dividing such amount by the price per share to the public of such shares of Common Stock sold in the first Qualifying Offering by the Company) minus $1,982,514, which represents the aggregate dollar value of the spread of the options of NeoSystems Holdco (the “HoldCo Options”) that will be assumed by Novume at Closing (collectively, the “Merger Consideration”). A “Qualifying Offering” is defined as a firm commitment underwritten public offering of the Company for an aggregate price to the public of at least $10 million, which results in the Company’s successful listing of Common Stock on the Nasdaq Stock Market or the New York Stock Exchange. The Merger Consideration is subject to certain adjustments in accordance with the Merger Agreement, including the assumption of NeoSystems’ obligations with respect to the holders of certain debt facilities and shares of preferred stock of NeoSystems HoldCo (the “HoldCo Preferred Stock”). Pursuant to the Merger Agreement, the Participating Stockholders may not, directly or indirectly, sell, offer to sell or contract to sell the shares of Common Stock received as Merger Consideration until 180 calendar days after the Qualifying Offering.

As consideration for the consummation of the Merger in addition to the Merger Consideration, at Closing Novume will (a) assume each HoldCo Option outstanding immediately prior to Closing that is held by an optionholder that continues in the employment, or service as a consultant or director, of NeoSystems; (b) assume the obligations of NeoSystems with respect to certain of its debt facilities, including outstanding principal totaling, in the aggregate, $4.95 million; and (c) redeem all of the shares of HoldCo Preferred Stock at Closing for up to an amount of $2.25 million.

The Merger Agreement contains customary representations, warranties and covenants made by Novume, Merger Sub, NeoSystems HoldCo, NeoSystems and the Key Holders. Among others, NeoSystems HoldCo and NeoSystems have agreed to operate their businesses, respectively, in the ordinary course during the period between the execution of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement, and not to solicit proposals relating to or enter into discussions concerning any proposals for alternative business combination transactions relating to NeoSystems HoldCo or NeoSystems (an “Alternative Transaction”).

The consummation of the Merger is subject to, among other things, the completion of the Qualifying Offering. .

The Merger Agreement contains certain customary termination rights for Novume and NeoSystems HoldCo including, among other things, the completion of the Qualifying Offering by February 28, 2018 and the consummation of the Merger prior to March 21, 2018. Additionally, Novume has agreed to pay NeoSystems HoldCo an amount equal to the Merger Expenses (as defined in the Merger Agreement) upon termination for failure to conduct a Qualifying Offering by February 28, 2018 and in the event of certain material incurable breaches of representations, warranties or covenants by Novume.

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