Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement
On March 25, 2023, Tempo Automation Holdings,
Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”)
by and among the Company, Optimum Design Associates, Inc., a California corporation (“ODA”), Optimum Design Associates Pty.
Ltd., an Australian proprietary company limited by shares (“ODA Australia” and, together with ODA, the “Acquired Companies”),
Nick Barbin and Roger Hileman (Mr. Hileman, together with Mr. Barbin, the “Sellers” and each, a “Seller”), pursuant
to which the Company has agreed to acquire all of the equity interests of the Acquired Companies from the Sellers (the “Acquisitions”).
The Purchase Agreement and the transactions contemplated thereby have been approved by the respective boards of directors or equivalent
governing body of the Company and each of the Acquired Companies.
Transaction
Overview. The Purchase Agreement provides that, upon the terms and subject to the conditions set forth in the Purchase Agreement,
the Company will acquire from the Sellers (i) all of the issued and outstanding capital stock of ODA (the “ODA Stock” and
such acquisition, the “U.S. Sale”) and (ii) all of the issued and outstanding capital stock of ODA Australia (the “ODA
Australia Shares” and such acquisition, the “Australia Sale”). As consideration for the U.S. Sale: (i) on the closing
date of the U.S. Sale (the “U.S. Closing Date”), the Company will pay to the Sellers a cash amount equal to approximately
$2.8 million (subject to customary adjustments set forth in the Purchase Agreement) plus 50% of the reasonable and documented
out-of-pocket expenses incurred by the Acquired Companies in connection with the audit of the audited financial statements required to
be delivered by the Acquired Companies prior to such closing (the “U.S. Closing Cash Consideration”); (ii) within five business
days of the U.S. Closing Date, the Company will issue to the Sellers an aggregate of 4,400,000 shares of common stock, par value $0.0001
per share, of the Company (“Common Stock”); (iii) on the six-month anniversary of the U.S. Closing Date, the Company will
pay to the Sellers an additional amount in cash equal to $1.5 million less the aggregate amount of Free Cash Flow Payments (as
defined herein) made to the Sellers after the U.S. Closing Date and prior to the six-month anniversary of the U.S. Closing Date (the
“Initial Deferred Cash Consideration”); (iv) on the 12-month anniversary of the U.S. Closing Date, the Company will pay to
the Sellers an additional amount in cash equal to $2.5 million less the aggregate amount of Free Cash Flow Payments made to the
Sellers on or after the six-month anniversary of the U.S. Closing Date and on or prior to the 12-month anniversary of the U.S. Closing
Date (the “Remaining Deferred Cash Consideration”); and (v) the Company will agree to pay the Sellers up to $7.5 million
of additional consideration (the “Earnout Consideration”) based on the Acquired Companies’ financial performance during
the fiscal years ending December 31, 2023, December 31, 2024 and December 31, 2025, which payments may, subject to certain limitations,
be made in cash, shares of Common Stock, or a combination thereof at the Company’s election, provided that at least 25% of the
Earnout Consideration must be paid in cash. Until the 12-month anniversary of the U.S. Closing Date, as promptly as reasonably practicable
following the last day of each calendar month, the Company will transfer, or cause to be transferred, to the Sellers an amount in cash
equal to the free cash flow of the Acquired Companies for such completed calendar month (each such payment, a “Free Cash Flow Payment”).
In no event may the amount of Free Cash Flow Payments exceed $4,000,000 in the aggregate. As consideration for the Australia Sale, the
Company will pay to the Sellers, on the closing date of the Australia Sale (the “Australia Closing Date” and the Australia
Closing Date and the U.S. Closing Date, each, a “Closing Date”), an amount in cash equal to $230,000 (subject to certain
customary adjustments set forth in the Purchase Agreement). In addition, the Company has agreed to provide specified compensation to
certain employees of the Acquired Companies based on the Acquired Companies’ financial performance during the fiscal years ending
December 31, 2023, December 31, 2024 and December 31, 2025, provided that such employees remain employed by the Company, the Acquired
Companies or their respective subsidiaries through the applicable payment dates.
Covenants, Representations
and Warranties and Indemnities. Each of the Company, the Acquired Companies and the Sellers have made customary representations,
warranties and covenants in the Purchase Agreement. The Acquired Companies and the Sellers have made certain covenants, among others,
regarding the conduct of the business of the Acquired Companies in the ordinary course of business and certain restrictions thereto prior
to the closing of the Acquisitions. Each of the Company, the Sellers and the Acquired Companies have agreed in the Purchase Agreement
to use commercially reasonable efforts, and to cooperate with each other party, to consummate the Acquisitions.
In addition, the
Purchase Agreement provides that, subject to certain negotiated limitations and survival periods, the Company and the Sellers will indemnify
each other and each other’s directors, officers, employees, affiliates, agents and other representatives, for breaches of these
representations, warranties and covenants and for certain other matters specified in the Purchase Agreement.
At the closing
of the U.S. Sale, the Company has agreed to enter into (a) a registration rights agreement with the Sellers, pursuant to which, among
other things, the Company will grant to the Sellers certain registration rights with respect to certain securities of the Company; (b)
an employment agreement with Mr. Barbin pursuant to which, among other things, Mr. Barbin will be appointed as the Vice President of
Optimum Design Services until the three-year anniversary of the U.S. Closing Date; (c) non-competition and non-solicitation agreements
with each of Mr. Barbin and Mr. Hileman, pursuant to which, among other things, each Seller will agree not to (i) invest in, finance,
participate in or become employed by any business that competes with the Company and its subsidiaries, (ii) solicit for employment or
hire any employee of the Acquired Companies or (iii) solicit any business from any customer of the Acquired Companies or provide any
goods or services to any customer of the Acquired Companies similar to those provided by the Acquired Companies, in each case, prior
to the two-year anniversary of the U.S. Closing Date; and (d) a services agreement with ODA and ODA Australia, pursuant to which, among
other things, ODA Australia will agree to continue to provide all services in the ordinary course of business consistent with past practice
that ODA Australia provides to ODA as of the date of the Purchase Agreement during the period commencing on the U.S. Closing Date and
ending on the Australia Closing Date.
Conditions to
Closing. The consummation of each of the Acquisitions is subject to customary closing conditions, including, among others, (a) the
absence of laws, orders, decrees, judgments and injunctions by any governmental entity of competent jurisdiction preventing the completion
of the Acquisitions or that make the completion of the Acquisitions illegal, (b) the receipt of specified governmental and regulatory
consents and approvals and expiration of any mandatory waiting period related thereto, (c) subject to certain exceptions, the accuracy
of representations and warranties with respect to the Acquired Companies, the Company and the Sellers, (d) compliance in all material
respects by the Acquired Companies, the Company and the Sellers with their respective covenants contained in the Purchase Agreement,
(e) the shares of Common Stock issuable as Stock Consideration and Earnout Consideration having been approved for listing on the Nasdaq
Capital Market, LLC, (f) there having occurred no material adverse effect with respect to the Company or the Acquired Companies, (g)
Buyer having obtained gross proceeds from one or more financing transactions sufficient to satisfy its cash payment obligations with
respect to the closing of the Acquisitions; (h) the entry by the Sellers into employment and non-compete agreements with the Company,
in each case substantially in the forms attached as exhibits to the Purchase Agreement; and (i) the delivery by the Acquired Companies
of certain audited financial statements with respect to the Acquired Companies.
Termination
Rights. The Purchase Agreement contains certain customary termination rights, including the right for (a) the parties to mutually
agree to terminate the Purchase Agreement, (b) either the Company or the Sellers to terminate the Purchase Agreement if (i) with respect
to the U.S. Sale, the U.S. Closing Date shall not have occurred by May 31, 2023 or (ii) with respect to the Australia Sale, the Australia
Closing Date shall not have occurred by June 30, 2023, in each case, subject to certain customary exceptions, (c) either the Company
or the Sellers to terminate the Purchase Agreement if a governmental entity of competent jurisdiction has enacted, issued or promulgated
any law or issued or granted any order that has become final and non-appealable and which results in a permanent restraint on the ability
of the parties to consummate the transactions contemplated by the Purchase Agreement and (d) either the Company, on the one hand, or
the Sellers, on the other hand, to terminate the Purchase Agreement if the other parties are in breach of the Purchase Agreement and
have not cured such breach within the time periods specified in the Purchase Agreement.
The foregoing summary
of the Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified
in its entirety by, the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1, and is incorporated into
this Current Report on Form 8-K (this “Report”) by reference.
The Purchase Agreement
contains representations, warranties and covenants that the respective parties made to each other as of the date of such agreement or
other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract
among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with
negotiating such agreement. The Purchase Agreement has been attached to provide investors with information regarding its terms. It is
not intended to provide any other factual information about the Company, the Acquired Companies or the Sellers. In particular, the representations,
warranties, covenants and agreements contained in the Purchase Agreement, which were made only for purposes of such agreement and as
of specific dates, were solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by
the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between
the parties to the Purchase Agreement instead of establishing these matters as facts) and may be subject to standards of materiality
applicable to the contracting parties that differ from those applicable to investors and reports and documents filed with the U.S. Securities
and Exchange Commission (the “SEC”). Investors should not rely on the representations, warranties, covenants and agreements,
or any descriptions thereof, as characterizations of the actual state of facts or condition of any party to the Purchase Agreement. In
addition, the representations, warranties, covenants and agreements and other terms of the Purchase Agreement may be subject to subsequent
waiver or modification. Moreover, information concerning the subject matter of the representations and warranties and other terms may
change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s
public disclosures.