| Item 1.01 | Entry into a Material Definitive Agreement. |
The Consideration
Pursuant to the Business Combination Agreement:
|
· |
the cumulative value of the merger consideration was $306,888,378; |
| · | Blocker Merger Sub merged with
and into the Blocker (the “Blocker Merger”), resulting in the equity interests of the Blocker being converted
into the right to receive 11,923,940 shares of Class A Common Stock under the Business Combination Agreement, and the owners of such
equity interests in the Blocker (the “Blocker Owners”) being entitled to such shares of Class A Common Stock
at the Closing, and thereafter, the surviving blocker merged with and into ROCR, with ROCR as the surviving company (the “Buyer
Merger”), resulting in the cancellation of the equity interests of the surviving blocker and ROCR directly owning all of
the units of QualTek (the “QualTek Units”) previously held by the Blocker in QualTek; |
| · | immediately following the Buyer
Merger, Company Merger Sub merged with and into QualTek, with QualTek as the surviving company (the “QualTek Merger”),
resulting in (i) QualTek becoming a subsidiary of ROCR, (ii) the QualTek Units (excluding those held by the Blocker and ROCR) being converted
into the right to receive 18,764,898 shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”
and, together with the Class A Common Stock, the “Common Stock”), under the Business Combination Agreement
and the holders of QualTek Units being entitled to such shares of Class B Common Stock at the Closing, (iii) the QualTek Units held by
ROCR being converted into the right to receive a number of common units of BCP QualTek (the “Common Units”)
equal to the number of shares of Class A Common Stock issued and outstanding (i.e., 21,571,283 QualTek Units), less the number of Common
Units received in connection with the contribution described immediately below (i.e., 16,160,418 QualTek Units); |
| · | with respect to the portion of
merger consideration under the Business Combination Agreement at the Closing to which the Blocker Owners and holders of QualTek Units
were entitled as described above, the cumulative value of merger consideration to which they are together entitled equals the Equity
Value. The “Equity Value” is the sum of (i) $294,318,543.8, plus (ii) the value of any Equity Interests of the Company issued
as consideration for any acquisitions by the Company prior to the Closing (i.e., $10,000,000), plus (iii) the amount of interest accrued
on that certain convertible promissory note in an aggregate principal amount of $30,557,501.2 issued by the Company to BCP QualTek II
in exchange for all of BCP QualTek II’s Class B Units. The exact amount was allocated between the Blocker Owners and holders of
QualTek Units as follows (i) 3,642,750 shares of Class A Common Stock to BCP AIV Investor Holdings-3, L.P., (ii) 4,184,290 shares of
Class A Common Stock to BCP Strategic AIV Investor Holdings-2, L.P., (iii) 4,096,901 shares of Class A Common Stock to BCP QualTek Investor
Holdings, L.P., (iv) 11,780,782 shares of Class B Common Stock and 11,780,782 Common Units to BCP QualTek, LLC, (v) 2,158,223 shares
of Class B Common Stock and 2,158,223 Common Units to BCP QualTek II, LLC, and (vi) 4,825,893 shares of Class B Common Stock and 4,825,893
Common Units to QualTek Management HoldCo, LLC (f/k/a BCP QualTek Management, LLC) (“QualTek Management”).
No portion of the merger consideration was paid in cash. The foregoing represents the total consideration to be paid to the Blocker Owners
and holders of QualTek Units in connection with the Business Combination; and |
| · | ROCR contributed, as a capital contribution in exchange for a portion
of the QualTek Units it acquired in the QualTek Merger (i.e., 16,160,418 QualTek Units), $161,604,181.12, representing the amount of
cash available after payment of the merger consideration under the Business Combination Agreement, which will be used by QualTek or
its Subsidiaries to pay the transaction expenses under the Business Combination Agreement. |
Tax Receivable Agreement
On February
14, 2022, in connection with the closing of the Business Combination (the “Closing”),
the Company entered into the Tax Receivable Agreement (the “Tax Receivable Agreement”) with the TRA Holder Representative
(as defined in the Tax Receivable Agreement) and the TRA Holders (as defined in the Tax Receivable Agreement).
Pursuant
to the Tax Receivable Agreement, the Company will generally be required to pay the TRA Holders 85% of the amount of savings, if any, in
U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest
related thereto that the Company (and applicable consolidated, unitary, or combined Subsidiaries thereof, if any) realizes, or is deemed
to realize, as a result of certain tax attributes, including:
| · | existing tax basis in certain assets of the Company and certain of its direct or indirect subsidiaries, including assets that will
eventually be subject to depreciation or amortization, once placed in service, attributable to Common Units acquired by the Company at
the Closing or from a TRA Holder (including Common Units held by the Blocker, which is acquired by the Company in a Reorganization Transaction
(as defined in the Tax Receivable Agreement)); |
| · | tax basis adjustments resulting from the acquisition of Common Units by the Company at the Closing and taxable exchanges of Common
Units (including any such adjustments resulting from certain payments made by the Company under the Tax Receivable Agreement) acquired
by the Company from a TRA Holder pursuant to the terms of the Third Amended and Restated LLCA (as defined below); |
| · | tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement; and |
| · | certain tax attributes of the Blocker, which holds Common Units that are acquired directly or indirectly by the Company pursuant to
a Reorganization Transaction (each of the foregoing, collectively, the “Tax Attributes”). |
Under the Tax Receivable Agreement, the Tax Group (as defined in the
Tax Receivable Agreement) will generally be treated as realizing a tax benefit from the use of a Tax Attribute on a “with and without”
basis, thereby generally treating the Tax Attributes as the last item used, subject to several exceptions. Payments under the Tax Receivable
Agreement generally will be based on the tax reporting positions that the Company determines (with the amount of subject payments determined
in consultation with an advisory firm and subject to the TRA Holder Representative’s review and consent), and the IRS or another
taxing authority may challenge all or any part of position taken with respect to Tax Attributes or the utilization thereof, and a court
may sustain such a challenge. In the event that any tax benefits initially claimed by the Tax Group are disallowed, the TRA Holders will
not be required to reimburse the Company for any excess payments that may previously have been made pursuant to the Tax Receivable Agreement,
for example, due to adjustments resulting from examinations by taxing authorities. Rather, any excess payments made to such TRA Holders
will be applied against and reduce any future cash payments otherwise required to be made by the Company under the Tax Receivable Agreement,
if any, after the determination of such excess. As a result, in certain circumstances the Company could be required to make payments under
the Tax Receivable Agreement in excess of the Tax Group’s actual savings in respect of the Tax Attributes.
The Tax Receivable Agreement provides that, in the event (such events
collectively, “Early Termination Events”) that (i) the Company exercises its early termination rights under
the Tax Receivable Agreement, (ii) certain changes of control of the Company occur (as described in the Third Amended and Restated
LLCA), (iii) the Company in certain circumstances, fails to make a payment required to be made pursuant to the Tax Receivable Agreement
by its final payment date, which non-payment continues for 60 days following such final payment date or (iv) the Company materially
breaches (or is deemed to materially breach) any of its material obligations under the Tax Receivable Agreement other than as described
in the foregoing clause (iii) and, in the case of clauses (iii) and (iv), unless certain liquidity related or restrictive covenant
related exceptions apply, the Company’s obligations under the Tax Receivable Agreement will accelerate (if the TRA Holder Representative
so elects in the case of clauses (ii)-(iv)) and the Company will be required to make a lump-sum cash payment to all the TRA Holders equal
to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement, which lump-sum
payment would be based on certain assumptions, including those relating to there being sufficient future taxable income of the Tax Group
to fully utilize the Tax Attributes over certain specified time periods and that all Common Units (including Common Units held by the
Blocker) that had not yet been exchanged for Common Stock or cash are deemed exchanged for cash. The lump-sum payment could be material
and could materially exceed any actual tax benefits that the Tax Group realizes subsequent to such payment.
As a result of the foregoing, in some circumstances (i) the Company
could be required to make payments under the Tax Receivable Agreement that are greater than or less than the actual tax savings that the
Tax Group realizes in respect of the Tax Attributes and (ii) it is possible that the Company may be required to make payments years
in advance of the actual realization of tax benefits (if any, and may never actually realize the benefits paid for) in respect of the
Tax Attributes (including if any Early Termination Events occur).
This summary is qualified in its entirety by reference to the text
of the Tax Receivable Agreement, which is included as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Investor Rights Agreement
On February 14, 2022, in connection with the Closing, the Company entered
into the Investor Rights Agreement (the “Investor Rights Agreement”) with certain Sellers as set forth therein,
the Equity Representative, the Sponsors and certain Other Holders (each as defined in the Investor Rights Agreement). Pursuant to the
Investor Rights Agreement, the Registration Rights Agreement, dated as of March 2, 2021, between the Other Holders and the Company
was terminated and the Company agreed to grant to the Other Holders, which includes certain equityholders of QualTek as well as the Sponsors,
certain registration rights, including customary piggyback registration rights and demand registration rights immediately after the Closing,
which are subject to customary terms and conditions, including with respect to cooperation and reduction of underwritten shelf takedown
provisions. Additionally, the Investor Rights Agreement sets forth certain corporate governance standards relating to the Company.
This summary is qualified in its entirety by reference to the text
of the Investor Rights Agreement, which is included as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Third Amended and Restated LLCA
On
February 14, 2022, in connection with the Closing, the Second Amended and Restated Limited Liability Company Agreement of BCP
QualTek was amended and restated (the “Third Amended and Restated LLCA”)
to, among other things, reflect: (a) the consummation of the transactions contemplated by the Business Combination Agreement
and the Ancillary Agreements (as such term is defined in the Business Combination Agreement), including the conversion of units
pursuant to Section 3.1(c)(ii) thereof and the admission of the Company as a Member, (b) the Company’s designation
as the sole Managing Member of BCP QualTek, and (c) the rights and obligations of the Members and other terms and provisions,
as set forth in Third Amended and Restated LLCA.
This summary is qualified in its entirety by reference to the text
of the Third Amended and Restated LLCA, which is included as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein
by reference.
Senior Unsecured Convertible Notes and Indenture
On February 14, 2022, in connection
with the Closing, the Company entered into an indenture (the “Indenture”) with Wilmington Trust, National Association,
as trustee, and certain guarantors party thereto, including, among others, certain subsidiaries of the Company, in respect of $124,685,000
in aggregate principal amount of senior unsecured convertible notes due 2027 (“Convertible Notes”) that were
issued to certain investors (collectively, the “Convertible Note Investors”). The Convertible Notes were purchased
by the Convertible Note Investors pursuant to certain convertible note subscription agreements, dated as of February 14, 2022, between
the Company and each of the Convertible Note Investors (collectively, the “Convertible Note Subscription Agreements”).
Pursuant to the Convertible Note Subscription Agreements, the Convertible
Note Investors, upon the terms and subject to the conditions set forth in the respective Convertible Note Subscription Agreements, purchased
from the Company, and the Company issued to the Convertible Note Investors, subject to the terms and conditions of the Indenture, $124,685,000
in aggregate principal amount of Convertible Notes at a purchase price of 98.00% of the principal amount. The Convertible Notes are guaranteed
by the Company’s subsidiaries that guarantee its credit facilities. The Convertible Notes are convertible into shares of the Company’s
Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), at an initial conversion price
of $10.00 (subject to adjustment) in accordance with the terms thereof, and shall mature on February 15, 2027. The Convertible Note Investors
may convert their Convertible Notes into shares of Class A Common Stock at any time, subject to the terms of the Indenture. Certain offering-related
expenses were payable by the Company, including customary fees payable to the placement agents, Roth and Craig-Hallum, aggregating $5,000,000.
The Convertible Notes are not redeemable by the Company.
Interest on the Convertible Notes is payable in cash on a quarterly
basis in arrears. The Convertible Notes provide for an interest rate that is set quarterly based on gross leverage with a minimum interest
rate of 9.50% per annum and up to a maximum of 11.75% per annum as follows:
| Total Net Leverage Ratio (as defined in the Indenture) | |
Applicable Interest Rate
(as defined in the Indenture) | |
| Less than 4.5x | |
| 9.50 | % |
| 4.5x or greater but less than 5.0x | |
| 10.00 | % |
| 5.0x or greater but less than 5.5x | |
| 10.75 | % |
| 5.5x or greater | |
| 11.75 | % |
The initial conversion price
(as may be adjusted, the “Convertible Price”) is $10.00 per share. The Conversion Price will be reduced to the
lowest of (i) $10.00, (ii) 115% of the arithmetic average of the daily VWAPs (as defined in the Definitive Proxy Statement) for the 10-trading
day period commencing on the first trading day after the public release of the Company’s earnings announcement for the quarter ending
March 31, 2022, (iii) 115% of the arithmetic average of the daily VWAPs for the 10-trading day period commencing on the first trading
day after the public release of the Company’s earnings announcement for the quarter ending June 30, 2022, (iv) 115% of the arithmetic
average of the daily VWAPs for the 10-trading day period commencing on the first trading day immediately following the first anniversary
of the Closing Date and (v) 115% of the arithmetic average of the daily VWAPs for the 10-trading day period commencing on the first trading
day after the closing date of any applicable conversion reset offering by the Company; provided that the Conversion Price may not be adjusted
to less than $5.50 per share pursuant to these provisions.
The Convertible Notes may be converted by the Company any time after
the two-year anniversary of the Closing Date (the “Company Forced Conversion Date”) subject to the following
conditions: (i) the Company’s share price trading at or above $14.00 for 20 out of any 30 consecutive trading days commencing
after the Company Forced Conversion Date; (ii) the holders receiving a make-whole payment in the form of cash or additional shares
at the time of such conversion; (iii) the 60-day average daily trading volume ending on, and including, the last trading day of the
applicable exercise period being greater than or equal to $15,000,000; (iv) the conversion of the Convertible Notes being made on a pro-rata
basis across all Convertible Note Investors; and (v) the conversion of the Convertible Notes, together with all previously converted
Convertible Notes, resulting in no more than 20% of the free float of the Company’s Class A Common Stock on a pro forma basis.
If a Fundamental Change (as defined in the Indenture) occurs prior
to the maturity date, holders of the Convertible Notes will have the right to require the Company to repurchase all or any portion of
their Convertible Notes in principal amounts of $1,000 or an integral multiple thereof, at a repurchase price equal to the principal amount
of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
Following certain corporate events that occur prior to the maturity
date or if the Company exercises its mandatory conversion right in connection with such corporate events, the Company will in certain
circumstances increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate
events or has been forced to convert its Convertible Notes in connection with such corporate events, as the case may be.
The Convertible Notes have customary negative covenants, including
limitations on indebtedness, restricted payments, and permitted investments. The Convertible Notes also have customary anti-dilution protections.
The Convertible Notes and any shares of Class A Common Stock issuable
upon conversion have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered
or sold in the United States without registration or an applicable exemption from registration requirements. However, the Company has
agreed to register the Convertible Notes and the shares of Class A Common Stock issuable upon conversion of the Convertible Notes.
This summary is qualified in its entirety by reference to the text
of the Indenture and the form of the Convertible Notes, which are included as Exhibits 10.4 and 10.5 to this Current Report on Form 8-K,
respectively, and are incorporated herein by reference.