UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
On August 14, 2023, Jupiter Wellness, Inc. (the “Company”) along with SRM Entertainment, Inc., a Nevada corporation (“SRM”), entered into an Underwriting Agreement (the “Underwriting Agreement”), with EF Hutton, division of Benchmark Investments, LLC, the representative of the underwriters (the “Representative”), in connection with SRM’s initial public offering (the “IPO”). Pursuant to the Underwriting Agreement, on August 14, 2023, SRM announced the pricing of its IPO of 1,250,000 shares of common stock, par value $0.0001 (the “Common Stock”) for a price of $5.00 per share, less certain underwriting discounts and commissions.
On December 9, 2022, the Company entered into the Exchange Agreement (the “Exchange Agreement”) with SRM to govern the separation of our business from SRM. On May 26, 2023, we amended the Exchange Agreement (the “Amended and Restated Exchange Agreement”) to include additional information regarding the distribution and the separation of our business from SRM. On August 14, 2023, we consummated the separation contemplated by the Amended and Restated Exchange Agreement. From this date forward, SRM will operate as a separate public company. Jupiter will no longer consolidate the numbers of SRM in its financial statements.
On August 14, 2023, the Company distributed 2,000,000 shares of Common Stock owned by the Company to its stockholders and holders of certain warrants based on the record date of July 7, 2023. Following the distribution, the Company is the largest shareholder of SRM, owning 4,500,000 shares of Common Stock.
On August 3, 2023, the Company and SRM entered into an Assignment and Assumption Agreement (the “McKinnon Assignment”), pursuant to which SRM assumed the employment agreement, between Douglas McKinnon and the Company. The McKinnon Assignment became effective on August 14, 2023.
Collectively, the McKinnon Assignment, the Exchange Agreement, the Amended and Restated Exchange Agreement and the Underwriting Agreement are the “Agreements”.
The foregoing description of each of the Agreements does not purport to be complete and are qualified in their entirety by the text of the Agreements which are filed as Exhibit 10.1. 10.2, 10.3 and 10.4, and are incorporated herein by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Pursuant to the McKinnon Assignment on August 14, 2023, Douglas McKinnon resigned from his position as the CFO of the Company. Mr. McKinnon did not advise the Company of any disagreement with the Company on any matter relating to its operations, policies or practices.
On August 15, 2023, the board of directors (the “Board”) of the Company appointed Markita L. Russell as the Chief Financial Officer of the Company.
Ms. Russell, has over 20 years of experience in accounting. From June 2017 to August 2019, Ms. Russell served as controller at Quantum Admin Services / Beachway Therapy Center, LLC. From September 2019 to March 2020, Ms. Russell served as acting controller and consultant of Nautical Ventures Group, Inc. From April 2020 to August 2021, Ms. Russell served as the Staff Accountant for Stem Holdings Inc. Since August 2021, Ms. Russell has served as the controller for SRM, performing accounting functions for SRM—from accounts receivable and accounts payable management to inventory and fixed asset management, cash management and financial reporting utilized for the Company’s Form 10-Q and Form 10-K filings with the U.S. Securities and Exchange Commission.
There are no arrangements or understandings between the Company and the newly appointed executive officer or director and any other person or persons pursuant to which each executive officer or director was appointed and there is no family relationship between or among any director or executive officer of the Company or any person nominated or chosen by the Company to become a director or executive officer.
There are no transactions between the Company and any newly appointed executive officer or director that are reportable pursuant to Item 404(a) of Regulation SK. The Company did not enter into or materially amend any material plan, contract or arrangement with any newly appointed executive officer or director in connection with his or her appointment as a director or executive officer.
Item 8.01 Other Events.
As a result of the distribution, the exercise price of an aggregate of 8,631,754 warrants issued in January 2023 was reduced from $1.00 per share to $0.932 per share and the amount of warrants increased from 8,631,754 to 9,260,554 warrants. The change is a result of the anti-dilution features contained in those warrants.
Item 9.01 Financial Statements and Exhibits
Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 21, 2023
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian John | |
| Brian John | ||
| Chief Executive Officer | ||
Exhibit 10.1
EXECUTION VERSION
UNDERWRITING
AGREEMENT
by and among
SRM ENTERTAINMENT, INC.,
JUPITER WELLNESS, INC.
and
EF HUTTON,
division of Benchmark Investments, LLC,
as Representative of the Several Underwriters
New York, New York
August 14, 2023
EF HUTTON,
division of Benchmark Investments, LLC
as Representative of the several Underwriters named on Schedule 1 attached hereto
590 Madison Avenue, 39th Floor
New York, New York 10022
Ladies and Gentlemen:
The undersigned, SRM Entertainment, Inc., a corporation formed under the laws of the State of Nevada (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement (as hereinafter defined) as being subsidiaries or affiliates of SRM Entertainment, Inc., the “Company”), hereby confirms its agreement (this “Agreement”) with EF Hutton, division of Benchmark Investments, LLC (the “Representative”), and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as set forth below.
The Company is a majority-owned subsidiary of Jupiter Wellness, Inc., a Delaware corporation (“Parent”). Prior to the date hereof, the Company and Parent entered into an exchange agreement, dated December 9, 2022, as amended and restated on May 26, 2023 (the “Exchange Agreement”), pursuant to which (i) the Company agreed to issue to Parent 6,500,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), in exchange for all of the issued and outstanding ordinary shares of S.R.M. Entertainment Limited (“SRM Limited”), a limited company established under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China and a wholly-owned subsidiary of Parent that operates the Parent’s business segment that creates and sells innovative products for the toy and entertainment industries (the “SRM Business”), owned by Parent (the “Share Exchange”), on the terms and subject to the conditions set forth in the Exchange Agreement, effective August 14, 2023, to effect a separation of the SRM Business from Parent, pursuant to which, the SRM Business will be contributed to the Company and all expenses related thereto shall be the responsibility of the Company, in each case, on the terms and subject to the conditions set forth therein (the “Separation”); and (ii) Parent agreed to distribute 2,000,000 shares of Common Stock out of the 6,500,000 shares of Common Stock received pursuant to the Share Exchange to holders of its common stock, par value $0.001 per share, and certain warrant holders (the “Distribution”), in each case, of record as of July 7, 2023 as further described herein.
| 1. | PURCHASE AND SALE OF SECURITIES. |
| 1.1 | Firm Shares. |
| 1.1.1 | Nature and Purchase of Firm Shares. |
(i) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of 1,250,000 authorized but unissued shares of Common Stock (the “Firm Shares”).
(ii) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof, at a purchase price of $4.60 per Firm Share (92% of the public offering price for each Firm Share). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).
| 1.1.2 | Payment and Delivery of Firm Shares. |
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the first (1st) Business Day following the date hereof or the second (2nd) Business Day following the date hereof if the Registration Statement (as defined in Section 2.1.1 hereof) is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Sullivan & Worcester LLP, 1633 Broadway, New York, NY 10019 (“Representative’s Counsel”), or at such other place (or remotely by email or other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”
(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer in U.S. dollars (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of The Depository Trust Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay-at-home,” “shelter-in-place,” “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
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| 1.2 | Over-allotment Option. |
1.2.1 Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase from the Company up to 187,500 additional shares of Common Stock (the “Option Shares”), representing fifteen percent (15%) of the Firm Shares sold in the Offering (the “Over-allotment Option”). The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public Securities is herein referred to as the “Offering.”
1.2.2 Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within forty-five (45) days after the date of this Agreement. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or email or other electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than two (2) Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely by email or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.
1.2.3 Payment and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in U.S. dollars (same day) funds, payable to the order of the Company upon delivery to the Representative of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least one (1) Business Day prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares. The Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time and date are simultaneous with the Closing Date, the term “Closing Date” shall refer to the time and date of delivery of the Firm Shares and Option Shares.
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| 1.3 | Representative’s Warrants. |
1.3.1 Purchase Warrants. The Company hereby agrees to issue to the Representative (and/or its designees) on the Closing Date or the Option Closing Date, as applicable, one or more warrants for the purchase of an aggregate of up to 57,500 shares of Common Stock, representing 4% of the number of Firm Shares and Option Shares sold on the Closing Date or the Option Closing Date, as applicable, in the form attached hereto as Exhibit A (the “Representative’s Warrants”), shall be exercisable, in whole or in part, commencing on a date which is six (6) months after the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of Common Stock of $6.00, which is equal to 120% of the initial public offering price of the Firm Shares. The Representative’s Warrants and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrants and the underlying shares of Common Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrants, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
1.3.2 Delivery. Delivery of the Representative’s Warrants shall be made on the Closing Date or the Option Closing Date(s), as applicable, and shall be issued in the name or names and in such authorized denominations as the Representative may request.
| 1.4 | Non-Accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10 hereof, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1.0%) of the aggregate gross proceeds raised in the Offering; provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof. |
| 2. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. |
The Company, SRM Limited and Parent (together, the “Company Group”) each, severally and not jointly, represent and warrant to the Underwriters as of the Applicable Time (as defined in Section 2.1.1 below), as of the Closing Date and as of the Option Closing Date, if any, as follows:
| 2.1 | Filing of Registration Statement. |
2.1.1 Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-272250), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and contains and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the effective date of the Registration Statement (the “Effective Date”) pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
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Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated August 14, 2023, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering, that includes the Rule 430A Information, is hereinafter called the “Prospectus”. Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
“Applicable Time” means 5:00 p.m., Eastern time, on the date of this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule 2-B hereto.
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
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“Pricing Disclosure Package” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2 Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 001-41768) providing for the registration of the Common Stock pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The registration of the Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
| 2.2 | Stock Exchange Listing. The shares of Common Stock have been approved for listing on The Nasdaq Stock Market LLC (the “Exchange”), subject only to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. |
| 2.3 | No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information. |
| 2.4 | Disclosures in Registration Statement. |
2.4.1 Compliance with Securities Act and 10b-5 Representation.
(i) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with the Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to the Commission’s EDGAR filing system (“EDGAR”), except to the extent permitted by Regulation S-T promulgated under the Securities Act (“Regulation S-T”).
(ii) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
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(iii) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus hereto does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the following disclosure contained in the “Underwriting” section of the Pricing Prospectus or the Prospectus: the names of the Underwriters, the information in the table under the subheading titled “Over-Allotment Option”, the information under the subheadings titled “Price Stabilization, Short Positions and Penalty Bids,” “Electronic Distribution,” “Other Relationships” and “Selling Restrictions Outside the United States” (the “Underwriters’ Information”).
(iv) Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
2.4.2 Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and constitute valid and binding agreements of the Company enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with their respective terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental or regulatory agency, authority, body, entity or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity” and collectively, “Governmental Entities”), including, without limitation, those relating to environmental laws and regulations.
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2.4.3 Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and any applicable foreign laws, rules and regulations relating to the Offering and the Company’s business as currently conducted or contemplated are correct and complete in all material respects and no other such laws, rules or regulations are required under the Securities Act and the Securities Act Regulations to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
2.4.4 No Other Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the Offering other than any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus and other materials, if any, permitted under the Securities Act and consistent with Section 3.2 hereof.
2.4.5 Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
| 2.5 | Changes After Dates in Registration Statement. |
2.5.1 No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor any change or development that, singularly or in the aggregate, would reasonably be expected to result in a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “Material Adverse Change”); (ii) there has been no Parent Adverse Change (as defined in Section 2.18.2 below); (iii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iv) no officer (as defined in Rule 16a-1(f) of the Exchange Act) or director of the Company has resigned from any position with the Company.
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2.5.2 Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
| 2.6 | Reserved. |
| 2.7 | Independent Accountants. M&K CPAs, PLLC (the “Auditor”), whose reports are filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act. |
| 2.8 | Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons, if any, that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) since the date of the last balance sheet included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company nor any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”) has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (d) there has not been any material adverse change in the Company’s long-term or short-term debt. The Company represents that it has no direct or indirect Subsidiaries other than those listed in Exhibit 21.1 to the Registration Statement. |
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| 2.9 | Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock or any security convertible or exercisable into shares of Common Stock, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities. |
| 2.10 | Valid Issuance of Securities, etc. |
2.10.1 Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission or the ability to force the Company to repurchase such securities with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights, rights of first refusal or rights of participation of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock, options, warrants and other outstanding securities convertible into or exercisable for shares of Common Stock, were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such securities, exempt from such registration requirements. The description of the Company’s stock option, restricted stock awards and other related plans or arrangements, and options and/or other rights granted thereunder, as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, accurately and fairly present, in all material respects, the information required to be shown with respect to such plans, arrangements, options and rights.
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2.10.2 Securities Sold Pursuant to this Agreement. The Public Securities and the Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for pursuant to the terms of this Agreement, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and the Representative’s Securities are and will be free from all preemptive rights of any holders of any security of the Company, or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and the Representative’s Securities has been duly and validly taken. The Representative’s Warrants, when issued and paid for pursuant to this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, and no further action is required by the Company, the Company’s board of directors (“Board of Directors”) or the Company’s stockholders in connection therewith. The Public Securities and the Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The shares of Common Stock issuable upon exercise of the Representative’s Warrants have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrants, such shares of Common Stock will be validly issued, fully paid and nonassessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.
| 2.11 | Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any options, warrants, rights or other securities exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in the Registration Statement or any other registration statement to be filed by the Company. |
| 2.12 | Validity and Binding Effect of Agreements. The execution, delivery and performance of this Agreement, the Exchange Agreement and the Representative’s Warrants have been duly and validly authorized by the Company and/or Parent, as applicable, and constitute, the valid and binding agreements of the Company and/or Parent, as applicable, in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. |
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| 2.13 | No Conflicts, etc. The execution, delivery and performance by the Company and Parent of this Agreement, the Exchange Agreement, the Representative’s Warrants and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by each member of the Company Group, as applicable with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever upon any property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, note, lease, loan agreement or any other agreement or instrument, license or permit to which the Company is a party or as to which any property of the Company is a party; (ii) result in any violation of the provisions of the Company’s articles of incorporation or Parent’s second amended and restated certificate of incorporation (as each may be amended and/or restated from time to time, the “Charter”) or the amended bylaws of the Company or Parent’s amended and restated bylaws (as each may be amended or restated from time to time, the “Bylaws”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof having jurisdiction over the Company. |
| 2.14 | No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other agreement or instrument to which any member of the Company Group is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. Each member of the Company Group is not in violation of any term or provision of its Charter or Bylaws, or in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity. |
| 2.15 | Corporate Power; Licenses; Consents. |
2.15.1 Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, each member of the Company Group and the Subsidiaries has all requisite corporate power and authority, and has all consents, authorizations, approvals, licenses, certificates, clearances, permits and orders and supplements and amendments thereto (each an “Authorization”, and collectively, “Authorizations”) of and from all Governmental Entities that it needs as of the date hereof to conduct its business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.15.2 Transactions Contemplated Herein. The Company and Parent have all corporate power and authority to enter into this Agreement and the Representative’s Warrants, as applicable, and to carry out the provisions and conditions hereof and thereof, and all Authorizations required in connection therewith have been obtained. No Authorization of, and no filing with, any Governmental Entity or another body is required for the valid issuance, sale and delivery of the Public Securities and the Representative’s Securities and the consummation of the transactions and agreements contemplated by this Agreement, the Representative’s Warrants and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable Securities Act and Securities Act Regulations, the necessary filings and approvals from the Exchange to list the shares of Common Stock, state or foreign securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”), such consents and approvals as having been obtained and are in full force and effect, and such consents, approvals, orders, authorizations and filings the failure of which to make or obtain is not reasonably likely to result in a Material Adverse Change.
| 2.16 | D&O Questionnaires. All information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Insiders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.25 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate and incorrect. |
| 2.17 | Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or in connection with the Company’s listing application for the listing of the shares of Common Stock on the Exchange. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to any member of the Company Group’s knowledge, threatened against, or involving any member of the Company Group or, to the Company Group’s knowledge, any executive officer or director thereof which would reasonably be expected to result in a Material Adverse Change, which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the shares of Common Stock on the Exchange. |
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| 2.18 | Good Standing. |
2.18.1. The Company has been duly incorporated and is validly existing as a corporation and is in good standing under the laws of the State of Nevada as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.
2.18.2. Parent has been duly incorporated and is validly existing as a corporation and is in good standing under the laws of the State of Delaware as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a material adverse change in the financial position or results of operations of Parent, nor any change or development that, singularly or in the aggregate, would have or reasonably be expected to result in a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of Parent (a “Parent Adverse Change”).
| 2.19 | Insurance. Each of the Company and the Subsidiaries carries or is entitled to the benefits of insurance (including, without limitation, as to directors and officers insurance coverage), with reputable insurers, in such amounts and covering such risks which the Company and/or the respective Subsidiary believes is adequate as is customary for companies engaged in similar business, and to the Company’s knowledge, all such insurance is in full force and effect. Each of the Company and the Subsidiaries has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change. |
| 2.20 | Transactions Affecting Disclosure to FINRA. |
2.20.1 Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by any member of the Company Group or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.
2.20.2 Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
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2.20.3 Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.20.4 FINRA Affiliation. There is no (i) officer or director of the Company, (ii) beneficial owner of ten percent (10%) or more of any class of the Company’s securities or (iii) beneficial owner of the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA). Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Public Securities to repay any outstanding debt owed to any affiliate of any Underwriter.
2.20.5 Information. All information provided by the Company in its FINRA questionnaire and, to the Company’s knowledge, all the information provided by the Insiders in their FINRA questionnaires to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
| 2.21 | Foreign Corrupt Practices Act. Each member of the Company Group and their Subsidiaries has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the “FCPA”). None of the Company, any member of the Company Group and its Subsidiaries or, to the knowledge of each member of the Company Group and Subsidiary, any director, officer, agent, employee or affiliate of a member of the Company Group and its Subsidiaries or any other person acting on behalf of, and with authority from, a member of the Company Group and its Subsidiaries, has, directly or indirectly, given or agreed to give any unlawful money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of a member of the Company Group or a Subsidiary (or assist it in connection with any actual or proposed transaction) that could reasonably be expected to (i) subject any member of the Company Group or any Subsidiary to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, have had a Material Adverse Change or Parent Material Adverse Change or (iii) if not continued in the future, adversely affect the assets, business, operations or prospects of any member of the Company Group, (iv) violated or is in violation of any provision of the FCPA or any applicable non-U.S. anti-bribery statute or regulation, (v) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment, or (vi) received notice of any investigation, proceeding or inquiry by any Governmental Entity regarding any of the matters in clauses (i)-(v) above; and any member of the Company Group and, to the knowledge of any member of the Company Group, the Company Group’s affiliates have conducted their respective businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. |
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| 2.22 | Compliance with OFAC. None of the members of the Company Group and its Subsidiaries or, to the members of the Company Group’s knowledge, any director, officer, agent, employee or affiliate of any member of the Company Group and its Subsidiaries or any other person acting on behalf of, and with authority from, a member of the Company Group and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and any member of the Company Group will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC. |
| 2.23 | Anti-Money Laundering Laws. The operations of any member of the Company Group and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its Subsidiaries conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity (collectively, the “Anti-Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving any member of the Company Group with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the members of the Company Group, threatened. |
| 2.24 | Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and Parent and delivered to the Representative or to Representative Counsel on the Closing Date or on the Option Closing Date shall be deemed a representation and warranty by the Company or Parent, as applicable, to the Underwriters as to the matters covered thereby. |
| 2.25 | Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s and Parent’s officers (as defined in Rule 16a-1(f) of the Exchange Act), directors and all owners of record of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into shares of Common Stock) who will be subject to the Lock-Up Agreement (as defined below) (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”). |
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| 2.26 | Subsidiaries. All direct and indirect Subsidiaries of the Company are duly organized and in good standing under the laws of the place of organization or incorporation, and each Subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Change on the Company taken as a whole. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. |
| 2.27 | Related Party Transactions. |
2.27.1 Business Relationships. There are no business relationships or related party transactions involving the Company (within the scope of Item 404 of Regulation S-K) or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required under the Securities Act and the Securities Act Regulations.
2.27.2 No Unconsolidated Entities. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.27.3 No Loans or Advances to Affiliates. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of (i) any of the officers or directors of the Company, (ii) any other affiliates of the Company or (iii) any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, which are, in the case of clauses (ii) and (iii), required to be disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus.
| 2.28 | Board of Directors. The Board of Directors is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the rules and regulations of the Commission promulgated thereunder (the “Exchange Act Regulations”), the Sarbanes- Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange. |
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| 2.29 | Sarbanes-Oxley Compliance. |
2.29.1 Disclosure Controls. The Company has designed and currently maintains a system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act Regulations) that will comply with the requirements of the Exchange Act within the time period required and has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
2.29.2 Compliance. The Company is and at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act that are then in effect and with which the Company is required to comply with as of the Applicable Time or on the Closing Date, and has taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act then applicable to the Company.
| 2.30 | Accounting Controls. The Company maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Auditor and the Audit Committee of the Board of Directors have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. |
| 2.31 | No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended. |
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| 2.32 | No Labor Disputes. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent. The Company is not aware that any officer, key employee or significant group of employees of the Company or any Subsidiary plans to terminate employment with the Company or any Subsidiary, as applicable. |
| 2.33 | Intellectual Property Rights. The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will or would reasonably be expected to involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change: (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented or disclosed in a patent application has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any persons. |
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| 2.34 | Taxes. Each of the Company and its Subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary, except those that are being contested in good faith or as would not have, individually or in the aggregate, result in a Material Adverse Change. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. To the Company’s knowledge, there are no tax liens against the assets, properties or business of the Company. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes. |
| 2.35 | ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would or reasonably be expected to cause the loss of such qualification. |
| 2.36 | Compliance with Laws. Each of the Company and its Subsidiaries: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the business of the Company as currently conducted (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or written notice from any Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any Authorizations; (C) possesses all Authorizations and such Authorizations are valid and in full force and effect and are not in violation of any term of any such Authorizations; (D) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any activity conducted by the Company is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding, nor, to the Company’s knowledge, has there been any material noncompliance with or violation of any Applicable Laws by the Company that could reasonably be expected to require the issuance of any such communication or result in an investigation, corrective action, or enforcement action by any Governmental Entity; (E) has not received written notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; and (F) has filed, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission), except where the failure to be so in compliance would not, individually or in the aggregate, result in or reasonably be expected to have a Material Adverse Change. |
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| 2.37 | Emerging Growth Company. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act. “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act. |
| 2.38 | Environmental Laws. Each of the Company and its Subsidiaries is in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses (“Environmental Laws”), except where the failure to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any of its Subsidiaries (or, to the knowledge of the members of the Company Group, any other entity for whose acts or omissions the Company or any of its Subsidiaries is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company or any of its Subsidiaries, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Change; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which any member of the Company Group has knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Change. In the ordinary course of business, Parent, the Company and each of the Subsidiaries conduct periodic reviews of the effect of Environmental Laws on their respective business and assets, in the course of which they identify and evaluate associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or governmental permits issued thereunder, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such reviews, Parent, the Company and each of the Subsidiaries have reasonably concluded that such associated costs and liabilities would not have, singularly or in the aggregate, a Material Adverse Change. |
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| 2.39 | Title to Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and each of its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any of its Subsidiaries has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company any such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease. |
| 2.40 | Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required. |
| 2.41 | Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus. |
| 2.42 | Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the Effective Date and at the time of any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the Effective Date, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer. |
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| 2.43 | Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations. |
| 2.44 | Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources. |
| 2.45 | Electronic Road Show. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering. |
| 2.46 | Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Public Securities to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board. |
| 2.47 | Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. |
| 2.48 | Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities issued in such prior offerings under the Securities Act. |
| 2.49 | Confidentiality and Non-Competition. No director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer (other than the Company) or prior employer that could materially affect his or her ability to be and act in his or her respective capacity of the Company or be reasonable expected to result in a Material Adverse Change. |
| 2.50 | Corporate Records. The minute books of Parent, the Company and each of the Subsidiaries have been made available to the Representative and Representative Counsel and such books (i) contain minutes of all material meetings and actions of the board of directors (including each board committee) and stockholders of Parent, the Company and each of the Subsidiaries, and (ii) reflect all material transactions referred to in such minutes. |
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| 2.51 | Diligence Materials. Parent, the Company and each of the Subsidiaries have provided to the Representative and Representative Counsel all materials required or necessary to respond in all material respects to the diligence request submitted to the Company or Company Counsel by the Representative. |
| 2.52 | Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities. |
| 2.53 | Testing-the-Waters Communications. The Company has filed publicly on EDGAR, at least fifteen (15) calendar days prior to any “road show” (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the offer and sale of the Securities. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-C hereto. Each Written Testing-the-Waters Communications did not, as of the Effective Date, and at all times through the completion of the public offer and sale of the Public Securities will not, include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus. Each Written Testing-the-Waters Communication did not, as of the Effective Date, when taken together with the General Disclosure Package, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading , and at all times through the completion of the offer and sale of the Public Securities will not, include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act. |
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| 2.54 | Sanctions. None of the Company, any of its Subsidiaries, their directors or officers or, to the knowledge of the Company, any agent, employee, affiliate or other person acting on behalf of the Company or any of its Subsidiaries has engaged in any activities sanctionable under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the Iran Sanctions Act of 1996, the National Defense Authorization Act for Fiscal Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012 or any Executive Order relating to any of the foregoing (collectively, and as each may be amended from time to time, the “Iran Sanctions”); and the Company will not directly or indirectly use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of engaging in any activities sanctionable under the Iran Sanctions. |
| 2.55 | IT Systems. Except as would not, individually or in the aggregate, result in a Material Adverse Change, the Company reasonably believes that (i) each of the Company and the Subsidiaries owns or has a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and the Subsidiaries (the “Company IT Systems”), (ii) the Company IT Systems are adequate for, and operate and perform as required in connection with, the operation of the business of the Company as currently conducted and (iii) each of the Company and the Subsidiaries has implemented reasonable backup, security and disaster recovery technology consistent with applicable regulatory standards. |
| 2.56 | Cybersecurity. There has been no security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”), except as would not, individually or in the aggregate, result in a Material Adverse Change, and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, result in a Material Adverse Change; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices. |
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| 2.57 | U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon the Representative’s request. |
| 2.58 | Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. |
| 2.59 | Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. |
| 2.60 | Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Charter or the laws of its state of incorporation that is or could become applicable as a result of the Underwriters and the Company fulfilling their obligations or exercising their rights under this Agreement, the Exchange Agreement, the Lock-Up Agreements, and any other documents or agreements executed in connection with the transactions contemplated hereunder. |
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| 3. | COVENANTS OF THE COMPANY. |
The Company covenants and agrees as follows:
| 3.1 | Amendments to Registration Statement. The Company shall deliver to the Representative, at least one (1) Business Day (or such shorter time mutually agreed by the parties hereto) prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing. |
| 3.2 | Federal Securities Laws. |
3.2.1 Compliance. The Company, subject to Section 3.2.2 hereof, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will, during the period required to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus, notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of its receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and the Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement; and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and the Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
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3.2.2 Continued Compliance. The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of Representative Counsel or Company Counsel, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser; or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement; and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or Representative Counsel shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or Representative Counsel shall reasonably object.
3.2.3 Exchange Act Registration. Until the later of (i) three (3) years after the date of this Agreement and (ii) the expiration date of the Representative’s Warrants (or the date that all of the Representative’s Warrants have been exercised, if earlier), the Company shall use its best efforts to maintain the registration of the Common Stock under the Exchange Act. The Company shall not deregister the Common Stock under the Exchange Act without the prior written consent of the Representative.
3.2.4 Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each Issuer General Use Free Writing Prospectus set forth in Schedule 2-B. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representative as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus, the Company has knowledge that there has occurred or is occurring an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
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3.2.5 Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication, the Company has knowledge that there occurred or is occurring an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
| 3.3 | Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and Representative Counsel, without charge, conformed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to each Underwriter, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) upon receipt of a written request for each Underwriter. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. |
| 3.4 | Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. |
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| 3.5 | Effectiveness and Events Requiring Notice to the Representative. The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus for through and including the expiration date of the Representative’s Warrants (or the date that all of the Representative’s Warrants have been exercised, if earlier), and shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities or the Representative’s Securities, as applicable, for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall use its reasonable best efforts to obtain promptly the lifting of such order. |
| 3.6 | Review of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information. |
| 3.7 | Listing. The Company shall use its best efforts to maintain the listing of the shares of Common Stock on the Exchange for at least three (3) years from the Closing Date. |
| 3.8 | Financial Public Relations. As of the Effective Date, the Company shall have retained a financial public relations firm reasonably acceptable to the Representative, which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the Closing Date. |
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| 3.9 | Reports to the Representative. |
3.9.1 Periodic Reports, etc. For a period of three (3) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) a copy of each registration statement filed by the Company under the Securities Act; (v) a copy of each report or other communication furnished to stockholders and (vi) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request. Documents filed with the Commission pursuant to its EDGAR system or press releases shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.1. Any documents not filed with the Commission pursuant to its EDGAR system shall be delivered to jrallo@efhuttongroup.com, with a copy to dboral@efhuttongroup.com.
3.9.2 Transfer Agent; Transfer Sheets. For a period of three (3) years after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. VStock Transfer, LLC is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.
3.9.3 Trading Reports. During such time as any of the Public Securities are listed on the Exchange, the Company shall provide to the Representative, at the Company’s expense, such reports published by the Exchange relating to price trading of the Public Securities, as the Representative shall reasonably request.
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| 3.10 | Payment of Expenses. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses related to the Offering or otherwise incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Public Securities and the Representative’s Securities with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of the shares of Common Stock on the Exchange and such other stock exchanges as the Company and the Representative together determine, including any fees charged by DTC; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors; (e) all fees, expenses and disbursements relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel, which will be Representative Counsel) unless such filings are not required in connection with the Company’s proposed listing on the Exchange; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any agreement among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities; (j) fees and expenses of the Transfer Agent for the shares of Common Stock; (k) stock transfer and/or stamp taxes, if any, payable upon the transfer of the Public Securities from the Company to the Underwriters; (l) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones in an aggregate amount not to exceed $5,000; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) the fees and expenses of Representative Counsel in an amount not to exceed $175,000 in the event of a Closing of the Offering and a maximum of $50,000 in the event there is not a Closing; (p) the $29,500 cost associated with the Underwriters’ use of Ipreo’s book- building, prospectus tracking and compliance software for the Offering; (q) to the extent approved by the Company in writing, the costs associated with post-Closing advertising of the Offering in the national editions of the Wall Street Journal and New York Times; (r) up to $20,000 of the Representative’s actual accountable “road show” expenses for the Offering; and (s) the Underwriters’ actual accountable expenses for the Offering. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters, less the Advance (as such term is defined in Section 8.3 hereof). The Company further agrees that, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Public Securities, less the Advance; provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Representative pursuant to Section 8.3 hereof. |
| 3.11 | Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus. |
| 3.12 | Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by an independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement. |
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| 3.13 | Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities. |
| 3.14 | Internal Controls. The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. |
| 3.15 | Accountants. As of the date of this Agreement, the Company has retained an independent registered public accounting firm, as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board, reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the Closing Date. The Representative acknowledges that M&K CPAs, PLLC is acceptable to the Representative. |
| 3.16 | FINRA. For a period of ninety (90) days from the later of the Closing Date or the Option Closing Date, the Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of ten percent (10%) or more of any class of the Company’s securities or (iii) any beneficial owner of the Company’s unregistered equity securities which were acquired during the one hundred eighty (180) days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA). |
| 3.17 | No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement. |
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| 3.18 | Company Lock-Up Agreements. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of ninety (90) days after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company other than a registration statement on Form S-4 or S-8; (iii) complete any offering of debt securities of the Company, other than entering into a line of credit with a traditional bank; or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), (iii), or (iv) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise. |
The restrictions contained in this Section 3.18 shall not apply to (i) the Public Securities or the Representative’s Securities; (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security, in each case outstanding on the date hereof, provided that such options, warrants, securities are disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus and have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities, (iii) the issuance of shares of Common Stock issued as part of the purchase price in connection with acquisitions or strategic transactions, or (iv) the issuance by the Company of any shares of Common Stock or standard options to purchase shares of Common Stock to directors, officers or employees of the Company in their capacity as such pursuant to an Approved Stock Plan. “Approved Stock Plan” means any employee benefit plan which has been approved by the Board of Directors prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer or director for services provided to the Company in their capacity as such.
| 3.19 | Release of D&O Lock-up Period. If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.25 hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver. |
| 3.20 | Blue Sky Qualifications. The Company shall use its best efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may reasonably designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. |
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| 3.21 | Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations. |
| 3.22 | Press Releases. Prior to the Closing Date and any Option Closing Date, the Company shall not issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Representative is notified), without the prior written consent of the Representative, which consent shall not be unreasonably withheld, unless in the judgment of the Company and its counsel, and after notification to the Representative, such press release or communication is required by law. |
| 3.23 | Sarbanes-Oxley. For a period of one (1) year after the date of this Agreement, the Company shall at all times comply in all material respects with all applicable provisions of the Sarbanes-Oxley Act in effect from time to time. |
| 3.24 | IRS Forms. If requested by the Representative, the Company shall deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (“IRS”) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form. |
| 3.25 | Corporation Records Service. For a period of three (3) years from the Closing Date, the Company shall register and maintain the registration with the Corporation Records Service (including annual report information) published by Standard & Poor’s Corporation. |
| 3.26 | “Key Man” Life Insurance. On or prior to Closing, the Company shall procure and maintain “key man” life insurance (in the amount customary in the Company’s industry with the Company as the sole beneficiary thereof) with an insurer rated at least AA or better in the most recent edition of “Best’s Life Reports” on the lives of officers of the Company. |
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| 3.27 | D&O Insurance. The Company has procured and shall maintain directors and officers insurance for each of the officers and directors of the Company in a manner consistent with the Company’s business and industry standards. |
| 3.28 | Emerging Growth Company Status. The Company shall promptly notify the Representative if the Company ceases to be an “emerging growth company,” as defined in Section 2(a) of the Securities Act, at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period. |
| 4. | CONDITIONS OF UNDERWRITERS’ OBLIGATIONS. |
The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
| 4.1 | Regulatory Matters. |
4.1.1 Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by the Representative, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto shall have been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus shall have been issued and no proceedings for any of those purposes shall have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) under the Securities Act Regulations (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A under the Securities Act Regulations.
4.1.2 FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3 Exchange Clearance. On or prior to the Closing Date, the Common Stock shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
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| 4.2 | Company Counsel Matters. |
4.2.1 Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the favorable opinion and negative assurance letter of Sichenzia Ross Ference LLP (“Company Counsel”), counsel to the Company, dated the Closing Date and addressed to the Representative, in form and substance reasonably satisfactory to the Representative.
4.2.2 Opinion of Counsel for Parent. On the Closing Date, the Representative shall have received the favorable opinion and negative assurance letter of Sichenzia Ross Ference LLP, counsel to Parent, dated the Closing Date and addressed to the Representative, substantially in form and substance reasonably acceptable to the Representative.
4.2.3 Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable opinions and/or negative assurance letters of each counsel listed in Sections 4.2.1 and 4.2.2 hereof, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsels in their respective opinions delivered on the Closing Date.
4.2.4 Reliance. The opinions of each counsel listed in Sections 4.2.1 and 4.2.2 hereof and any opinion relied upon thereby shall include a statement to the effect that it may be relied upon by Representative Counsel in its opinion delivered to the Underwriters.
| 4.3 | Comfort Letters. |
4.3.1 Comfort Letter. At the time this Agreement is executed, the Representative shall have received a cold comfort letter from the Auditor containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to the Representative and to Representative Counsel, dated as of the date of this Agreement.
4.3.2 Bring-down Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1 hereof.
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| 4.4 | Officers’ Certificates. |
4.4.1 Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer and its Chief Financial Officer certifying that on behalf of the Company and not in an individual capacity that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to their knowledge after reasonable investigation, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included in the Pricing Disclosure Package, any Material Adverse Change.
4.4.2 Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Closing Date, as the case may be, respectively, certifying on behalf of the Company and not in an individual capacity: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
4.4.3 Parent Certificate. Parent shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer and its Chief Financial Officer certifying that on behalf of Parent and not in an individual capacity that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to their knowledge after reasonable investigation, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of Parent in this Agreement are true and correct and Parent has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included in the Pricing Disclosure Package, any Material Adverse Change.
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| 4.5 | No Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no Material Adverse Change in the condition or prospects or the business activities, financial or otherwise, of any member of the Company Group from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may reasonably be expected to cause a Material Adverse Change, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) no action shall have been taken and no law, statute, rule, regulation or order shall have been enacted, adopted or issued by any Governmental Entity which would prevent the issuance or sale of the Public Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of any member of the Company Group; (v) no injunction, restraining order or order of any other nature by any federal, state or foreign court of competent jurisdiction shall have been issued which would prevent the issuance or sale of the Public Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of any member of the Company Group; and (vi) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. |
| 4.6 | No Material Misstatement or Omission. The Underwriters shall not have discovered and disclosed to the Company on or prior to the Closing Date and any Option Closing Date that the Registration Statement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Representative Counsel, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue statement of fact which, in the opinion of Representative Counsel, is material or omits to state any fact which, in the opinion of Representative Counsel, is material and is necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. |
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| 4.7 | Corporate Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Public Securities, the Representative’s Securities, the Registration Statement, the Pricing Disclosure Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all other legal matters relating to this Agreement, the Representative’s Securities and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to Representative Counsel, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. |
| 4.8 | Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto. |
| 4.9 | Share Exchange, Separation and Distribution. On or before the date of this Agreement, the Share Exchange and the Separation shall have been consummated. On or before the Closing Date, the Distribution shall have been consummated. |
| 4.10 | Representative’s Warrants. On the Closing Date and each Option Closing Date (if any), the Company shall have delivered to the Representative executed copies of the Representative’s Warrants. |
| 4.11 | Additional Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representative and Representative Counsel. |
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| 5. | INDEMNIFICATION. |
| 5.1 | Indemnification of the Underwriters. |
5.1.1 General. The Company Group shall indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives, partners, shareholders, affiliates, counsel and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, (x) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and the Representative’s Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information or (y) otherwise arising in connection with or allegedly in connection with the Offering, including the Share Exchange, Separation and Distribution. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party (a) is based on the Underwriters’ Information or material omission therefrom, (b) results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.3 hereof, or (c) is found in a final, non-appealable judgment of a court of competent jurisdiction to have resulted primarily from the willful misconduct or gross negligence of such Underwriter Indemnified Party. The Company also agrees that it will reimburse each Underwriter Indemnified Party for all reasonable and documented fees and expenses (including but not limited to any and all reasonable legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise), and further agrees wherever and whenever possible to advance payment of such expenses as they are incurred by an Underwriter Indemnified Party in investigating, preparing, pursuing or defending any Claim.
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5.1.2 Procedure. If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1 hereof, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) the action includes both the Company and the indemnified party as defendants and such indemnified party or parties shall have been advised by its counsel that there may be defenses available to it or them which are different from or additional to those available to the Company which makes it impossible or inadvisable for the Company and such indemnified party to be represented in the action by the same counsel (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter Indemnified Parties who are party to such action (in addition to local counsel) shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld.
| 5.2 | Indemnification of the Company. Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to such losses, liabilities, claims, damages and expenses (or actions in respect thereof) which arise out of or are based upon untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2 hereof. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication. |
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| 5.3 | Contribution. |
5.3.1 Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and each of the Underwriters, on the other hand, from the Offering, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total proceeds from the Offering (before deducting expenses) received by the Company bear to the total underwriting discount and commissions received by the Underwriters in connection with the Offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, on the one hand, and the Underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company through the Representative by or on behalf of any Underwriter for use in any Preliminary Prospectus, any Registration Statement or the Prospectus, or in any amendment or supplement thereto, consists solely of the Underwriters’ Information and any material information that was omitted therefrom. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 5.3.1 no Underwriter shall be required to contribute any amount in excess of the total discount and commission received by such Underwriter in connection with the Offering less the amount of any damages which such Underwriter has otherwise paid or becomes liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
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5.3.2 Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid fifteen (15) days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute as provided in this Section 5.3 are several and in proportion to their respective underwriting obligation, and not joint.
| 6. | DEFAULT BY AN UNDERWRITER. |
| 6.1 | Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder. |
| 6.2 | Default Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 hereof relates to more than 10% of the number of Firm Shares or Option Shares, the Representative may in its discretion arrange for itself or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the number of Firm Shares or Option Shares, the Representative does not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties satisfactory to the Representative to purchase said Firm Shares or Option Shares on such terms. In the event that neither the Representative nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by the Representative or the Company without liability on the part of the Company (except as provided in Sections 3.10 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder. |
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| 6.3 | Postponement of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the reasonable opinion of Representative Counsel may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares or Option Shares. |
| 7. | ADDITIONAL COVENANTS. |
| 7.1 | Prohibition on Press Releases and Public Announcements. No member of the Company Group shall issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m., Eastern time, on the first (1st) Business Day following the forty-fifth (45th) day after the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business. |
| 7.2 | Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Public Securities listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one (1) member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” or , absent meeting such qualification, has “accounting or related financial management expertise” or “financial sophistication” or such term, as applicable, is defined under Regulation S-K or the listing rules of the Exchange, as applicable. |
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| 7.3 | Tail Period. The Company agrees to pay the Representative a cash fee equal to eight percent (8.0%) of the gross proceeds received by the Company from the sale of the securities offered to any investor actually introduced by the Representative to the Company during the Engagement Period (as defined below) (the “Tail Financing”), and such Tail Financing is consummated at any time during the Engagement Period or within the twelve (12) month period following the expiration of the Engagement Period, provided that such financing is by a party actually introduced to the Company in an offering in which the Company has direct knowledge of such party’s participation and not a party that the Company can demonstrate was already known to the Company. In addition, unless (x) the Company terminates this Agreement for “Cause” (as defined below), or (y) the Representative fails to provide the underwriting services provided in this Agreement, upon termination of this Agreement, if the Company subsequently completes a public or private financing with any investors introduced to the Company by the Representative during the twelve (12) month period following such termination, the Representative shall be entitled to receive the same compensation to be paid to the Representative in connection with the Offering. “Cause”, for the purpose of this Agreement, shall mean, as determined by a court of competent jurisdiction, willful misconduct, gross negligence or a material breach of this Agreement by the Representative. In the event that the Company believes that the Representative has engaged in conduct constituting Cause, the Company must first notify the Representative in writing of the facts and circumstances supporting such an assertion(s), and the Representative shall have twenty (20) days to cure such alleged conduct. “Engagement Period” shall mean the period beginning on January 18, 2022, and ending on the earlier of (i) August 7, 2023, (ii) the final Option Closing Date, if any, of the Offering, or (iii) the date that either party to this Agreement gives the other party to this Agreement at least thirty (30) days’ advance written notice of termination of that certain engagement letter agreement by and between the Company and the Representative, dated January 18, 2022, as amended on February 7, 2023 (the “Engagement Letter”), in accordance with the terms thereof. |
| 7.4 | [Reserved]. |
| 8. | EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF. |
| 8.1 | Effective Date. This Agreement shall become effective as of the date hereof once the Company, Parent and the Representative have executed the same and delivered counterparts of such signatures to the other parties. |
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| 8.2 | Termination. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in the Representative’s reasonable opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the Exchange or the New York Stock Exchange shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative’s reasonable opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of a Material Adverse Change, or an adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities. |
| 8.3 | Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) up to $50,000, inclusive of the payments totaling $50,000 in advance for accountable expenses previously paid by the Company to the Representative (the “Advance”), and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. |
Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
| 8.4 | Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 hereof shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof. |
| 8.5 | Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities. |
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| 9. | MISCELLANEOUS. |
| 9.1 | Constructive Knowledge. Whenever a representation or warranty or other statement in this Agreement (including, without limitation, schedules hereto) is made with respect to a party’s “knowledge,” such statement refers to the knowledge, after reasonable inquiry, of such party’s employees or agents who were or are responsible for or involved with the indicated matter. |
| 9.2 | Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by email transmission and confirmed and shall be deemed given when so delivered or emailed and confirmed (which confirmation may be by email transmission) or if mailed, two (2) days after such mailing. |
If to the Representative:
EF Hutton,
division of Benchmark Investments, LLC
590 Madison Avenue, 39th Floor
New York, New York 10022
Attn: Joseph T. Rallo
Email: jrallo@efhuttongroupcm.com
with a copy (which shall not constitute notice) to:
Sullivan & Worcester LLP
1633 Broadway
New York, NY 10019
Attn: David E. Danovitch
Email: ddanovitch@sullivanlaw.com
If to the Company:
SRM Entertainment, Inc.
1061 E Indiantown Road, Suite 110
Jupiter, Florida 33477
Attn:
Richard Miller, Chief Executive Officer
Email: rmiller@jupiterwellness.com
with a copy (which shall not constitute notice) to:
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, New York 10036
Attn: Arthur Marcus
Email: Amarcus@SRF.LAW
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If to the Parent:
Jupiter Wellness, Inc.
1061 E. Indiantown Rd., Ste. 110
Jupiter, FL 33477
Attn: Brian John, Chief Executive Officer
Email: bjohn@jupiterwellness.com
with a copy (which shall not constitute notice) to:
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, New York 10036
Attn: Arthur Marcus
Email: Amarcus@SRF.LAW
| 9.3 | Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. |
| 9.4 | Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto. |
| 9.5 | Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that the Engagement Letter shall remain in full force and effect. |
| 9.6 | Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters. |
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| 9.7 | Governing Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof to the extent that such principles or rules would require or permit the application of the laws of any jurisdiction other than those of the State of New York. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. Each of the Company and the Underwriters agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. |
| 9.8 | Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by email/pdf transmission shall constitute valid and sufficient delivery thereof. |
| 9.9 | Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment. |
[Signature Page Follows]
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If the foregoing correctly sets forth the understanding between the Underwriters, the Company and Parent, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
| Very truly yours, | ||
| SRM ENTERTAINMENT, INC. | ||
| By: | /s/ Richard Miller | |
| Name: | Richard Miller | |
| Title: | Chief Executive Officer | |
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian S. John | |
| Name: | Brian S. John | |
| Title: | Chief Executive Officer | |
as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto:
| EF HUTTON, | ||
| division of Benchmark Investments, LLC | ||
| By: | /s/ Sam Fleischman | |
| Name: | Sam Fleischman | |
| Title: | Supervisory Principal | |
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SCHEDULE 1
| Underwriter | Total Number of Firm Shares to be Purchased | Number of Additional Option Shares to be Purchased if the Over-Allotment Option is Fully Exercised | ||||||
| EF Hutton, division of Benchmark Investments, LLC | 1,195,000 | 179,250 | ||||||
| Dominari Securities LLC | 50,000 | 7,500 | ||||||
| Westpark Capital, Inc. | 5,000 | 750 | ||||||
| TOTAL | 1,250,000 | 187,500 | ||||||
SCHEDULE 2-A
Pricing Information
Number of Firm Shares: 1,250,000
Number of Option Shares: 187,500
Public Offering Price per Firm Share: $5.00
Public Offering Price per Option Share: $5.00
Underwriting Discount per Firm Share: $0.40
Underwriting Discount per Option Share: $0.40
Proceeds to Company per Firm Share (before expenses): $4.60
Proceeds to Company per Option Share (before expenses): $4.60
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
None.
SCHEDULE 2-C
Written Testing-the-Waters Communications
None.
SCHEDULE 3
List of Lock-Up Parties
Directors and Executive Officers
| 1. | Richard Miller | |
| 2. | Douglas McKinnon | |
| 3. | Taft Flittner | |
| 4. | Deborah McDaniel-Hand | |
| 5. | Brian John | |
| 6. | Gary Herman | |
| 7. | Christopher Melton | |
| 8. | Hans Haywood | |
| 9. | Dr. Skender Fani | |
| 10. | Glynn Wilson | |
| 11. | Hector Alila | |
| 12. | Nancy Torres Kaufman |
5% Stockholders
| 13. | Jupiter Wellness, Inc. |
EXHIBIT A
Form of Representative’s Warrant
(See attached.)
EXHIBIT B
Form of Lock-Up Agreement
____________, 2023
EF HUTTON,
division of Benchmark Investments, LLC
as Representative of the Underwriters
590 Madison Avenue, 39th Floor
New York, New York 10022
Ladies and Gentlemen:
The undersigned understands that EF Hutton, division of Benchmark Investments, LLC (the “Representative”), proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with SRM Entertainment, Inc., a Nevada corporation (the “Company”), and Jupiter Wellness, Inc., a Delaware corporation (“Parent”), providing for the public offering (the “Public Offering”) of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock).
To induce the Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof and ending ninety (90) days after the date of the Underwriting Agreement (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 13 or Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or other public announcement shall be required or shall be voluntarily made during the Lock-Up Period in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of the undersigned or a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; or (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock- Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) it shall be a condition to any such transfer that (i) the transferee/donee agrees to be bound by the terms of this lock-up agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto; (ii) each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the Lock-Up Period; and (iii) the undersigned notifies the Representative at least two (2) business days prior to the proposed transfer or disposition.
In addition, the foregoing restrictions shall not apply to (i) the exercise or vesting of stock options or other equity awards granted pursuant to the Company’s equity incentive plans; provided that it shall apply to any of the undersigned’s shares of Common Stock issued upon such exercise, (ii) the conversion or exercise of convertible debt or warrants; provided that it shall apply to any of the undersigned’s shares of Common Stock issued upon such exercise, or (iii) the establishment of any new plan (a “Plan”) that satisfies all of the requirements of Rule 10b5-1I(1)(i)(B) under the Exchange Act; provided that no sales of the undersigned’s securities of the Company shall be made pursuant to such new Plan prior to the expiration of the Lock-Up Period (as such may have been extended pursuant to the provisions hereof), and such a Plan may only be established if no public announcement of the establishment or existence thereof and no filing with the U.S. Securities and Exchange Commission or other regulatory authority in respect thereof or transactions thereunder or contemplated thereby, by the undersigned, the Company or any other person, shall be required, and no such announcement or filing is made voluntarily, by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period (as such may have been extended pursuant to the provisions hereof).
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities subject to this lock-up agreement except in compliance herewith.
The undersigned agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during the period from the date hereof to and including the thirty-fourth (34th) day following the expiration of the Lock-Up Period, the undersigned will give notice thereof to the Company and will not consummate any such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period has expired.
If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable to any shares of Common Stock that the undersigned may purchase or receive as a distribution in connection with the Public Offering; (ii) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the shares of Common Stock to be sold thereunder, the undersigned shall be released from all obligations under this lock-up agreement.
This lock-up agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
| Very truly yours, | ||
| (Name - Please Print) | ||
| (Signature) | ||
| (Name of Signatory, in the case of entities - Please Print) | ||
| (Title of Signatory, in the case of entities - Please Print) | ||
| (Name - Please Print) | ||
| Address: | ||
EXHIBIT C
Form of Press Release
SRM Entertainment, Inc.
[Date]
SRM Entertainment, Inc. (the “Company”) announced today that EF Hutton, division of Benchmark Investments, LLC, acting as representative for the underwriters in the Company’s recent public offering of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to _______________ shares of common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on___________, 202__, and such shares of common stock may be sold on or after such date.
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.
Exhibit 10.2
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the “Agreement”) is entered into as of December 9, 2022, by and between Jupiter Wellness, Inc., a Delaware corporation (the “Company”) and SRM Entertainment, Inc, a Nevada corporation (“SRM NV”) formed on April 24, 2022. Each party to this Agreement is individually referred to herein as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the Company is a publicly held corporation organized under the laws of the State of Delaware and listed and traded on the NASDAQ Exchange under the symbol JUPW;
WHEREAS, the Company owns 100% of the issued and outstanding shares of SRM Entertainment LTD, a Hong Kong Special Administrative Region of the People’s Republic of China limited company (“SRM Ltd”);
WHEREAS, The Company agrees to acquire 6,500,000 shares of SRM NV’s common stock (the “SRM NV Common Stock”) (representing 79.3% of SRM NV’s outstanding common stock) in exchange for all of the issued and outstanding shares of the SRM Ltd common stock (the “SRM Ltd Common Stock”);
WHEREAS, it is the intent of the Parties that SRM NV file a registration Statement (SEC Form S-1) to register certain shares of SRM NV as soon as practicable; and
WHEREAS, for Federal income tax purposes, it is intended that the Exchange qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
AGREEMENT
NOW THEREFORE, on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived therefrom, and intending to be legally bound hereby, it is hereby agreed as follows:
ARTICLE I – SHARE EXCHANGE
Section 1.01 The Exchange. On the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined below), (i) the Company shall sell, assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, all of the shares of SRM Ltd. Common Stock held by the Company to SRM NV; the objective of such sale (the “Exchange”) being the acquisition by SRM NV of not less than 100% of the issued and outstanding shares of SRM Ltd Common Stock. In exchange for the transfer of such securities by the Company, SRM NV shall deliver to the Company 6,500,000 restricted shares of SRM NV Common Stock at closing (as defined below) (the “Consideration Shares”).
Section 1.02 Closing. The closing (“Closing” or “Closing Date”) of the transactions contemplated by this Agreement shall take place at a mutually agreeable time and place and shall close immediately after the effective date of the SEC Form S-1.
ARTICLE II – TRANSITION
Section 2.01 Shared Employees. Douglas McKinnon and Markita Russell are currently providing services to both the Company and SRM NV and shall continue to do so during the transition period. For providing these services, Mr. McKinnon and Ms. Russell shall be paid $25,000 per annum directly from SRM NV. The transition period shall be mutually agreed upon by the Parties.
Section 2.02 Office and Facilities. Currently both the Company and SRM NV share the same office premises and related facilities. The Company agrees that SRM NV may maintain its presence at the current office location until such time as it is mutually agreed that SRM NV requires its own office and facilities, or the Parties agree on a monthly sub-lease arrangement.
ARTICLE III – MISCELLANEOUS
Section 3.01 Governing Law. This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of the laws of the State of Florida. Venue for all matters shall be in Palm Beach County, Florida, without giving effect to principles of conflicts of law thereunder. Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the federal courts of the United States in the Southern District of Florida. By execution and delivery of this Agreement, each party hereto irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction.
Section 3.02 Notices. Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered to it or sent by telecopy, overnight courier or registered mail or certified mail, postage prepaid, addressed as follows:
If to SRM NV to:
Richard Miller
1061 E. Indiantown Rd., Ste. 110
Jupiter, FL 33477
If to JUPW to:
Brian S. John
1061 E. Indiantown Rd., Ste. 110
Jupiter, FL 33477
or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered, (ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3) days after mailing, if sent by registered or certified mail.
Section 3.03 Attorney’s Fees. In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party shall be reimbursed by the losing party for all costs, including reasonable attorney’s fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.
Section 3.04 Confidentiality. Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement. In the event of the termination of this Agreement, each party shall return to the other party all documents and other materials obtained by it or on its behalf and shall destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein.
Section 2.05 Expenses. The Company will bear the expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby.
Section 2.06 Entire Agreement. This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.
| JUPITER WELLNESS, INC.: | ||||
| By: | /s/ Brian John | |||
| Name: | Brian S. John | |||
| Date: | 12/09/2022 | Title: | Chief Executive Officer | |
| SRM ENTERTAINMENT, INC.: | ||||
| By: | /s/ Richard Miller | |||
| Name: | Richard Miller | |||
| Date: | 12/09/2022 | Title: | Chief Executive Officer | |
Exhibit 10.3
AMENDED AND RESTATED STOCK EXCHANGE AGREEMENT
between
JUPITER WELLNESS, INC.
and
SRM ENTERTAINMENT, INC.
Dated as of May 26, 2023
AMENDED AND RESTATED STOCK EXCHANGE AGREEMENT, dated as of May 26, 2023 between Jupiter Wellness, Inc., a Delaware corporation (the “Company”), and SRM Entertainment, Inc., a Nevada corporation (“SRM”) (the Company and SRM each a “Party” and together, the “Parties”).
WHEREAS, on December 9, 2022, the Parties entered into a Stock Exchange Agreement (the “Original Agreement”) whereby SRM agreed to acquire all of the capital stock of SRM Ltd., as defined below;
WHEREAS, the Company is a publicly held corporation organized under the laws of the State of Delaware and its shares of common stock are listed and traded on the Nasdaq Stock Market LLC under the symbol JUPW;
WHEREAS, the Company owns 100% of the issued and outstanding ordinary shares of SRM Entertainment LTD, a Hong Kong Special Administrative Region of the People’s Republic of China limited company (“SRM Ltd”), which currently operates the Company’s business segment that creates and sells innovative products for the toy and entertainment industries (the “SRM Business”), and owns all of the assets and liabilities related thereto;
WHEREAS, the Parties have determined to effect a separation of the SRM Business from the Company (the “Separation”) whereby the SRM Business will be contributed to SRM and all expenses related thereto shall be the responsibility of SRM, in each case, on the terms and subject to the conditions set forth herein;
WHEREAS, to effect the Separation, the Company desires to acquire 6,500,000 shares of SRM’s common stock, par value $0.0001 per share (the “SRM Common Stock”), (representing approximately 80.0% of SRM’s outstanding common stock post-exchange) in exchange for all of the issued and outstanding ordinary shares of SRM Ltd owned by the Company (the “SRM Ltd Shares”);
WHEREAS, SRM intends to file with the Securities and Exchange Commission (“SEC”) a draft Registration Statement on Form S-1 (the “IPO Registration Statement”) to register certain shares of SRM Common Stock to be sold in an initial public offering of SRM (the “SRM IPO”) and to be distributed to stockholders of the Company as of a record date (the “Record Date”) to be determined by the Company (the “Distribution”), drafts of which have been confidentially submitted to the SEC; and
WHEREAS, the Company and SRM have determined that it is necessary and desirable to amend and restate the Original Agreement in its entirety on the terms and conditions set forth herein, effective as of the date stated above.
NOW, THEREFORE, in consideration of the foregoing premises and the covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
Share Exchange
1.01. Share Exchange.
(a) Share Exchange. On the terms and subject to the conditions set forth in this Agreement, at or prior to the effective time of the IPO Registration Statement (the “Effective Time”), the Company shall contribute, convey, transfer, assign and deliver to SRM, as a contribution, all of its right, title and interest in and to the SRM Ltd Shares owned by it, free and clear of all liens and encumbrances, and in exchange therefor, SRM will accept and agree to assume all obligations with respect to such SRM Ltd Shares, if any, from and after the Effective Time and shall issue to the Company 6,500,000 shares of SRM Common Stock (the “Share Exchange”).
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(b) Costs and Expenses for Transfer of Assets and Liabilities. Any costs and expenses incurred to effect any assignment, transfer, conveyance and delivery contemplated by this Section 1.01 shall, except as set forth herein, be the responsibility of the Company. Other than costs and expenses incurred in accordance with the foregoing, nothing in this Section 1.01(b) shall require any Party to incur any material obligation or grant any material concession for the benefit of any member of the other Party in order to effect any transaction contemplated by this Section 1.01; and
(c) In the event that at any time after the Effective Time, a Party becomes aware that an SRM Asset (as defined below) has not been transferred pursuant to Section 1.01(a), the Parties shall cause the prompt transfer of such SRM Asset.
1.02. Vendor and other Contracts.
All current contracts pertaining to the SRM Business are in the name of SRM Ltd. In the event that any contract necessary to operate the business of SRM are in the Company’s name, the Company shall obtain the necessary consents to transfer such contracts to SRM.
ARTICLE II
THE SRM IPO
2.01. Sole and Absolute Discretion; Cooperation.
Subject to the terms of the underwriting agreement to be entered into between the Company, SRM and the underwriters in the SRM IPO (the “Underwriting Agreement”), the Company and SRM shall mutually determine the terms of the SRM IPO, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the SRM IPO and the timing and conditions to the consummation of the SRM IPO. In addition, subject to the terms of the Underwriting Agreement, the Company and SRM may, at any time and from time to time until the consummation of the SRM IPO, modify or change the terms of the SRM IPO, including by accelerating or delaying the timing of the consummation of all or part of the SRM IPO. SRM shall cooperate with the Company to accomplish the SRM IPO and shall promptly take any and all actions necessary or desirable to effect the SRM IPO, including, without limitation, the registration under the Securities Act of 1933, as amended (the Securities Act”), shares of SRM Common Stock on an appropriate registration form or forms to be designated by the Company.
2.02. Actions Prior to the SRM IPO.
(a) Subject to the conditions specified in this Section 2.02, the Company and SRM shall use their reasonable best efforts to consummate the SRM IPO. Such actions shall include, but not necessarily be limited to, those specified in this Section 2.02.
(b) Registration Statements. SRM shall prepare and file the IPO Registration Statement, and shall file such amendments or supplements thereto, and shall use its reasonable best efforts to cause the same to become and remain effective as required by law or by the Underwriting Agreement, including, but not limited to, filing such amendments to the IPO Registration Statement as may be required by the Underwriting Agreement, the SEC or federal, state or foreign securities laws. The IPO Registration Statement and any preliminary, final or supplemental prospectus forming a part of the Registration Statement (each, a “Prospectus”) shall contain such information as is required under the Securities Act. The Company and SRM shall also cooperate in preparing, filing with the SEC and causing to become effective a registration statement registering the SRM Common Stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(c) Underwriting Activities. SRM and the Company shall enter into the Underwriting Agreement, in form and substance reasonably satisfactory to the Company and SRM and shall comply with their obligations thereunder.
(d) SRM IPO Consultation. The Company and SRM shall consult with each other and the underwriter in the SRM IPO (the “Underwriter”) regarding the timing, pricing and other material matters with respect to the SRM IPO.
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(e) Nasdaq Listing. SRM shall prepare, file and use its reasonable best efforts to have the SRM Common Stock approved for listing on Nasdaq, subject to official notice of issuance.
(f) Preparation of Materials. SRM shall participate in the preparation of materials and presentations as the Underwriter shall deem necessary or desirable.
(g) SRM IPO Costs. SRM shall pay all third-party costs, fees and expenses relating to the SRM IPO, all of the reimbursable expenses of the Underwriter pursuant to the Underwriting Agreement, all of the costs of producing, printing, mailing and otherwise distributing the Prospectus, as well as the Underwriter’s discount as provided in the Underwriting Agreement.
(h) SRM Directors and Officers. On or prior to the Effective Time the Company and SRM shall take all necessary actions so that, as of such time, the directors and executive officers of SRM shall be those set forth in the IPO Registration Statement, unless otherwise agreed by the Parties.
2.03. Conditions Precedent to Consummation of the SRM IPO.
(a) Subject to Section 2.01, as soon as practicable after the date of this Agreement, the Parties hereto shall use their reasonable best efforts to satisfy the conditions to the consummation of the SRM IPO set forth in this Section 2.03:
(i) The Share Exchange shall have occurred as contemplated by Section 1.01 so that by operation of law SRM owns all of the SRM Assets or has licenses to any assets necessary to operate the SRM Business as conducted by the Company and SRM Ltd immediately prior to the Effective Time.
(ii) The IPO Registration Statement shall have been filed and declared effective by the SEC, and there shall be no stop-order in effect with respect thereto, and no proceeding for that purpose shall have been instituted by the SEC.
(iii) The shares of SRM Common Stock shall have been approved for listing on Nasdaq, subject to official notice of issuance.
(iv) SRM and the Company shall have entered into the Underwriting Agreement, and all conditions to the obligations of SRM, the Company and the Underwriter shall have been satisfied or waived.
(viii) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation or the SRM IPO or any of the other transactions contemplated by this Agreement shall be in effect.
(ix) Such other actions as the parties hereto may, based upon the advice of counsel, reasonably requested to be taken prior to the Separation and the SRM IPO in order to assure the successful completion of the Separation and the SRM IPO and the other transactions contemplated by this Agreement shall have been taken.
(x) This Agreement shall not have been terminated.
(xi) No event or development shall have occurred or exist or be expected to occur that, in the judgment of the Company’s Board of Directors, in its sole discretion, makes it inadvisable to effect the Share Exchange or the SRM IPO.
(b) The foregoing conditions are for the sole benefit of the Company and shall not give rise to or create any duty on the part of the Company to waive or not waive such conditions or in any way limit the Company’s right to terminate this Agreement or alter the consequences of any such termination from those specified in such Article. Any determination made by the Company’s board prior to the entry into the Underwriting Agreement concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 2.03 shall be conclusive. This Agreement may only be terminated in accordance with Section 9.01.
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ARTICLE III
THE DISTRIBUTION
3.01. Sole and Absolute Discretion; Cooperation.
(a) The Company shall effect the Distribution as promptly as possible following the Effective Time; provided, however, that prior to the Effective Time, the Company and SRM may determine whether to proceed with, the Distribution. Subject to any restrictions contained in the Underwriting Agreement, the Company shall have the sole discretion to determine the declaration and payment dates of the Distribution at any time prior to the Effective Time, and the payment date as so determined by the Company is referred to herein as the “Distribution Date.” The Distribution will not take place unless the IPO Registration Statement is declared effective by the SEC.
(b) SRM shall cooperate with the Company to accomplish the Distribution and shall, at the Company’s direction, promptly take any and all actions necessary or desirable to effect the Distribution.
3.02. Actions Prior to the Distribution.
Prior to the Distribution Date and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:
(a) Securities Law Matters. The Company and SRM shall prepare, prior to the Distribution, for the holders of shares of common stock of the Company, such information concerning SRM, its business, operations and management, the Distribution and such other matters as the Company shall reasonably determine and as may be required by law. The Company and SRM will prepare and file with the SEC any such documentation, which the Company and SRM determine to be necessary or desirable to effectuate the Distribution, and the Company and SRM shall each use its reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. The IPO Registration Statement shall serve to have satisfied this requirement.
(b) The Distribution Agent. The Company shall enter into an agreement with VStock Transfer, LLC, the Company’s transfer agent (the “Agent”), or otherwise provide instructions to the Agent regarding the Distribution.
3.03 Conditions to the Distribution.
(a) The consummation of the Distribution will be subject to the satisfaction, or waiver by the Company in its sole and absolute discretion, of the following conditions:
(i) The actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws, including, but not limited to the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, in connection with the Distribution shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable governmental authority.
(ii) No order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the transactions related thereto shall be in effect, and no other event outside the control of the Company shall have occurred or failed to occur that prevents the consummation of the Distribution or any related transactions.
(iii) The shares of SRM Common Stock shall have been approved for listing on Nasdaq, subject to official notice of issuance.
(b) The foregoing conditions are for the sole benefit of the Company and shall not give rise to or create any duty on the part of the Company or the Company’s board to waive or not waive any such condition or in any way limit the Company’s right to terminate this Agreement or alter the consequences of any such termination from those specified herein. Any determination made by the Company’s board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 2.03(a) shall be conclusive and binding on the Parties. The Company’s ability to terminate this Agreement shall cease upon the execution of the IPO Underwriting Agreement.
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3.04. The Distribution.
(a) Subject to Section 2.03, on or prior to the Distribution Date, the Company will instruct the Agent to set aside 2,000,000 of the shares of SRM Common Stock to be issued to the Company in the Separation for the benefit of holders of shares of common stock of the Company and certain warrants issued in the Company’s July 2021 offering (the “July Warrants”) on a record date to be determined by the Company (the “Record Date”) to effect the Distribution, and shall cause the Agent to distribute, as of the Distribution Date, the appropriate number of whole shares of SRM Common Stock to each such holder (the “Record Holder”) or designated transferee or transferees of any Record Holder by way of direct registration in book-entry form. The Distribution shall be effective as of the Distribution Date.
(b) Each Record Holder will be entitled to receive in the Distribution a number of whole shares of SRM Common Stock equal to the number of shares of common stock of the Company or shares of common stock of the Company underlying the July Warrants held by such Record Holder on the Record Date multiplied by the distribution ratio to be determined by the Company, rounded up to the nearest whole number.
(c) Until the shares of SRM Common Stock are duly transferred in accordance with this Section 3.04 and applicable law, from and after the Distribution Date, SRM will regard the individuals or entities entitled to receive such shares of SRM Common Stock in accordance with this Section 3.04 as record holders of shares of SRM Common Stock in accordance with the terms of the Distribution without requiring any action on the part of such individuals or entities. SRM agrees that, subject to any transfers of such shares, from and after the Distribution Date, (i) each such holder will be entitled to receive all dividends, if any, payable on, and exercise voting rights and all other rights and privileges with respect to, the shares of SRM Common Stock then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the shares of SRM Common Stock then held by such holder.
ARTICLE IV
COMPANY RELEASE; INDEMNIFICATION
4.01. Release of Pre-Separation Claims.
(a) Company Release of SRM. Effective as of the Effective Time, the Company does hereby, for itself and each of its subsidiaries and their respective successors and assigns, and, to the extent permitted by law, all individuals who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of the Company (in each case, in their respective capacities as such), remise, release and forever discharge (i) SRM and their respective successors and assigns, including SRM Ltd, and (ii) all stockholders, directors, officers, agents or employees of SRM or SRM Ltd other than the Company (such persons released in this Section 4.01(a) shall be referred to as the “SRM Persons”, in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from (A) all of the liabilities of the Company, (B) all liabilities arising from or in connection with the transactions and all other activities to implement the Separation, the Share Exchange, the SRM IPO and the Distribution and (C) all damages arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to or following the Effective Time (whether or not such labilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the business of the Company or any liability of the Company (the “Company Liabilities”). To avoid ambiguity, the Company agrees that in the event that an action is brought against the Company related to the Separation, the Share Exchange, the SRM IPO or the Distribution, the Company agrees not to bring any claim against SRM or any SRM Person.
(b) No Claims. The Company shall not make any claim or demand, or commence any judicial proceeding asserting any claim or demand, including any claim of contribution or any indemnification, against SRM, or any other SRM Person released pursuant to Section 4.01(b), with respect to any SRM Liabilities (as defined below) released pursuant to Section 4.01(b).
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4.02. Indemnification by SRM.
Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by Law, SRM shall, indemnify, defend and hold harmless the Company and each stockholder, director, officer, agent or employees of the Company, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Company Indemnitees”), from and against any and all liabilities of the Company Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):
(a) any the SRM Business or the SRM Assets;
(b) any SRM Liability;
(c) any failure of SRM to pay, perform or otherwise promptly discharge any SRM Liability in accordance with their terms, whether prior to, on or after the Effective Time; and
(d) any material breach by SRM of this Agreement.
4.03. Indemnification by the Company.
Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by law, the Company shall, and shall cause the other members of the Company to, indemnify, defend and hold harmless SRM and each SRM Person or their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “SRM Indemnitees”), from and against any and all liabilities of the SRM Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):
(a) any Company Liability or the Company’s assets or business other than the SRM Business or the SRM Assets;
(b) any failure of the Company to pay, perform or otherwise promptly discharge any of the Company Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;
(c) any breach by the Company of this Agreement;
(e) Company Taxes (as defined below);
(f) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information (i) contained in the IPO Registration Statement or any Prospectus (including in any amendments or supplements thereto), (ii) contained in any public filings made by the Company with the SEC following the date of the SRM IPO, or (iii) provided by the Company to SRM specifically for inclusion in SRM’s annual or quarterly or current reports following the date of the SRM IPO; and
(g) any action brought against SRM relating to the SRM IPO, the Separation, the Share Exchange or the Distribution.
4.04. Indemnification Obligations Net of Insurance Proceeds and Other Amounts.
(a) The Parties intend that any liability subject to indemnification (an “Indemnified Liability”), contribution or reimbursement pursuant to this Article IV will be net of any insurance proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any individual or entity by or on behalf of the Indemnitee (as defined below) in respect of any Indemnifiable Liability pursuant to an insurance policy (an “Insurance Policy”). Accordingly, the amount which either Party (an “Indemnifying Party”) is required to pay to any person entitled to indemnification or contribution hereunder (an “Indemnitee”) will be reduced by any insurance proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any person by or on behalf of the Indemnitee in respect of the related Indemnified Liability. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Indemnified Liability and subsequently receives any insurance proceeds or any other amounts in respect of such Indemnified Liability, then within ten (10) calendar days of receipt of such insurance proceeds, the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the insurance proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.
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(b) The Parties agree that it is their intent that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement , have any subrogation rights with respect thereto, it being understood that no insurer or any other Indemnified Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification and contribution provisions hereof. Each Party shall use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Indemnified Liabilities for which indemnification or contribution may be available under this Article IV. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any action to collect or recover insurance proceeds, and an Indemnitee need not attempt to collect any insurance proceeds prior to making a claim for indemnification or contribution or receiving any Indemnity Payment otherwise owed to it under this Agreement.
4.05. Procedures for Indemnification of Third-Party Claims.
(a) Notice of Claims. If, at or following the Effective Time, an Indemnitee shall receive notice or otherwise learn of the assertion by an individual or entity who is not themselves an Indemnified Party (including any federal, state or foreign government of government agency (a “Governmental Authority”) who is not a subsidiary of the Company of any claim or of the commencement by any such person of any action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 4.02 or 4.03, or any other Section of this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event within fourteen (14) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 4.05(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 4.05(a).
(b) Control of Defense. Subject to any insurer’s rights pursuant to an Insurance Policy of either Party, an Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided, that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such damages to the extent resulting from, or arising out of, such Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim. Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 4.5(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim and specifying any reservations or exceptions to its defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim as provided in this Section 4.5(b) or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 4.5(a), then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim. Notwithstanding anything herein to the contrary, to the extent a Third-Party Claim involves or would reasonably be expected to involve both an SRM Liability and the Company Liability (collectively, a “Shared Third-Party Claim”), the Company shall have the sole right to defend and control such portion of any Action relating to such Third-Party Claim to the extent it relates to a the Company Liability, and SRM shall have the sole right to defend and control such portion of any Action relating to such Third-Party Claim to the extent it relates to an SRM Liability.
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(c) Allocation of Defense Costs. If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, whether with or without any reservations or exceptions with respect to such defense, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 4.05(a), and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim. In the event of a Shared Third-Party Claim, each Party shall be liable for the portion of the fees and expenses incurred by such Party in connection with the defense of such Shared Third-Party Claim that is equal to the relative portion of such Party’s Liability in respect of such Shared Third-Party Claim, and shall be entitled to seek any indemnification or reimbursement from the other Party for any fees or expenses incurred by such Party during the course of the defense of such Shared Third-Party Claim in excess of such fees and expenses that are the responsibility of such Party pursuant to this Agreement.
(d) No Settlement. Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages that are fully payable by the settling or compromising Party, does not involve any admission, finding or determination of wrongdoing or violation of Law or the Indemnitee and provides for a full, unconditional and irrevocable release of the other Party and the Indemnitee(s) from all Liability in connection with the Third-Party Claim. The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.
4.06. Right of Contribution.
(a) Contribution. If any right of indemnification contained in Section 4.02 or Section 4.03 is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnitee in respect of any Indemnified Liability for which such Indemnitee is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Indemnified Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnitee.
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4.07. Limitation of an Indemnified Liability.
The indemnification includes all liabilities and expenses incurred in connection with a matter resulting in the right to indemnification, including without limitation, any reasonable fees for independent legal counsel and accountants. No Indemnitee shall be entitled to indemnification for any special, punitive or exemplary damages, except to the extent such damages are finally awarded and actually paid by the Indemnitee to a third party in connection with a Third Party Claim.
4.08. Survival of Indemnification.
The indemnification provisions in this Article IV shall survive until the expiration of the applicable statute of limitations, plus sixty days. The right to indemnification with respect to claims of which notice was given prior to the expiration of the applicable survival period shall survive such expiration until such claim is finally resolved and any obligations with respect thereto are fully satisfied.
ARTICLE V
ACCESS TO INFORMATION; PRIVILEGE
Section 5.01. Financial Statements and Accounting.
(a) Each of SRM and the Company agrees to provide the other Party and its auditors reasonable assistance and reasonable access to the properties, books and records, other information and personnel of each Party or any of its subsidiaries set forth in this Section 5.01, from the Effective Time until the completion of each Party’s respective audit for the fiscal year ending December 31, 2023, (i) in connection with the preparation and audit of each Party’s respective quarterly and annual financial statements for the fiscal year ended December 31, 2023, and (ii) to the extent reasonably necessary to respond (and for the limited purpose of responding) to any written request or official comment from a Governmental Authority;
(b) SRM shall authorize and request its auditors to make reasonably available to the Company’s auditors the personnel performing its annual audits and work papers related thereto (subject to the execution of any reasonable and customary access letters that such party’s auditors may require in connection with such review of such work papers), in all cases within a reasonable time prior to the Company’s auditors’ opinion date, so that the Company’s auditors are able to perform the procedures they reasonably consider necessary to take responsibility for the work of SRM’s auditors as it relates to the Company’s auditors’ report on SRM’s financial statements, all within sufficient time to enable the Company to meet its timetable for the filing of its annual financial statements.
Section 5.02. Ownership of Information.
Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article V shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.
Section 5.03. Confidentiality.
Notwithstanding any termination of this Agreement, the Parties shall hold, and shall each cause its and their other respective officers, directors, accountants, agents or attorneys (“Representatives”) to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party, any and all non-public information (“Confidential Information”) concerning the other Party; provided that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, tax returns or other disclosures required by applicable law, including the rules and regulations of any securities exchange such Party’s securities are traded on. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will cooperate in obtaining. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such information.
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Section 5.04. Limitation of Liability.
IN NO EVENT SHALL ANY PARTY BE LIABLE TO THE OTHER PARTY OR ANY OF ITS SUBSIDIARIES FOR PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING LOSS OF FUTURE PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT TO THE EXTENT AWARDED BY A COURT OF COMPETENT JURISDICTION IN CONNECTION WITH A THIRD-PARTY CLAIM.
Section 5.05 Liability for Information Provided.
No Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Article V is found to be inaccurate, in the absence of intentional misconduct by the Party providing such information.
ARTICLE VI
CERTAIN OTHER MATTERS
Section 6.01. Insurance.
(a) The Company and SRM agree that from and after the date of the IPO Closing they shall maintain their own insurance policies, except that the Company’s general liability policy shall cover SRM to the extent that they share premises.
(b) SRM shall notify the Company, as promptly as practicable, of any claim made by SRM pursuant to this Section 6.01.
(c) Except as provided in Section 6.01(a), from and after the date of the IPO Closing, SRM shall not have any rights to or under any of the Policies of the Company.
(d) This Agreement shall not be considered as an attempted assignment of any policy shared by and between the Company and SRM or SRM Ltd or as a contract of insurance and shall not be construed to waive any right or remedy of the Company in respect of any policy shared by and between the Company and SRM or SRM Ltd.
Section 6.02. Bulk Sales Laws.
Each Party hereby waives compliance with the requirements and provisions of the “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to any of the transactions contemplated in this Agreement.
Section 6.03. Shared Employees and Premises.
(a) Shared Employees. Douglas McKinnon and Markita Russell are currently providing services to both the Company and SRM and shall continue to do so during the one year period following this Agreement (the “Transition Period”). For providing these services, Mr. McKinnon and Ms. Russell shall be paid $25,000 per annum directly from SRM.
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(b) Office and Facilities. Currently both the Company and SRM share the same office premises and related facilities. The Company agrees that SRM may maintain its presence at the current office location until such time as it is mutually agreed that SRM requires its own office and facilities, or the Parties agree on a monthly sub-lease arrangement.
Section 6.04. Further Actions.
(a) Except as otherwise provided in this Agreement, the Parties shall use their commercially reasonable efforts to take, or cause to be taken, all appropriate action, to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable under applicable Law to execute and deliver the Transaction Documents and such other documents and other papers as may be required to carry out the provisions of this Agreement and to consummate and make effective the transactions contemplated by this Agreement.
(b) From time to time after the Effective Time, without additional consideration, each Party shall execute and deliver such further instruments and take such other action as may be necessary or is reasonably requested by the other Party to make effective the transactions contemplated by this Agreement and the other Transaction Documents. Without limiting the foregoing, upon reasonable request of a Party, the other Party shall execute, acknowledge and deliver all such further assurances, deeds, assignments, consequences, powers of attorney and other instruments and papers as may be required for the transfer of direct or indirect ownership of the applicable Transferred Assets, as contemplated by this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Mutual Representations.
Each party hereto represents and warrants to the other that (i) it is duly authorized to enter into and perform this Agreement and has duly executed and delivered this Agreement, (ii) the execution, delivery and performance of its obligations under this Agreement will not conflict with or result in a breach of or default under or a violation of its or its subsidiaries’ organizational documents, any material contract to which it is a party or by which any of its assets or subsidiaries are bound or any order, judgment, decree, permit, statute, law, rule or regulation to which it or any of its subsidiaries is subject, and (iii) this Agreement constitutes its valid and binding obligation, enforceable in accordance with its terms, subject to (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement generally of creditors’ rights and remedies, (B) general principles of equity (regardless of whether considered in a proceeding at law or in equity), including the discretion of any court of competent jurisdiction in granting specific performance or other equitable relief, and (C) an implied duty to take action and make determinations on a reasonable basis and in good faith.
Section 7.02 Company Representations and Warranties.
The Company represents and warrants to SRM that (i) the assets of SRM Ltd include all tangible and intangible assets currently used in and necessary to conduct the SRM Business as conducted by the Company and SRM Ltd immediately prior to the Effective Time (the “SRM Assets”), including those assets accounted for in SRM Ltd’s audited balance sheet for the year ended December 31, 2022 (the “Balance Sheet”) as included in the IPO Registration Statement, and none of such SRM Assets are owned by any other person, and (ii) the liabilities of SRM Ltd only consist of the liabilities exclusively related to the SRM Business (the “SRM Liabilities”) and such liabilities are all accounted for in the Balance Sheet, including the promissory note dated September 1, 2022 in favor of the Company, which has a balance of $1,511,205.74, and $6,293 of expenses paid by the Company on behalf of SRM, totaling $1,517,498.74 as of the date hereof and will be repaid using a portion of the net proceeds of the SRM IPO. From and after the date of the Balance Sheet, SRM Ltd has not incurred any liabilities not in the ordinary course of the SRM Business or unrelated to the SRM Business. The IPO Registration Statement shall include all material changes in the SRM Assets or SRM Liabilities since the date of the Balance Sheet through the date of the prospectus included therein.
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ARTICLE VIII
TAX MATTERS
Section 8.01. Tax Indemnification.
The Company shall be liable for, and shall indemnify and hold SRM harmless from and against, any liability for taxes on the Company or imposed with respect to the income, receipts, property, profits, wages, capital, net worth, employees or operations of the Company attributable to any period prior to the Effective Time (the “Pre-Separation Tax Period”) (including, for the avoidance of doubt, any withholding taxes imposed on payments made by SRM to the Company) (the “Company Taxes”). SRM shall be liable for, and shall indemnify and hold harmless the Company from and against, any liability for taxes imposed on SRM or imposed with respect to the income, receipts, property, profits, wages, capital, net worth, employees or operations of SRM attributable to any period after the Separation, inclusive of the date of the Effective Time (the “Post-Separation Tax Period”) (including, for the avoidance of doubt, any withholding taxes) (the “SRM Taxes”).
Section 8.02. Tax Contests.
Each Party shall promptly notify the other Party in writing upon receipt by such Party or any of its officers or directors of a written communication from any governmental authority responsible for the collection of taxes (a “Taxing Authority”) with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding (a “Tax Contest”) concerning any taxes for which the other Party may be liable pursuant to this Agreement. In the case of any Tax Contest relating to the Company Taxes that is undertaken against SRM, SRM shall (i) use reasonable best efforts to keep the Company informed regarding the progress and substantive aspects of such Tax Contest, (ii) offer the Company a reasonable opportunity to comment before submitting to any Taxing Authority any written materials prepared or furnished in connection with such Tax Contest, and allow the Company to participate in any related meeting or telephonic conference with the applicable Taxing Authority and (iii) not settle or otherwise dispose of any item subject to such Tax Contest that could reasonably be expected to adversely affect the Company without obtaining the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. In the case of any Tax Contest relating to SRM Taxes that is undertaken against the Company, the Company shall (i) use reasonable best efforts to keep SRM informed regarding the progress and substantive aspects of such Tax Contest, (ii) offer SRM a reasonable opportunity to comment before submitting to any Taxing Authority any written materials prepared or furnished in connection with such Tax Contest, and allow SRM to participate in any related meeting or telephonic conference with the applicable Taxing Authority and (iii) not settle or otherwise dispose of any item subject to such Tax Contest that could reasonably be expected to adversely affect SRM without obtaining the prior written consent of SRM, which consent shall not be unreasonably withheld, conditioned or delayed.
Section 8.03. Cooperation.
The Parties shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Parties and their Affiliates, including (i) preparation and filing of Tax returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Party and its Affiliates reasonably available to such other Party. Each Party shall also make available to the other Party, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. Any information or documents provided under this Section 8.03 shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax returns or in connection with any administrative or judicial proceedings relating to Taxes. In addition, in the event that a Party determines that the provision of any information or documents to the other Party could be commercially detrimental, violates any law or agreement or waive any Privilege, the Parties shall use commercially reasonable efforts to permit each other’s compliance with its obligations under this Section 8.03 in a manner that avoids any such harm or consequence.
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ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Termination.
This Agreement may be terminated and the Separation and the Distribution may be abandoned at any time prior to the Effective Time by and in the sole discretion of the Company; provided, however, that this Agreement and the Separation and the Distribution may not be terminated or abandoned following the entry into the Underwriting Agreement unless the closing of the SRM IPO does not occur following such entry in accordance with the terms of the Underwriting Agreement.
Section 9.02. Survival of Covenants.
Except as expressly set forth in this Agreement or any other Transaction Document, all covenants and agreements contained in this Agreement and each of the other Transaction Documents shall survive the Distribution and remain in full force and effect in accordance with their applicable terms.
Section 9.03. Expenses.
Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be borne by the Party incurring such costs and expenses.
Section 9.04. Notices.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and, in the case of delivery in person or by overnight mail, shall be deemed to have been duly given upon receipt) by delivery in person or overnight mail to the respective parties or delivery by electronic mail transmission (providing confirmation of transmission) to the respective Parties. Any notice sent by electronic mail transmission shall be deemed to have been given and received at the time of confirmation of transmission. However, if such electronic mail transmission is sent after 5:00 pm, Eastern Time, notice shall be deemed to have been given on the next business day. All notices, requests, claims, demands and other communications hereunder shall be addressed as follows, or to such other address or email address for a Party as shall be specified in a notice given in accordance with this Section 9.04:
(a) if to the Company:
Jupiter Wellness, Inc.
1061 E. Indiantown Rd., Suite 110
Jupiter, FL 33477
Email: bjohn@jupiterwellness.com
Attention: Brian S. John
(b) if to SRM:
SRM Entertainment, Inc.
1061 E. Indiantown Rd., Suite 110
Jupiter, FL 33477
Email: rmiller@jupiterwellness.com
Attention: Richard Miller
with a copy to (which shall not constitute notice):
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036 USA
Email: amarcus@srf.law
Attention: Arthur Marcus
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Section 9.05. Public Announcements.
From and after the Effective Time, the Parties shall consult with each other before issuing, and give each other the opportunity to review and comment upon, that portion of any press release or other public statements that relates to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except: (a) as may be required by applicable law or applicable stock exchange regulation, in which case the Party that is so required shall, to the extent legally permissible, consult with the other Party before issuing such press release or making such public statement; (b) for disclosures made that are substantially consistent with disclosure contained in the IPO Registration Statement or related prospectus or any press release or public statement previously issued with the prior written consent of the other Party; or (c) as may pertain to disputes between SRM, on one hand, and the Company on the other hand.
Section 9.06. Severability.
If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the Parties shall be construed and enforced accordingly.
Section 9.07. Entire Agreement; Construction.
This Agreement constitutes the entire agreement of the Parties and their Affiliates (as defined below) with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof and thereof, including, but not limited to, the Original Agreement.
Section 9.08. Assignment.
This Agreement may not be assigned by a Party without the consent of the other Party; provided that a Party may assign this Agreement or any of its rights and obligations hereunder to an entity that controls, is controlled by, or is under common control with such Party (an “Affiliate”) without the consent of the other Party provided that (a) no such assignment shall relieve the assignor of any of its obligations hereunder and (b) such rights shall be assigned back to the assigning Party if such Affiliate ceases to be an Affiliate of the assigning Party; provided, however, that this Agreement may not be assigned following the pricing of the SRM IPO unless the IPO Closing does not occur following such pricing in accordance with the terms of the Underwriting Agreement without the prior written consent of the underwriter. Any attempted assignment that is not in accordance with this Section 9.08 shall be null and void.
Section 9.09. Amendment.
This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, each Party that expressly references the Section of this Agreement to be amended or (b) by a waiver in accordance with Section 9.10.
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Section 9.10. Waiver.
Any Party may (a) extend the time for the performance of any of the obligations or other acts of the other Party; (b) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered by the other Party pursuant to this Agreement; or (c) waive compliance with any of the agreements of the other Party or conditions to such obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. Notwithstanding the foregoing, no failure or delay by any Party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise of any other right hereunder. Any waiver of any term or condition hereof shall not be construed as a waiver of any subsequent breach or as a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement.
Section 9.11. Specific Performance.
The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Each Party agrees that, in the event of any breach or threatened breach by the other Party of any obligation contained in this Agreement, the non-breaching Party shall be entitled to (a) an order of specific performance to enforce the observance and performance of such obligation and (b) an injunction restraining such breach or threatened breach. Each Party further agrees that the non-breaching Party shall not be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 9.11, and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
Section 9.12. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to any applicable principles of conflict of laws that would cause the laws of another state to otherwise govern this Agreement.
Section 9.13. Waiver of Jury Trial.
EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION AMONG THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.13.
Section 9.14. No Duplication; No Double Recovery.
Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of or resulting from the same facts and circumstances (including with respect to the rights, entitlements, obligations and recoveries that may arise out of Article IV).
Section 9.15. Mutual Drafting.
The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
Section 9.16. Counterparts.
This Agreement may be executed in any number of counterparts and by different Parties in separate counterparts, and delivered by means of electronic mail transmission or otherwise, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
| 16 |
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed as of the date first written above by its respective officers thereunto duly authorized.
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian S. John | |
| Name: | Brian S. John | |
| Title: | Chief Executive Officer | |
SRM ENTERTAINMENT, INC | ||
| By: | /s/ Richard Miller | |
| Name: | Richard Miller | |
| Title: | Chief Executive Officer | |
[Signature Page to Amended and Restated Stock Exchange Agreement]
| 17 |
Exhibit 10.4
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this “Agreement”), dated as of August 3, 2023 (the “Effective Date”), is entered into by and between Jupiter Wellness, Inc. (the “Assignor”) and SRM Entertainment, Inc. (the “Assignee”).
WHEREAS, the Assignor entered into an Employment Agreement, (together with the amendments thereto, the “Employment Agreement”) with Douglas McKinnon (the “Executive”), who is an executive officer of the Assignee and an employee of the Assignor and/or one of its affiliates, dated August 5, 2019;
WHEREAS, the Assignor will cause the Assignee to assume and agree to perform the Assignee’s obligations under the Employment Agreement, and that effective upon such assumption, the Assignor will have no further liability for the Employment Agreement, except as set forth in Schedule A attached hereto (the “Retained Obligations”), and the Assignee will be expressly and unconditionally responsible for its liabilities set forth in the Employment Agreement;
WHEREAS, effective as of the Effective Date, the Assignor desires to assign and the Assignee desires to assume and discharge or perform when due, all of the Assignor’s obligations under the Employment Agreement other than the Retained Obligations;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and in the Employment Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Assignment of Employment Agreement
Effective as of the Effective Date, the Assignor hereby irrevocably, absolutely and unconditionally assigns, transfers, conveys and delivers to the Assignee and its successors and permitted assigns forever all of the Assignor’s right, title and interest of every kind, nature and description in, to and under the Employment Agreement, except as related to the Retained Obligations.
2. Acceptance of Assignment and Assumption of Employment Agreement
(a) Effective as of the Effective Date, the Assignee hereby accepts the assignment, transfer, conveyance and delivery of the Employment Agreement, other than with respect to the Retained Obligations.
(b) Effective as of the Effective Date, the Assignee hereby irrevocably, absolutely and unconditionally assumes, undertakes and agrees to pay, perform and discharge in full, and release and discharge the Assignor and its affiliates, successors and assigns, irrevocably, completely, unconditionally and forever from any and all obligations under the Employment Agreement, other than the Retained Obligations.
3. Acknowledgement that Employment Agreement Conditioned upon the IPO
The Assignor and the Assignee acknowledge and agree that, except as otherwise provided in Schedule A attached hereto with respect to the Retained Obligations, if the proposed initial public offering of the Assignee is not consummated by December 31, 2023, this Agreement will terminate and have no effect (including on the terms of the Executive’s employment with the Assignor and its affiliates).
[Next page is a signature page.]
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed on its behalf.
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian John | |
| Name: | Brian John | |
| Title: | Chief Executive Officer | |
| Date: | 08/03/2023 | |
| SRM ENTERTAINMENT, INC. | ||
| By: | /s/ Richard Miller | |
| Name: | Richard Miller | |
| Title: | Chief Executive Officer | |
| Date: | 08/03/2023 | |
IN WITNESS WHEREOF, the undersigned has agreed to this Agreement between Jupiter Wellness, Inc. and SRM Entertainment, Inc., whereas SRM Entertainment, Inc. has assumed the obligations under the Employment Agreement.
| DOUGLAS O. MCKINNON | ||
| By: | /s/ Douglas McKinnon | |
| Name: | Douglas McKinnon | |
| Date: | 08/03/2023 | |
SCHEDULE A
RETAINED OBLIGATIONS
$25,000 is payable to the Executive as a result of the cancellation of the Assignor’s common stock issued in lieu of salary recorded in the books and records of the Assignor.
The term of all unexercised options of Assignor held by the Executive will continue through the full-term of the Executive’s option.
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