UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
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Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
This section describes the material provisions of the Merger Agreement (as defined below) but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1. Unless otherwise defined herein, the capitalized terms used below are defined in the Merger Agreement.
The Merger
On September 7, 2022, Pono Capital Corp, a Delaware corporation (“Pono”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Pono, Pono Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Pono (“Merger Sub”), AERWINS Technologies Inc., a Delaware corporation (“AERWINS”), Mehana Equity, LLC, in its capacity as Purchaser Representative, and Shuhei Komatsu, in his capacity as Seller Representative.
Pursuant to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into AERWINS, with AERWINS continuing as the surviving corporation (the “Surviving Corporation”).
Merger Consideration
As consideration for the Merger, the holders of AERWINS securities collectively shall be entitled to receive from Pono, in the aggregate, a number of Pono securities with an aggregate value equal to (the “Merger Consideration”) (a) Six Hundred Million U.S. Dollars ($600,000,000), minus (b) the amount by which the aggregate amount of any outstanding indebtedness (minus cash held by AERWINS) of AERWINS at Closing (the “Closing Net Indebtedness”), minus (c) the amount by which AERWINS’ Net Working Capital is less than $3 million, plus (d) the amount by which AERWINS’ Net Working Capital exceeds $3 million, minus (e) specified transaction expenses of AERWNS associated with the Merger, with each AERWINS stockholder receiving, for each share of AERWINS common stock held, a number of shares of Pono common stock equal to (i) the Per Share Consideration, divided by (ii) $10.00. Each outstanding option or warrant to purchase AERWINS common stock shall be converted into the right to receive an option or warrant to purchase a number of shares of Pono common stock equal to (x) the Per Share Consideration divided by (y) $10.00.
The Merger Consideration otherwise payable to AERWINS stockholders is subject to the withholding of a number of shares of Pono common stock equal to three percent (3.0%) of the Merger Consideration to be placed in escrow for post-closing adjustments (if any) to the Merger Consideration.
The Merger Consideration is subject to adjustment after the Closing based on confirmed amounts of the Closing Net Indebtedness, Net Working Capital and transaction expenses as of the Closing Date. If the adjustment is a negative adjustment in favor of Pono, the escrow agent shall distribute to Pono a number of shares of Pono common stock with a value equal to the absolute value of the adjustment amount. If the adjustment is a positive adjustment in favor of AERWINS, Pono will issue to the AERWINS stockholders an additional number of shares of Pono common stock with a value equal to the adjustment amount.
Representations and Warranties
The Merger Agreement contains customary representations and warranties by each of Pono and AERWINS. Certain of the representations are subject to specified exceptions and qualifications contained in the Merger Agreement or in information provided pursuant to certain disclosure schedules to the Merger Agreement.
Covenants of the Parties
Under the Merger Agreement, each party agrees to use its commercially reasonable efforts to effect the Closing. The Merger Agreement also contains certain customary covenants by the parties during the period between the signing of the Merger Agreement and the earlier of the Closing or the termination of the Merger Agreement in accordance with its terms, including covenants regarding the conduct of their respective businesses, efforts, access, confidentiality and public announcements, the Pono proxy statement for the transaction (which includes the adoption of a new equity incentive plan for Pono with a number of awards thereunder equal to 15% of the issued and outstanding shares of Pono immediately after the Closing), notice of breaches, no insider trading, indemnification of directors and officers, and other customary covenants. The parties also have agreed to the following covenants:
| ● | Each party is subject to a “no-shop” obligation between signing of the Merger Agreement and Closing and will not be allowed to solicit or discuss competing transactions with other potential parties during such time period. |
| ● | The Pono board of directors after the Closing will consist of at least seven directors, including: (i) five (5) persons designated prior to the Closing by AERWINS, three of whom must qualify as independent directors; (ii) one (1) person designated prior to the Closing by Pono; and (iii) one (1) person mutually agreed upon and designated prior to the Closing by Pono and AERWINS, who must qualify as an independent director. |
| ● | AERWINS shall deliver audited financial statements prepared in accordance with GAAP and audited in accordance with PCAOB auditing standards for the fiscal years ended December 31, 2021 and December 31, 2020 to Pono by September 30, 2022 (the “PCAOB Audited Financials”). |
Indemnification
The representations and warranties of AERWINS and Pono contained in the Merger Agreement will not survive the Closing, and from and after the Closing, AERWINS and Pono will not have any further obligations, nor shall any claim be asserted or action be brought against AERWINS and Pono or their respective representatives with respect thereto. The covenants and agreements made by AERWINS and Pono in the Merger Agreement, including any rights arising out of any breach of such covenants or agreements, shall not survive the Closing, except for those covenants and agreements contained therein that by their terms apply or are to be performed in whole or in part after the Closing (which such covenants shall survive the Closing and continue until fully performed in accordance with their terms).
Conditions to Consummation of the Merger
The consummation of the Merger is subject to customary Closing conditions unless waived, including:
| ● | the approval by the stockholders of each of AERWINS and Pono; |
| ● | approvals of any required governmental authorities and the expiration or termination of any anti-trust waiting periods; |
| ● | receipt of specified third-party consents; |
| ● | no law or order preventing the transactions; |
| ● | after giving effect to the redemption, Pono shall have at least $5,000,001 of net tangible assets as required by its charter; |
| ● | the parties agree to waive any minimum cash requirement as a Closing condition; |
| ● | the members of the post-Closing Pono board shall have been elected or appointed as of the Closing; |
| ● | the Registration Statement shall have been declared effective by the SEC and shall remain effective as of the Closing, and no stop order or similar order shall be in effect with respect to the Registration Statement; and |
| ● | the shares of Pono common stock issued as Merger Consideration shall have been approved for listing on Nasdaq, subject to official notice of issuance. |
In addition, unless waived by AERWINS, the obligations of AERWINS to consummate the Merger are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (a) the representations and warranties of Pono being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect); (b) Pono having performed in all material respects the respective obligations and complied in all material respects with their respective covenants and agreements under the Merger Agreement required to be performed or complied with on or prior the date of the Closing; (c) absence of any Material Adverse Effect with respect to Pono since the date of the Merger Agreement which is continuing and uncured; and (d) the Escrow Agreement and the Registration Rights Agreement being executed and delivered.
Unless waived by Pono, the obligations of Pono and Merger Sub to consummate the Merger are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (a) the representations and warranties of AERWINS being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect); (b) AERWINS having performed in all material respects the respective obligations and complied in all material respects with its covenants and agreements under the Merger Agreement required to be performed or complied with on or prior the date of the Closing; and (c) absence of any Material Adverse Effect with respect to AERWINS as a whole since the date of the Merger Agreement which is continuing and uncured; and (d) each Lock-Up Agreement, the Non-Competition Agreement, the Escrow Agreement, the Registration Rights Agreement, and employment agreements with specified employees being executed and delivered.
Termination
The Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including:
| ● | by mutual agreement; |
| ● | for the other party’s uncured breach; |
| ● | if there is a government order preventing the Closing; |
| ● | by either party if the Closing does not occur by January 31, 2023, subject to extension by Pono in connection with an Extension of the time period for it to close a business combination transaction; |
| ● | by Pono if there has been an event after the signing of the Merger Agreement that has had a Material Adverse Effect on AERWINS that is continuing and uncured; |
| ● | by AERWINS if there has been an event after the signing of the Merger Agreement that has had a Material Adverse Effect on Pono that is continuing and uncured; |
| ● | by Pono or AERWINS if the Pono stockholders vote and do not approve the transactions contemplated by the Merger Agreement; and |
| ● | By Pono if, after AERWINS delivers the PCAOB Audited Financials, Pono reasonably determines that the PCAOB Audited Financials differ in any material respect from AERWINS’ unaudited annual financial statements, or if the PCAOB Audited Financials are not delivered to Purchaser on or before September 30, 2022. |
Trust Account Waiver
AERWINS agrees that it and its affiliates will not have any right, title, interest or claim of any kind in or to any monies in Pono’s trust account held for its public shareholders, and agrees not to, and waives any right to, make any claim against the trust account (including any distributions therefrom).
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached to this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.
The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (i) have certain limited exceptions, will not survive consummation of the Merger indefinitely unless otherwise stated in the Merger Agreement, and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding Pono, its respective affiliates or their respective businesses. The Merger Agreement should not be read alone but should instead be read in conjunction with the other information regarding Pono or AERWINS, their respective affiliates and their respective businesses included in the filings they make with the Securities and Exchange Commission.
Related Agreements
This section describes the material provisions of certain additional agreements entered into or to be entered into pursuant to the Merger Agreement (the “Related Agreements”) but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements, copies of each of which are attached hereto as exhibits. Stockholders and other interested parties are urged to read such Related Agreements in their entirety.
Lock-Up Agreement
No later than September 12, 2022, certain significant stockholders of AERWINS will enter into lock-up agreements (the “Lock-up Agreements”) providing for a lock-up period commencing on the Closing Date and ending on the earlier of (x) six months from the Closing (or, in the case of Shuhei Komatsu, AERWINS’ Chief Executive Officer, thirty months from the Closing), (y) the date Pono consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Pono’s stockholders having the right to exchange their shares of Pono common stock for cash, securities or other property and (z) the date on which the closing sale price of Pono common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least one hundred and fifty (150) days after the Closing; provided that ⅓ of such restricted shares shall be released from such restrictions if the closing stock price of Pono common stock reaches each of $13.00, $15.00, and $17.00.
The foregoing description of the Lock-up Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Lock-up Agreements, the forms of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Non-Competition and Non-Solicitation Agreement
No later than September 12, 2022, certain significant stockholders of AERWINS will enter into non-competition and non-solicitation agreements (the “Non-Competition Agreements”), pursuant to which they will agree not to compete with Pono, AERWINS and their respective subsidiaries during the two-year period following the Closing and, during such two-year restricted period, not to solicit employees or customers or clients of such entities. The agreements also contain customary non-disparagement and confidentiality provisions.
The foregoing description of the Non-Competition Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Non-Competition Agreements, which is filed as Exhibit 10.2 hereto and incorporated by reference herein.
Registration Rights Agreement
At the Closing, certain significant stockholders of AERWINS will enter into a registration rights agreement with Pono providing for the right to three demand registrations and piggy-back registrations with respect to the Merger Consideration shares.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of agreement, which is attached as Exhibit 10.3 hereto and is incorporated herein by reference.
Purchaser Support Agreement
Simultaneously with the execution of the Merger Agreement, the Purchaser Representative entered into a support agreement (the “Purchaser Support Agreement”) in favor of Pono and AERWINS and their present and future successors and subsidiaries.
In the Purchaser Support Agreement, the Purchaser Representative agreed to vote all equity interests in Pono in favor of the Merger Agreement and related transactions and to take certain other actions in support of the Merger Agreement and related transactions. The Purchaser Support Agreement also prevents the Purchaser Representative from transferring its voting rights with respect to equity interests in Pono or otherwise transferring equity interests in Pono prior to the meeting of Pono’s stockholders to approve the Merger Agreement and related transactions, except for certain permitted transfers.
The foregoing description of the Purchaser Support Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Purchaser Support Agreement, the form of which is filed as Exhibit 10.4 hereto and incorporated by reference herein.
Voting Agreement
Simultaneously with the execution of the Merger Agreement, certain stockholders of AERWINS entered into a voting agreement (the “Voting Agreement”) in favor of Pono and AERWINS and their present and future successors and subsidiaries.
In the Voting Agreement for certain stockholders of AERWINS, they each agreed to vote all of their AERWINS stock interests in favor of the Merger Agreement and related transactions and to take certain other actions in support of the Merger Agreement and related transactions. The Voting Agreement also prevents them from transferring their voting rights with respect to their AERWINS stock or otherwise transferring their AERWINS stock prior to the AERWINS approval of the Merger Agreement and related transactions, except for certain permitted transfers.
The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Voting Agreement, a copy of which, or the form of which, is filed as Exhibit 10.5 hereto and incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On September 7, 2022, Pono issued a press release announcing the execution of the Merger Agreement. The press release is attached hereto as Exhibit 99.1.
The foregoing (including Exhibit 99.1) is being furnished pursuant to Item 7.01 and will not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor will it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.
Forward Looking Statements
Certain statements herein are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to the proposed business combination. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “aim,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Many factors could cause actual future events to differ materially from the forward-looking statements contained herein, including but not limited to: (i) the risk that the business combination may not be completed in a timely manner or at all, which may adversely affect the price of Pono’s securities; (ii) the failure to satisfy the conditions to the consummation of the business combination, including the approval of the merger agreement by the stockholders of Pono; (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; (iv) the outcome of any legal proceedings that may be instituted against any of the parties to the merger agreement following the announcement of the entry into the merger agreement and proposed business combination; (v) redemptions exceeding anticipated levels or the failure to meet The Nasdaq Capital Market’s initial listing standards in connection with the consummation of the proposed business combination; (vi) the effect of the announcement or pendency of the proposed business combination on AERWINS’ business relationships, operating results and business generally; (vii) risks that the proposed business combination disrupts the current plans of AERWINS; (viii) changes in the markets in which AERWINS compete, including with respect to its competitive landscape, technology evolution or regulatory changes; (ix) the inability of AERWINS to obtain regulatory approval for the XTURISMO or Speeder hoverbike in any jurisdiction or the failure of the C.O.S.M.O.S. system to achieve approvals or market acceptance; (x) the risk that Pono and AERWINS will need to raise additional capital to execute its business plans, which may not be available on acceptable terms or at all; (xi) the risk of product liability or regulatory lawsuits or proceedings related to AERWINS’ business; (xii) the ability of the parties to recognize the benefits of the merger agreement and the business combination; (xiii) the lack of useful financial information for an accurate estimate of future capital expenditures and future revenue; (xiv) statements regarding AERWINS’ industry and market size; (xv) financial condition and performance of AERWINS and Pono, including the anticipated benefits, the implied enterprise value, the expected financial impacts of the business combination, potential level of redemptions of Pono’s public stockholders, the financial condition, liquidity, results of operations, the products, the expected future performance and market opportunities of AERWINS; and (xvi) those factors discussed in Pono’s filings with the SEC and that that will be contained in the registration statement on Form S-4 and the related proxy statement relating to the business combination. You should carefully consider the foregoing factors and the other risks and uncertainties that will be described in the “Risk Factors” section of the registration statement on Form S-4 and related proxy statement and other documents to be filed by Pono from time to time with the Securities and Exchange Commission (“SEC”). These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and while AERWINS and Pono may elect to update these forward-looking statements at some point in the future, they assume no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, subject to applicable law. None of AERWINS or Pono gives any assurance that AERWINS and Pono will achieve their respective expectations.
Additional Information and Where to Find It
Pono Capital Corp. intends to file with the SEC a registration statement on Form S-4 with a proxy statement containing information about the proposed transaction and the respective businesses of AERWINS’ and Pono Capital Corp. Pono Capital Corp. will mail a final prospectus and definitive proxy statement and other relevant documents after the SEC completes its review. Pono Capital Corp stockholders are urged to read the preliminary prospectus and proxy statement and any amendments thereto and the final prospectus and definitive proxy statement in connection with the solicitation of proxies for the special meeting to be held to approve the proposed transaction, because these documents will contain important information about Pono Capital Corp., AERWINS, and the proposed transaction. The final prospectus and definitive proxy statement will be mailed to stockholders of Pono Capital Corp. as of a record date to be established for voting on the proposed transaction. Stockholders of Pono Capital Corp. will also be able to obtain a free copy of the proxy statement, as well as other filings containing information about Pono Capital Corp. without charge, at the SEC’s website (www.sec.gov) or by calling 1-800-SEC-0330. Copies of the proxy statement and Pono Capital Corp.’s other filings with the SEC can also be obtained, without charge, by directing a request to: info@Ponospac.com. The information contained in, or that can be accessed through, AERWINS’ website is not incorporated by reference in, and is not part of, this press release.
No Offer or Solicitation
This press release does not constitute (i) a solicitation of a proxy, consent, or authorization with respect to any securities or in respect of the proposed business combination, or (ii) an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act.
Participants in the Solicitation
AERWINS and Pono Capital Corp and their respective directors and officers and other members of management and employees may be deemed participants in the solicitation of proxies in connection with the proposed business combination. Pono Capital Corp stockholders and other interested persons may obtain, without charge, more detailed information regarding directors and officers of Pono Capital Corp in Pono Capital Corp’s initial public offering prospectus, which was declared effective the SEC on August 10, 2021. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies from Pono Capital Corp’s stockholders in connection with the proposed business combination will be included in the definitely proxy statement/prospectus the Pono Capital Corp intends to file with the SEC.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being filed herewith:
| Exhibit No. | Description | |
| 2.1† | Agreement and Plan of Merger, dated September 7, 2022, by and among Pono, Merger Sub, AERWINS, the Purchaser Representative, and the Seller Representative. | |
| 10.1 | Form of Lock-up Agreement. | |
| 10.2 | Non-Competition Agreement. | |
| 10.3 | Registration Rights Agreement. | |
| 10.4 | Purchaser Support Agreement. | |
| 10.5 | Voting Agreement. | |
| 99.1 | Press Release, dated September 7, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| † | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. |
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.
| PONO CAPITAL CORP | ||
| Date: September 7, 2022 | By: | /s/ Dustin Shindo |
| Name: Dustin Shindo | ||
| Title: Chief Executive Officer | ||