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
Amended and Restated Stock Purchase Agreement
As previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) by Jupiter Wellness, Inc., a Delaware corporation (the “Company”), on December 14, 2021, the Company entered into a Stock Purchase Agreement (the “Original Purchase Agreement”), through Jupiter Wellness Investments, Inc., a Florida corporation and a wholly-owned direct subsidiary of the Company (“Acquisition Sub”, and together with the Company, “Jupiter Wellness”), with Next Frontier Pharmaceuticals, Inc., a Delaware corporation and subsidiary of Next Frontier Holdings, Inc. (“Next Frontier Pharmaceuticals”), Next Frontier Holdings, Inc., a Delaware corporation (“Next Frontier Holdings”), and certain individuals named therein, stockholders of Next Frontier Pharmaceuticals (together with Next Frontier Holdings, the “Sellers”). Pursuant to the Original Purchase Agreement, Acquisition Sub was to purchase approximately all of the shares of common stock of Next Frontier Pharmaceuticals, to be followed post the closing of the Transactions (later defined) by an anticipated statutory merger of Acquisition Sub with and into Next Frontier Pharmaceuticals, with Next Frontier Pharmaceuticals surviving as a direct, wholly-owned subsidiary of the Company (the “Acquisition”). The Acquisition and the other transactions contemplated in the Original Purchase Agreement are referred to herein as the Transactions.
On January 7, 2022, the parties entered into an Amended and Restated Stock Purchase Agreement (the “Amended and Restated Purchase Agreement”), pursuant to which the parties amended certain provisions of the Original Merger Agreement, in order to, among other things:
| ● | modify the Amended and Restated Purchase Agreement to provide that Jupiter Wellness will purchase from Next Frontier Holdings and that certain individual named therein approximately 94.2% of shares of common stock of Next Frontier Pharmaceuticals. | |
| ● | require that in connection with the Acquisition, and subject to the terms and satisfaction or waiver of conditions of the Amended and Restated Purchase Agreement, the Company will contribute certain consumer products assets, to be identified at a later time, to SRM Entertainment LTD, a Hong Kong Special Administrative Region of the People’s Republic of China limited company and a wholly-owned subsidiary of the Company (“SRM”). | |
| ● | provide that the Company, following the contribution of the consumer product assets, completion of registration of SRM’s shares of common stock on a national stock exchange, and consummation of the Acquisition, shall distribute to the Company’s stockholders of record date (of before the anticipated Closing), all of the shares of common stock of SRM (the “Distribution”). |
| ● | revise the Amended and Restated Purchase Agreement to clarify that a condition to consummation of the Acquisition (the “Closing”) is that the Company obtains stockholders approval of NASDAQ Listing Standard Rule 5635, including by endorsing its approval with the recommendation of the board of directors of the Company that stockholders vote in favor of (i) the issuance of newly-created Convertible Series B Preferred Stock issued to the Sellers as the closing consideration of the Transactions (“Preferred Stock”) and the issuance of the shares of the Company’s common stock underlying the Preferred Stock (the “Common Shares”), (ii) an amendment to the Second Amended and Restated Certificate of Incorporation to increase the authorized number of shares of the Parent’s Common Stock, (iii) amendment of Parent’s Certificate of Incorporation to authorize the issuance of the Preferred Stock Consideration, (iv) Transition Advisory Agreements (as defined below), and (v) adjournment of the meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are insufficient votes present in person or by proxy for, or otherwise in connection with, the approval of each of the above proposals, and (vi) all other transactions and actions the Company’s board of directors deems necessary, in the related proxy materials (the “Transactions”). The modification to the Amended and Restated Purchase Agreement also provides that each of the Transaction proposals shall be conditioned on the approval of each of the other proposals. | |
| ● | modify the Amended and Restated Purchase Agreement to provide that as promptly as practicable after the date of Amended and Restated Purchase Agreement, the Company shall prepare and file with the SEC a Notice of Meeting and Preliminary Proxy Statement relating to a meeting of the Company’s stockholders to be held for the purpose of voting on the Transactions. | |
| ● | require that the Company shall consummate the Distribution as promptly as practicable following the Closing, but in no event more than ninety (90) days following the Closing date. | |
| ● | require that the Sellers and their affiliates, for a period six (6) months following the Closing, subject to certain exceptions provided therein, without the prior written approval of legal outside counsel of the Company, directly or indirectly, transfer any of the Preferred Stock, or the Common Shares, to be received by the Sellers upon the Closing Date. | |
| ● | require that the Preferred Stock or the Common Shares will bear a transfer restriction legend and that the Company may issue to its transfer agent an appropriate “stop order” or equivalent instructions with respect to any Preferred Stock and Common Shares received by the Sellers. | |
| ● | require that the Company submits to NASDAQ an Additional Listing Application the Parent regarding the Common Shares and that the Company shall use its commercially reasonable efforts to secure NASDAQ’s approval of the Additional Listing Application. | |
| ● | require that the Company reserves a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue the Common Shares pursuant to any exercise of the Preferred Stock following the Closing. | |
| ● | require, subject to certain exceptions specified therein, the Company’s board of directors not to withdraw its support of the Transactions and their approval by the Company’s stockholders. | |
| ● | require that the Company and the Sellers cooperate with each other and use their respective commercially reasonable efforts to take to consummate and make effective the Transactions and the Distribution as soon as practicable. | |
| ● | require that the board of directors of the Company, by resolutions of majority of the independent directors, approved the Transactions, recommended that the stockholders of the Company approve the Transactions, and directed that the approval of the Transactions be submitted to stockholders of the Company for consideration. |
| ● | require that the Transactions receive (i) all requisite approvals of the stockholders of the Company required pursuant to Delaware law, the Company’s Certificate of Incorporation and Bylaws and the rules and regulations of the NASDAQ, and (ii) approval of a majority of the shares of Common Stock of the Company that are not owned, beneficially or of record, by the Management Team (as defined below), Sellers, or any of their affiliates. | |
| ● | modify the Amended and Restated Purchase Agreement to include a termination clause, pursuant to which the Transactions could be abandoned, mutually or unilaterally, by the parties. | |
| ● | revise the Amended and Restated Purchase Agreement to require the parties to enter to an agreement of confidentiality. |
The foregoing description of the Amended and Restated Purchase Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Amended and Restated Purchase Agreement, a copy of which is attached as Exhibit 2.1 hereto and is incorporated by reference herein.
Supporting Agreements
Stockholders Agreement
Concurrently with the execution of the Amended and Restated Purchase Agreement, the Company, Next Frontier Holdings and four members of the Company’s Management Team, the owners of approximately 33% of the Company’s outstanding shares of Common Stock (the “Management Team”), entered into that certain Stockholders Agreement, pursuant to which, among other things, the parties have agreed that for a period of twelve (12) months following the Closing, certain major stockholders actions with respect to the Company, would require the approval of the Management Team members. Such stockholders actions would include, among other things: (i) effectuating any sale of the Company or liquidation or dissolution of Company, or sell, transfer or otherwise dispose of any of the material assets or properties of Company or any of its Subsidiaries; (ii) merging the Company with or into, or consolidate with, another entity or effect any recapitalization, reorganization, change of form of organization, forward or reverse split, dividend or similar transaction; and (iii) acquire any corporation, business concern or other material assets or property for consideration in excess of 19.9% of the market value of Company, whether by acquisition of assets, capital stock or otherwise, and whether in consideration of the payment of cash, the issuance of capital stock or otherwise or make any investment in any entity in an amount in excess of such amount.
The foregoing description of the Stockholders Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Stockholders Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Voting Agreement
Concurrently with the entry into the Amended and Restated Purchase Agreement, the Sellers and Management Team members, entered into that certain Voting Agreement (the “Voting Agreement”) with the Company. Pursuant to the Voting Agreement, the Sellers and Management Team members have agreed to, among other things, vote all of the shares of common stock of the Company they beneficially own in favor of the Transactions.
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 is filed as Exhibit 10.2 hereto and incorporated by reference herein.
Confidentiality Agreement
Further to the entry into the Amended and Restated Purchase Agreement, Next Frontier Pharmaceuticals and Company entered into that certain Agreement of Confidentiality (“Confidentiality Agreement”), which provides, among other things, that for a period of twelve (12) months from the date of the Confidentiality Agreement, neither party to the Confidentiality Agreement shall solicit, induce or attempt to solicit or induce any of the suppliers, distributors, vendors, customers, employees directors or officers of the other Party to discontinue such person’s relationship with the other party. Furthermore, the Confidentiality Agreement provides that in an event that the Acquisition has not been consummated, Next Frontier Pharmaceuticals agrees to a twelve (12) months standstill agreement.
The foregoing description of the Confidentiality Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Confidentiality Agreement, a copy of which is filed as Exhibit 10.3 hereto and incorporated by reference herein.
Transition Services Agreements
Also in connection with entry into the Amended and Restated Purchase Agreement, and in exchange for their anticipated early termination as officers and forfeiture of certain accrued benefits, the Company entered into twelve-month Transition Advisory Agreements (the “Transition Advisory Agreements”) with the Management Team, which includes: (i) Brian S. John, our Chief Executive Officer and Chief Investment Officer, (ii) Dr. Glynn Wilson, our Chairman of the Board, (iii) Ryan Allison, the Company’s Chief Operating Officer, and (iv) Richard Miller, our Chief Compliance Officer.
Pursuant to the Transition Advisory Agreements, each of the Team Management members is expected to be hired as a corporate adviser to the Company’s incoming executive management effective the Closing. That is, following the Closing, the Management Team Members’ existing employment agreements with the Company will be superseded by the Transition Advisory Agreements.
The Management Team members’ Transition Advisory Agreements are expected to entitle them, among other things, to a signing bonus, fixed advisory fees, reimbursement of reasonable expenses incurred in connection with the advisory services rendered, eligibility to participate in health and welfare plans and programs maintained by the Company and indemnification.
Brian S. John
Mr. Brian John’s Transition Advisory Agreement is expected to govern the terms and conditions of his anticipated advisory role to the Company’s incoming management following the closing of the Transactions. Pursuant to his Transition Advisory Agreement, Mr. John is expected to be entitled to, among other things, a signing bonus of $250,000 and a annual advisory fee at an annualized rate of $250,000.
Ryan Allison
Mr. Ryan Allison’s Transition Advisory Agreement is expected to govern the terms and conditions of his anticipated advisory role to the Company’s incoming management following the closing of the Transactions. Pursuant to his Transition Advisory Agreement, Mr. Allison is expected to be entitled to, among other things, a signing bonus of $180,000 and a annual advisory fee at an annualized rate of $180,000.
Dr. Glynn Wilson
Dr. Glynn Wilson’s Transition Advisory Agreement is expected to govern the terms and conditions of his anticipated advisory role to the Company’s incoming management following the closing of the Transactions. Pursuant to his Transition Advisory Agreement, Dr. Wilson is expected to be entitled to, among other things, a signing bonus of $150,000 and a annual advisory fee at an annualized rate of $150,000.
Richard Miller
Mr. Richard Miller’s Transition Advisory Agreement is expected to govern the terms and conditions of his anticipated advisory role to the Company’s incoming management following the closing of the Transactions. Pursuant to his Transition Advisory Agreement, Mr. Miller is expected to be entitled to, among other things, a signing bonus of $175,000 and a annual advisory fee at an annualized rate of $175,000.
Each Transition Advisory Agreement is in substantially the form included herein as Exhibit 10.4. The description of the Transition Advisory Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the form of Transition Advisory Agreements, which are incorporated by reference herein.
Debt Financing Transaction
On January 7, 2022, the Company made a loan (the “Loan”) to Next Frontier Pharmaceuticals. In connection with the Loan, the Company was issued a Secured Promissory Note in the principal amount of $5,000,000 (the “Note”) representing Next Frontier Pharmaceuticals’ obligations under the Loan. At the Company’s sole and absolute discretion, principal under this Note may be borrowed, repaid and re-borrowed. On the same day, pursuant to Note, the Company funded Next Frontier Pharmaceuticals with an amount of $1,000,000.
The Note has an interest rate of eight percent (8%) per annum. Following an Event of Default, as defined in the Note, the interest rate will increase to the highest non-usurious rate allowable per applicable law.
The maturity date of the Note is the earlier of: (i) 6-months from the issuance date of the Note, (ii) the occurrence of an Event of Default (as defined in the Note), (iii) such date as a new third party lender advances a loan to Next Frontier Pharmaceuticals (such earliest date is hereinafter referred to as the “Maturity Date”).
The Note is a secured obligation of Next Frontier Pharmaceuticals, Next Frontier Holdings, and Next Frontier Pharmaceuticals’ subsidiaries companies, Benuvia Manufacturing, Inc., a Delaware corporation (“BM”), Benuvia Therapeutics, LLC, a Delaware limited liability company (“BT”), Benuvia Manufacturing, LLC, a Delaware limited liability company (“BM LLC”), and Benuvia Therapeutics IP LLC, a Delaware limited liability company (“BT IP LLC”). The Note is a primary obligation of NFH, BM, BT, and BT IP LLC (collectively the “Guarantors”) as defined in the Note.
The Company, Next Frontier Pharmaceuticals, the Guarantors, and Benuvia Holdings, LLC, a Delaware limited liability company (“Senior Lender”), among others, are currently party to an Intercreditor and Subordination Agreement, dated December 8, 2021 (the “Intercreditor Agreement”). The Senior Lender consents to the entry of the Note by Next Frontier Pharmaceuticals and the Guarantors and the principal advances evidenced therein. The amounts advanced in the Note shall constitute additional Junior Liabilities (as defined in the Intercreditor Agreement) and, by their execution, the parties shall be bound by the terms and conditions contained in the Intercreditor Agreement, provided, however, Next Frontier Pharmaceuticals and the Guarantors shall be permitted to repay the Company all principal and interest owing thereunder in full on the Maturity Date, notwithstanding any restrictions which may otherwise be contained in the Intercreditor Agreement.
The description of the terms of the Note is a summary and is qualified by the actual agreement attached to this Current Report on Form 8-K as exhibit 10.5 which is incorporated by reference in its entirety.
The Company relied on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) with respect to the foregoing, pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder.
Forward-Looking Statements
This Current Report on Form 8-K and certain exhibits furnished or filed herewith contain forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from the Company’s historical experience and its present expectations or projections. These risks and uncertainties include, but are not limited to, those described above and in “Item 1A. Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and those described from time to time in other reports which the Company files with the SEC.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information under Item 1.01 is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities
The information under Item 1.01 is incorporated by reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
# Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally copies of omitted schedules and exhibits to the Securities and Exchange Commission or its staff 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.
Date: January 13, 2022
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian John | |
| Brian John | ||
| Chief Executive Officer | ||
Exhibit 2.1
EXECUTION VERSION
FIRST AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND AMONG
JUPITER WELLNESS, INC.,
JUPITER WELLESS INVESTMENTS, INC.,
NEXT FRONTIER PHARMACEUTICALS, INC.,
NEXT FRONTIER HOLDINGS, INC.,
AND
THE SELLERS NAMED HEREIN
DATED AS OF JANUARY 7, 2022
TABLE OF CONTENTS
| SECTION 1 DESCRIPTION OF THE TRANSACTIONS. | 7 |
| Section 1.1. The Company Acquisition .. | 7 |
| Section 1.2. The Buyer and Company Merger .. | 7 |
| Section 1.3. The Internal Restructuring | 7 |
| Section 1.4. The SRM Spin-Off | 7 |
| Section 1.5. Further Action | 7 |
| SECTION 2 PURCHASE AND SALE. | 8 |
| Section 2.1. Purchase and Sale | 8 |
| Section 2.2. Payments at Closing | 8 |
| Section 2.3. Transactions to be Effectuated at Closing | 8 |
| Section 2.4. Closing | 10 |
| SECTION 3 CONDITIONS TO CLOSING. | 10 |
| Section 3.1. The Buying Parties Conditions | 10 |
| Section 3.2. Sellers’ Conditions | 12 |
| Section 3.3. Conduct of Businesses Prior to the Closing | 13 |
| SECTION 4 COVENANTS. | 13 |
| Section 4.1. Proxy Statement; Parent Stockholders Meeting. | 13 |
| Section 4.2. Transfer Restrictions. | 14 |
| Section 4.3. Section Additional Listing Application. | 14 |
| Section 4.4. Reservation of Common Stock. | 15 |
| Section 4.5. Board Recommendation. | 15 |
| Section 4.6. Cooperation; Commercially Reasonable Efforts. | 15 |
| SECTION 5 REPRESENTATIONS BY THE COMPANY AND NFHI | 15 |
| Section 5.1. Corporate Existence and Power. | 15 |
| Section 5.2. Corporate Authorization | 16 |
| Section 5.3. Governmental Authorization | 16 |
| Section 5.4. Non-Contravention | 16 |
| Section 5.5. Capitalization; Subsidiaries. | 17 |
| Section 5.6. Financial Records | 17 |
| Section 5.7. Absence of Certain Changes | 18 |
| Section 5.8. No Undisclosed Liabilities | 19 |
| Section 5.9. Material Contracts | 19 |
| Section 5.10. Compliance | 19 |
| Section 5.11. Litigation | 20 |
| Section 5.12. No Proceedings | 20 |
| Section 5.13. Property | 20 |
| Section 5.14. Condemnation | 20 |
| Section 5.15. Employees; Unions | 20 |
| Section 5.16. Taxes | 21 |
| Section 5.17. Liens | 22 |
| Section 5.18. Brokers or Finders | 22 |
| Section 5.19. Insurance | 23 |
| Section 5.20. Licenses | 23 |
| Section 5.21. Operational Assets | 23 |
| Section 5.22. Employees of NFHI | 23 |
| Section 5.23. Proprietary Rights | 23 |
| Section 5.24. Accounts Payable | 24 |
| Section 5.25. Employee Benefits | 24 |
| Section 5.26. Financial Statements | 24 |
| Section 5.27. Accounts Receivable | 24 |
| Section 5.28. No Additional Representations or Warranties | 24 |
| SECTION 6 REPRESENTATIONS OF THE BUYER AND PARENT. | 24 |
| Section 6.1. Authority | 24 |
| Section 6.2. Authorization/Execution | 24 |
| Section 6.3. Organization and Good Standing; No Violation | 25 |
| Section 6.4. Capitalization; Subsidiaries | 25 |
| Section 6.5. Financial Records | 26 |
| Section 6.6. SEC Documents | 26 |
| Section 6.7. Legal Proceedings | 26 |
| Section 6.8. Solvency | 27 |
| Section 6.9. No Conflicts; Consents | 27 |
| Section 6.10. Brokers and Finders | 27 |
| Section 6.11. Tax Matters | 27 |
| Section 6.12. Proxy Statements | 29 |
| Section 6.13. Board Recommendation; Required Vote | 29 |
| SECTION 7 INDEMNIFICATION. | 29 |
| Section 7.1. Survival | 29 |
| Section 7.2. Indemnification of the Buyer, Parent and Management Team by | 30 |
| Section 7.3. Indemnification of the Sellers by the Buyer | 30 |
| Section 7.4. Method of Asserting Claims | 31 |
| Section 7.5. Exclusive Remedy | 33 |
| Section 7.6. Release | 33 |
| Section 7.7. Termination. | 33 |
| SECTION 8 AGREEMENT OF NON-DISCLOSURE; NON-SOLICITATION | 34 |
| SECTION 9 TAX MATTERS | 34 |
| Section 9.1. Treatment of Transaction | 34 |
| Section 9.2. Preparation of Tax Returns | 35 |
| Section 9.3. Tax Cooperation | 35 |
| Section 9.4. Audits and Tax Adjustments | 35 |
| SECTION 10 MISCELLANEOUS. | 36 |
| Section 10.1. Entire Agreement | 36 |
| Section 10.2. Further Assurances and Cooperation | 36 |
| Section 10.3. Successors and Assigns | 36 |
| Section 10.4. Amendments | 36 |
| Section 10.5. Construction | 36 |
| Section 10.6. Severability | 36 |
| Section 10.7. Waivers | 36 |
| Section 10.8. Time is of the Essence | 36 |
| Section 10.9. Transaction Expenses | 36 |
| Section 10.10. Notices | 37 |
| Section 10.11. Waiver of Jury Trial | 37 |
| Section 10.12. Calculation of Time Periods | 37 |
| Section 10.13. Third Party Beneficiary | 37 |
| Section 10.14. Governing Law; Venue | 38 |
| Section 10.15. Captions | 38 |
| Section 10.16. Counterparts | 38 |
| Section 10.17. Legal Privilege and other Matters | 38 |
| Section 10.18. Construction | 38 |
EXHIBITS AND SCHEDULES
EXHIBITS
| Exhibit A | Secured Note | |
| Exhibit B | Form of Transition Advisory Agreement | |
| Exhibit C | Form of Assignment of the Shares | |
| Exhibit D | Form of Voting Agreement | |
| Exhibit E | Certificate of Designation | |
| Exhibit F | Stockholders Agreement | |
| Exhibit G | Agreement of Confidentiality | |
| Exhibit H | Contribution and Distribution Agreement |
SCHEDULES
Schedule A |
Defined Terms | |
| Schedule 1 | Selling Stockholders | |
| Schedule 5.1(b) | List of Subsidiaries | |
Schedule 5.3(d) |
Company Products | |
| Schedule 5.5 | Company Capitalization Table | |
| Schedule 5.5(a) | Holders of Shares | |
| Schedule 5.5(d) | Subsidiary Ownership | |
| Schedule 5.7 | Certain Changes | |
| Schedule 5.8 | Liabilities and Obligations | |
| Schedule 5.9 | Contracts | |
| Schedule 5.11 | Litigation | |
| Schedule 5.13 | Property | |
| Schedule 5.15 | Employees and Independent Contractors | |
Schedule 5.16 Schedule 5.17 |
Sales and Use Taxes Permitted Liens | |
| Schedule 5.19 | Insurance | |
| Schedule 5.20 | Licenses | |
| Schedule 5.21 | Operational Assets not Owned or Leased | |
| Schedule 5.22 | List of Corporate Employees and Employment Contracts | |
| Schedule 5.23(b) | Trademarks, Domain Name Registration and Material Software | |
| Schedule 5.25(a) | List of Employee Benefit Plans | |
| Schedule 5.26 | Financial Statements | |
| Schedule 5.27 | Accounts Receivable | |
| Schedule 6.4 | Parent Stock Capitalization |
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of January 7, 2022, is entered into by and among JUPITER WELLNESS, INC., a Delaware corporation (the “Parent”), JUPITER WELLNESS INVESTMENTS, INC., a Florida corporation (the “Buyer” and, together with the Parent, collectively, the “Buying Parties”), NEXT FRONTIER PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), NEXT FRONTIER HOLDINGS, INC., a Delaware corporation (“NFHI”) and the stockholders listed on Schedule 1 in the ownership amounts and addresses listed therein (the “Individual Stockholders”, and together with NFHI, collectively, the “Sellers”). Each of the parties constituting the Buying Parties and the Sellers are hereinafter referred to individually as a “Party” and, jointly, as the “Parties.”
RECITALS
WHEREAS, the board of directors of Parent has determined that the consummation of the Transactions (later defined) contemplated by the terms and conditions set forth in this Agreement and the Contribution and Distribution Agreement, dated the date hereof (as it may be amended, modified or supplemented from time to time, the “Distribution Agreement”), by and among Parties and the other Transaction Documents, is fair to, advisable and in the best interests of Parent and Parent’s stockholders;
WHEREAS, the Sellers own all of the issued and outstanding shares of common stock of the Company, on a fully-diluted basis, and wishes to effectuate the sale of 94.2% of the Company’s issued and outstanding shares of common stock of the Company on a fully-diluted basis (“the “Shares”);
WHEREAS, the Sellers desire to sell and transfer, and Buyer desires to purchase, all of the Sellers’ right, title and interest in the Shares, for the consideration set forth in Section 2.1, subject to the terms and conditions of this Agreement;
WHEREAS, the Parties contemplate that, pursuant to this Agreement, immediately after the Closing, Buyer shall be merged with and into the Company, with the Company surviving the merger as a wholly owned direct subsidiary of Parent;
WHEREAS, in connection with the acquisition of approximately 94.2% of the Company’s issued and outstanding shares of common stock (“NFP Acquisition”) by the Buyer, and prior to the date hereof, the Sellers and the Company has effectuated an acquisition of the shares or assets of Benuvia Manufacturing, Inc. and Benuvia Therapeutics LLC (collectively, “Benuvia”) pursuant to which, Sellers shall become the sole owner of Benuvia (the “Benuvia Acquisition”);
WHEREAS, in connection with the transactions contemplated herein, the Buying Parties has lent the Company a total of Ten Million Dollars and Two Hundred Thousand ($10,200,000) pursuant to a secured lending arrangement (the “Secured Note”), substantially in the form attached hereto as Exhibit A, to be secured by liens on the property, plant and equipment (including fixtures) located at 3950 N. Mays St., Round Rock, Texas 78665, pursuant to the terms and conditions set forth in the Secured Note purchase agreement (the “Secured Note Purchase Agreement”) with the Company;
WHEREAS, in connection with the transaction contemplated herein, the Buying Parties extend an additional funding of $1,000,000 is anticipated to made on or about the date hereof;
WHEREAS, in connection with the transactions contemplated herein, on the terms and subject to the conditions set forth in the Transition Advisory Agreements (the “Transition Advisory Agreements”), prior to the Closing, Parent shall enter into the Transition Advisory Agreements with certain key employees of the Parent (the “Management Team”), pursuant to which the Management Team members will be hired as advisers for the Parent effective with the Closing, and the Management Team members’ existing employment agreement with the Parent will be superseded by the Transition Advisory Agreements;
WHEREAS, SRM Entertainment LTD, a Hong Kong Special Administrative Region of the People’s Republic of China limited company (“SRM”) and a wholly-owned direct subsidiary of Parent;
| 6 |
WHEREAS, on the terms and subject to the conditions set forth in Distribution Agreement, in order to effectuate such contemplated distribution, Parent shall undertake the Internal Restructuring and, in connection therewith, effectuate the Consumer Products Contribution;
WHEREAS, on the terms and subject to the conditions set forth in the Contribution Agreement, following the completion of the Internal Restructuring and the Closing, Parent shall distribute to its stockholders of record date of before the anticipated Closing, all of the shares of common stock of SRM (the “Distribution”);
WHEREAS, the board of directors of Parent have approved and declared advisable and in the best interests of Parent and its stockholders this Agreement and the transactions contemplated hereby; and
WHEREAS, the Parties desire to set forth the principal arrangements among them regarding the foregoing transactions and to make certain covenants and agreements specified herein in connection therewith and to prescribe certain conditions relating thereto.
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements contained herein, and intending to be legally bound hereby, the Parties agree as follows:
SECTION 1 DESCRIPTION OF THE TRANSACTIONS.
Section 1.1. The Company Acquisition. Upon the terms and subject to the conditions set forth in this Agreement, Sellers shall irrevocably and forever sell, assign, and transfer to Buyer and its successors and assigns, and Buyer shall buy and accept from Sellers, all of Sellers’ rights, title, and interests in ninety-four and half percent (94.5%) of the issued and outstanding on a fully diluted bases of the Shares, free and clear of any and all liens, encumbrances, and claims of ownership, in exchange for 500,000 newly designated convertible Preferred Stock (later defined) of the Parent. The Preferred stock shall be convertible, subject to the conditions set forth in this Agreement, into an aggregate amount of 65,000,000 shares of Common Stock of the Parent (the “Common Stock”).
Section 1.2. The Buyer and Company Merger. Upon the terms and subject to the conditions set forth in this Agreement, following the Closing, it is anticipated that Buyer shall be merged with and into the Company. By virtue of the merger, the separate existence of Buyer shall cease and the Company shall continue as the surviving corporation in the merger as a wholly-owned subsidiary of Parent, and shall succeed to and assume all the property, rights, privileges, powers and franchises and be subject to all of the restrictions, debt and duties of Buyer in accordance with the Delaware General Corporate Law.
Section 1.3. The Internal Restructuring. The Internal Restructuring, and the transfer of assets and assumption of liabilities contemplated by, as applicable, the Distribution Agreement, in each case, shall have been consummated in all material respects in accordance with and subject to the terms of this Agreement, the Distribution Agreement and all other actions that the board of directors of the Parent deems necessary to effectuate the Distribution.
Section 1.4. The SRM Distribution. As soon as practicable following the Closing, it is anticipated that Parent makes the Distribution to Parent’s stockholders of record date of before the anticipated Closing, pursuant to and in accordance with the provisions of this Agreement, the Distribution Agreement and all other actions that the board of directors of the Parent deems necessary to effectuate the Distribution.
Section 1.5. Further Action. If, at any time after the Closing, any further action is determined by Parent to be necessary or desirable to carry out the purposes of this Agreement, the Distribution Agreement, the Transactions or to vest the Company with full right, title and possession of and to all rights and property of Buyer, the officers and directors of the Company and Parent shall be fully authorized to take such action.
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SECTION 2 PURCHASE AND SALE.
Section 2.1. Purchase and Sale.
(a) At the Closing (defined below), Sellers shall irrevocably and forever sell, assign, and transfer to Buyer and its successors and assigns, and Buyer shall buy and accept from Sellers, all of Sellers’ rights, title, and interests in one ninety four and half percent (94.5%) of the issued and outstanding on a fully diluted bases of the Shares, free and clear of any and all liens, encumbrances, and claims of ownership, in exchange for convertible preferred stock of the Parent (the “Preferred Stock”), and shall be payable as follows.
(b) Preferred Stock Consideration. At Closing, the Buying Parties shall issue and deliver to the Sellers 500,000 shares of Preferred Stock (the “Preferred Stock Consideration”), which may be represented by one or more certificates, or the extent not in certificate form, such transfer of Preferred Stock Consideration to be evidenced in book-entry form, at the Buying Parties’ election, which are convertible, subject to Section 2.2.1 of this Agreement, into 65,000,000 shares of Common Stock of the Parent in the aggregate.
Section 2.2. Payments at Closing. At the Closing, the Buying Parties will transfer to the Sellers the Preferred Stock Consideration payable to the Sellers at the Closing.
Section 2.2.1. 19.9% Limit on Shares Issuable. Following the signing of this Agreement, Parent shall use reasonable efforts to obtain at its meeting of stockholders the Requisite Parent Stockholder Approval pursuant to NASDAQ Listing Standard Rule 5635, including by endorsing its approval with the recommendation of the board of directors of Parent that stockholders vote in favor of (i) the issuance of Preferred Stock Consideration and the issuance of the shares of Common Shares (later defined) underlying the Preferred Stock Consideration, (ii) an amendment to the Second Amended and Restated Certificate of Incorporation to increase the authorized number of shares of the Parent’s Common Stock, (iii) amendment of Parent’s Certificate of Incorporation to authorize the issuance of the Preferred Stock Consideration, (iv) Transition Advisory Agreements, and (v) adjournment of the meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are insufficient votes present in person or by proxy for, or otherwise in connection with, the approval of each of the above proposals, and (vi) all other transactions and actions the Company’s board of directors deems necessary, in the related proxy materials (the “Transactions”). Each of the Transaction proposals shall be conditioned on the approval of each of the other proposals. Unless and until the Requisite Parent Stockholder Approval is obtained, or in the opinion of counsel to Parent, is not required, in no event will the number of Shares issuable as payment, in whole or in part, of the Preferred Stock Consideration pursuant to Section 2.1(a) hereof, exceed nineteen and nine-tenths percent (19.9%) in the aggregate of either (1) Parent’s issued and outstanding Common Stock as of the date hereof prior to the issuance or (2) the total voting power of Parent’s securities outstanding as of the date hereof prior to the issuance of the Common Stock underlying the Preferred Stock Consideration that are entitled to vote on a matter being voted on by holders of Parent’s stockholders.
Section 2.3. Transactions to be Effectuated at Closing.
| (a) | At Closing, the Parent and the Buyer shall: |
| (i) | deliver to the Management Team: |
| (A) | Duly executed and delivered Transition Advisory Agreements, substantially in the form attached hereto as Exhibit B; |
| (ii) | deliver to the applicable Parties: |
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| (A) | Resolutions by at least a majority of the Parent’s directors who are independent directors approving the Transactions; | |
| (B) | the Certificate of Designation setting forth the rights, privileges and preferences of the Preferred Stock, substantially in the form attached hereto as Exhibit E, and all other agreements, documents, instruments or certificates required to be delivered by either the Parent or Buyer at or prior to the Closing pursuant to Section 3.2 of this Agreement; | |
| (C) | The Voting Agreement; and | |
| (D) | Distribution Agreement in the Form of Exhibit H hereto. |
| (b) | At Closing, Sellers shall: |
| (i) | deliver to the Buying Parties: |
| (A) | The Shares in the form of Exhibit C hereto (the “Assignment”), duly executed by Sellers; | |
| (B) | Closing Indebtedness Certificate (as defined below); | |
| (C) | Closing Transaction Expenses Certificate (as defined below); | |
| (D) | Company’s officer’s certificate, which should list all of assets and liabilities of the Company; | |
| (E) | Company’s officer’s certificate dated as of the Closing, duly executed by Chief Executive Officer or Chief Financial Officer or persons preforming similar functions, in his capacity as executive officer of the Company; | |
| (F) | Company’s secretary’s certificate dated as of the Closing, duly executed by the Company’s secretary, (a) attaching copies of the certificate of incorporation and bylaws of the Company, and any amendments thereto; (b) attaching a true, correct and complete copy of the stock ledger of the Company from the date of its incorporation or organization through the Closing; (c) certifying the good standing (or equivalent status in the relevant jurisdiction) in its jurisdiction of incorporation or organization and in each other jurisdiction where it is qualified to do business (or equivalent status in the relevant jurisdiction) and that there are no proceedings for the dissolution or liquidation of the Company, and (d) certifying the incumbency, signature and authority of the officers of the Company authorized to execute, deliver and perform this Agreement and all other documents, instruments or agreements related thereto executed or to be executed by the Company; | |
| (G) | The Voting Agreement; and | |
| (H) | all other agreements, documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to Section 3.1 of this Agreement. |
| (ii) | deliver to the Management Team: |
| (A) | The Voting Agreement in the Form of Exhibit D hereto; and | |
| (B) | The Stockholders Agreement in the Form of Exhibit F hereto. |
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| (c) | At Closing, the Management Team shall: |
| (i) | deliver to Parent: |
(A) Copies of resignation letters effective as of the Closing Date, duly executed and delivered by each of the member of the Management Team as officers and directors (other than Dr. Glynn Wilson who should remain to serve as a director) of the Parent;
(B) Duly executed and delivered Transition Advisory Agreements; and
(C) The Voting Agreement.
(ii) deliver to Sellers:
(A) The Voting Agreement; and
(B) The Stockholder Agreement.
Section 2.4. Closing. The closing of the NFP Acquisition and the Transactions (the “Closing”) shall take place by conference call and by exchange of signature pages by email, fax or other electronic transmission at 9:00 a.m. eastern time on (a) the second (2nd) Business Day after the conditions set forth in Section 3 have been satisfied, or, if permissible, waived by the Party entitled to the benefit of the same (other than those conditions which by their terms are required to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) or (b) such other date and time as the Parties mutually agree (the date upon which the Closing occurs, the “Closing Date”).
SECTION 3 CONDITIONS TO CLOSING.
Section 3.1. The Buying Parties Conditions. The obligation of the Buying Parties to consummate the Transactions is subject to the fulfillment of, or to the Buyer’s written waiver or extension or modification thereof, of each of the following conditions to Closing:
(a) Representations and Warranties.
(i) The Fundamental Representations of the Sellers set forth in this Agreement shall have been true and correct in all respects as of the date of this Agreement and shall be true and correct in all material respects as of the date of the Closing as if made on and as of such date; and
| (ii) | all other representations and warranties of the Sellers set forth in Section 5 below shall be true and correct (in each case, disregarding any qualifiers as to “materiality” or “material adverse effect” contained therein) as of the Closing as though then made (or if such representations and warranties relate to a specific date, such representations and warranties shall be true and correct as of such date). |
(b) Performance and Obligations of the Sellers. The Sellers shall have performed or complied in all respects with all covenants required by this Agreement to be performed or complied with by the Company on or prior to the Closing Date.
(c) Deliverables. The Sellers shall have made the deliveries required by Section 2.3(b) hereto.
(d) Consents and Approvals. The Buying Parties shall have received all consents, approvals, certifications and licenses as may be necessary to own the Shares and operate the Business, including:
(i) Parent Board Approval. Majority of the independent directors of the Parent’s board of directors have unanimously (i) determined that it is in the best interests of the Parent and its stockholders to enter into this Agreement and consummate the Transactions upon the terms and subject to the conditions set forth herein and declared this Agreement advisable; (ii) approved the execution and delivery of this Agreement by the Parent, the performance by the Buying Entities of the covenants and other obligations hereunder, and the consummation of the transactions upon the terms and conditions set forth herein; (iii) directed that the adoption of this Agreement be submitted to a vote at a meeting of the stockholders of the Company and (iv) resolved to recommend that the Company Stockholders vote in favor of adoption of this Agreement in accordance with the Delaware General Corporation Law.
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(ii) Compliance with Legal Requirements; Majority of the Minority Approval. The Transactions, including the Amendment (as defined below), shall have received (i) all requisite approvals of the stockholders of the Parent required pursuant to Delaware law, the Company’s Certificate of Incorporation and Bylaws and the rules and regulations of the NASDAQ (the “Required Stockholders Approval”), and (ii) approval of a majority of the shares of Common Stock of the Parent present in person or represented by proxy at a meeting of the stockholders of the Company called for such purpose that are not owned, beneficially or of record, by the Management Team, Sellers, or any of their Affiliates (the “Majority of the Minority Requirement”).
(e) No Material Adverse Change. The Buying Parties shall be satisfied that there has been no Material Adverse Change to the Business or any of the Company’s assets or the Company’s liabilities.
(f) No Default. The Company shall not be in default under any of contract, lease or other agreement or instrument affecting or relating to the Company’s assets, the Company’s liabilities, or the Business, where in Buyer’s good faith judgment such default would reasonably be expected to have a Material Adverse Effect on the Business or the Company either prior to or after Closing.
(g) Schedules. The Buying Parties shall have approved the Company Disclosure Schedule, which approval may be granted or denied by Buyer in its sole discretion.
(h) Executed Agreements and Certificates. The Buying Parties shall have received the following agreements and documents, each of which shall be in full force and effect:
(i) The Company shall deliver to the Buying Entities as promptly as reasonably practicable after the date hereof the most recent consolidated audited financial statements of the Company, and unaudited consolidated statements of operations and comprehensive income, changes in stockholders’ equity and cash flows the most recently available quarter and all notes thereto, accompanied by an unqualified report of the PCAOB Auditor (“PCAOB Audited Financial Statements”), which comply with the applicable accounting requirements and with the rules and regulations of the Securities and Exchange Commission (the “SEC”), the Securities Exchange Act of 1934, as amended, and Securities Act of 1933, as amended, applicable to a registrant. The PCAOB Audited Financial Statements shall comply as to form in all material respects, and shall be prepared in accordance, with U.S. GAAP (as modified by the rules and regulations of the SEC) applied on a consistent basis throughout the periods involved, shall fairly present in all material respects the consolidated financial position of the Company at the date thereof and the results of its operations and cash flows for the period therein indicated. When delivered by the Company to the Buying Entities after the date hereof, the PCAOB Audited Financial Statements will not reflect any differences from the financial statements for the periods shown, except for such differences that would not constitute a Material Adverse Effect. All costs incurred in connection with preparing and obtaining the PCAOB Audited Financial Statements shall be borne by the Sellers;
(ii) a certificate of a secretary or assistant secretary (a “Secretary’s Certificate”) of the Company, as set forth in Section 2.3(b)(vii), and three (3) certified copies of (A) the Certificate of Incorporation and Bylaws and (B) the resolutions of the Company and NFHI authorizing the execution, delivery and performance of this Agreement and the Transaction and the transfer of the Shares and the updated register of Company’s stock ownership evidencing the Buyer as the sole holder of the Shares as of the Closing, and the incumbency and signatures of officers of the Company executing this Agreement;
(iii) a certificate executed on behalf of the Company by its Chief Executive Officer or Chief Financial Officer or persons preforming similar functions (an “Officer’s Certificate”) and containing representations and warranties of the Company, to the effect that the conditions set forth in Section 3.1 have been duly satisfied;
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(iv) all of the statutory and other books (duly written up to date) of the Company;
(v) the executed consents, including the consent needed pursuant to any regulatory transfer consents from the FDA or other governmental authority (the “Third Party Consents”) for the Contracts identified on Schedule 5.1(viii);
(vi) any other documentation that effectuates this Agreement or any amendment hereto, as the Buying Entities may request, including proof that all taxes, assessments, wages, and insurance premiums have been paid in full or will be paid in full as of the Closing Date;
(vii) a good standing certificate for Company dated no earlier than seven (7) days prior to the Closing Date issued by the Delaware Secretary of State or other applicable governmental authority; and
(viii) The Parent’s board of directors has received the written opinion of an independent as financial advisor to the Parent to that effect that as of the date of such opinion, and subject to the factors and assumptions set forth therein, the Preferred Stock Consideration to be paid to the Sellers, in light of the Transactions contemplated here, is fair to such holders from a financial point of view.
(i) Tail Insurance Policy. On or prior to the Closing, the Sellers will deliver to the Parent, Buyer and Management Team evidence that the Sellers have obtained, at their sole expense, an irrevocable “tail” insurance policy in a form acceptable to the Buyer from a reputable insurance carrier: (i) for coverage, terms and conditions that are no less favorable than policies of Parent, with respect to claims arising out of or relating to events that occurred before or at the Closing (including in connection with the Transactions contemplated by the this Agreement), but in any event not less than an aggregate liability coverage limit of not less than Two Million Dollars $2,000,000, as to the Next Frontier Pharmaceuticals business, (ii) with a coverage term of not less than the six (6) years period subsequent to the Closing Date, (iii) listing the Buyer and Parent as additional insureds, and (iv) requiring not less than 30 days advance notice to Parent, Buyer and Management Team members prior to cancellation by the carrier (the “Tail Insurance Policy”). The Seller shall also provide Buyer, Parent and Management Team members with proof that all premiums have been paid in full on the Tail Insurance Policy. The Sellers will continually pay for such irrevocable insurance policies and will not cancel or change such insurance policies in any respect. If the Company or any its respective successors or assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of the Company shall be covered under such “tail” insurance policy that is set forth in this Section 3.1(j). The provisions of this Section 3.1(j) are intended for the benefit of, and will be enforceable by the Parent, Buyer, Company and Management Team members, their successors, assigns or Representatives, and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have had by contract or otherwise.
Section 3.2. Sellers’ Conditions. The obligation of the Sellers to consummate the Transaction is subject to the fulfillment of, or the Sellers’ written waiver or extension or modification thereof, each of the following conditions to Closing:
(a) Representations and Warranties.
(i) The Fundamental Representations of the Buying Parties shall be true and correct in all respects as of the Closing as though then made (or if such representations and warranties relate to a specific date, such representations and warranties shall be true and correct as of such date); and
(ii) all other representations and warranties of the Buying Parties set forth in Section 6 shall be true and correct (in each case, disregarding any qualifiers as to “materiality” or “material adverse effect” contained therein) as of the Closing as though then made (or if such representations and warranties relate to a specific date, such representations and warranties shall be true and correct as of such date), except to the extent such failure of the representations and warranties to be so true and correct would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Parent or the Buyer.
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(b) Performance and Obligations of the Buying Parties. The Buying Parties shall have performed or complied in all respects with all covenants required by this Agreement to be performed or complied with by the Buying Parties, as the case may be, on or prior to the Closing Date.
(c) Deliverables. The Buying Parties and Management Team shall have made the deliveries required by Section 2.3(a) and Section 2.3(c) hereto.
| (d) | Consents and Approval. The Transactions shall have received (i) the Required Stockholders Approval, and (ii) the Majority of the Minority Requirement; |
(e) Executed Agreements and Certificates. The Sellers shall have received the following agreements and documents, each of which shall be in full force and effect:
(i) a Secretary’s Certificate of the Buying Parties and (A) the charter documents of each of the Buying Parties as certified by the Secretary of State (or equivalent Governmental Authority) of their jurisdiction of incorporation, and bylaws, each as amended, and (B) the resolutions of the Buyer authorizing the execution, delivery and performance of this Agreement and the Transaction and the issuance of the Preferred Stock, and the incumbency and signatures of officers of the Parent and the Buyer;
(ii) a filed and effective Certificate of Designation setting forth the rights, privileges and preferences of the Preferred Stock; and
(iii) the Preferred Stock Consideration, as set forth in Sections 2.1 and 2.2 of this Agreement.
Section 3.3. Conduct of Businesses Prior to the Closing. From the date the conditions set forth in this Section 3 have been satisfied until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), the Company and NFHI will (a) conduct the business of the Company in the Ordinary Course of Business consistent with past practice; and (b) use best efforts to maintain and preserve intact the current organization, business and franchise of the Company and the Company Subsidiaries, and to preserve the rights, franchises, goodwill and relationships of their employees, customers, lenders, suppliers, regulators and others having business relationships with the Company and the Company Subsidiaries.
SECTION 4 COVENANTS.
Section 4.1. Proxy Statement; Parent Stockholders Meeting.
(a) As promptly as practicable after the date of this Agreement, Parent shall prepare and file with the SEC a Notice of Meeting and Preliminary Proxy Statement relating to a meeting of the Parent’s stockholders (the “Parent Stockholder Meeting”) to be held for the purpose of voting on the Transactions and other matters as may be deemed necessary or advisable by the Parent, including, without limitation, an amendment of the Company’s Certificate of Incorporation to increase the number of authorized shares of Common Stock (the “Amendment”). As promptly as practicable after filing such Notice of Meeting and Preliminary Proxy Statement, but in any event subject to the rules and regulations of the SEC, the Company shall prepare and file with the SEC, and mail to its stockholders of record as of the close of business on the record date established by the Parent for the Parent Stockholder Meeting (the “Record Stockholders”), a Notice of Meeting and Definitive Proxy Statement relating to the Parent Stockholder Meeting. The Notice of Meeting and Preliminary Proxy Statement and Notice of Meeting and Definitive Proxy Statement are sometimes hereinafter referred to as the “Proxy Statements.”
(b) Sellers shall furnish all information concerning the Sellers as the Parents may request in connection with the preparation of the Proxy Statements, including, without limitation, any information in response to comments received from the SEC, if applicable.
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(c) The Parent Stockholder Meeting shall be called for a date which, after taking into consideration the provisions of the Certificate of Incorporation and Bylaws, the Delaware General Corporation Law, the rules and regulations of the SEC and the NASDAQ Listing Rules and the recommendations of any proxy solicitor engaged by the Parent with respect to the Parent Stockholder Meeting and the Transactions, is as prompt as practicable after the Notice of Meeting and Definitive Proxy Statement is filed with the SEC and mailed to the Record Stockholders
(d) The Parent shall use its commercially reasonable efforts to secure all required authorizations, consents, waivers, amendments and approvals with respect to the Transactions and the Amendment, including, without limitation, the stockholder approvals described in Section 3.1(d)(ii) hereto and contemplated by the Proxy Statements, including postponing or adjourning the Proxy Stockholder Meeting (i) for the absence of a quorum, (ii) to allow reasonable additional time for any supplemental or amended disclosure necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the stockholders prior to the Parent Stockholder Meeting or (iv) to allow additional solicitation of votes in order to obtain the Required Stockholders Approval
(e) Parent shall consummate the Distribution in accordance with the terms of the Distribution Agreement, and shall use its best efforts to complete the Distribution as promptly as practicable following the Closing, but in no event more than ninety (90) days following the Closing date.
Section 4.2. Transfer Restrictions.
(a) No Seller shall, and any such Seller shall cause its Affiliates not to, without the prior written approval of legal outside counsel of Parent, directly or indirectly, offer, sell, contract to sell, transfer, assign, pledge, grant any option to purchase, make any short sale or otherwise dispose of or distribute (“Transfer”) any of (i) the Preferred Stock issued to such Seller as the closing consideration of the Transactions, or (ii) the Common Stock underlying the Preferred Stock (the “Common Shares”), to be received by such Seller pursuant to the terms hereof during the period commencing on the Closing Date and ending on the six (6) month anniversary of said Closing; provided, however, that NFH may transfer its shares of the Preferred Stock or Common Shares following the Closing to NFH’s stockholders subject to the transfer restrictions in this Section 4.2.
(b) Each Seller hereby acknowledges and agrees that each certificate or book-entry share representing the Preferred Stock or Common Shares, received by such Seller pursuant to the terms hereof, shall bear a legend substantially in the following form (in addition to any other legend required under applicable securities Laws) and a comparable notation or other arrangement will be made with respect to any uncertificated Common Shares:
(i) “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”
(ii) “THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT CERTAIN FIRST AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, BY AND AMONG THE ISSUER AND THE OTHER PARTIES THERETO, AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH.”
(c) Parent shall, promptly upon the written request of a Seller, and at Parent’s expense, cause (i) the removal of the legend set forth in Section 4.2(b)(i) from any certificate and any related “stop order” or equivalent restriction on any book-entry share evidencing the Common Shares by such Seller pursuant to the terms hereof, provided that such Seller delivers to Parent (A) such documentation, representations and warranties as may be reasonably requested by Parent, and (B) an opinion of Parent’s counsel, reasonably acceptable in form and substance to Parent, that a registration statement under the Securities Act is then in effect with respect to such Common Shares, or (ii) the removal of the legend set forth in Section 4.2(b)(ii) from any certificate and any related “stop order” or equivalent restriction on any book-entry share evidencing Common Shares received by such Seller pursuant to the terms hereof upon the termination or lapse of the restrictions on Transfer set forth in Section 4.2(a). If so requested by a Seller, any certificates subject to legend removal hereunder may be surrendered in exchange for Common Shares held in book-entry form and shall be transmitted by Parent’s transfer agent to such Seller through the direct registration system.
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(d) Stop-Transfer Notice. Each Seller acknowledges and agrees that, in order to ensure compliance with the restrictions imposed by this Agreement, Parent may issue to its transfer agent an appropriate “stop order” or equivalent instructions with respect to any Preferred Stock and Common Shares received by such Seller pursuant to the terms hereof that are held in book-entry form (and may make appropriate notations to the same effect in its own records).
Section 4.3. Section Additional Listing Application. As promptly as practicable after the date of this Agreement, but in any event after taking into consideration the rules and regulations of the NASDAQ with respect to the timing of, and supporting documents required to accompany, the Additional Listing Application (as hereinafter defined), the Parent shall submit to NASDAQ an additional listing application relating to the Common Shares (the “Additional Listing Application”) and shall use its commercially reasonable efforts to secure NASDAQ’s approval of the Additional Listing Application.
Section 4.3.1 Completing NASDAQ Initial Listing Application. As promptly as practicable after the date of this Agreement, but in any event after taking into consideration the rules and regulations of the NASDAQ with respect to the timing of, and supporting documents required to accompany, the Initial Listing Application, Parent shall submit NASDAQ’s Initial Listing Application, and complete its process prior to Closing of the Transactions.
Section 4.4. Reservation of Common Stock. No later than the effective date of the Amendment, the Parent will reserve and the Parent shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Parent to issue the Common Shares pursuant to any exercise of the Preferred Stock.
Section 4.5. Board Recommendation. The board of directors of the Parent shall not withdraw or modify, or propose to or resolve to withdraw or modify the Board Recommendation, unless a failure to do so would be materially inconsistent with the Parent board of directors’ fiduciary duties as determined after consultation with outside legal counsel.
Section 4.6. Cooperation; Commercially Reasonable Efforts. The Parent and the Sellers shall cooperate with each other and use their respective commercially reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable under this Agreement and applicable laws, rules and regulations to consummate and make effective the Transactions, the Amendment and the Distribution as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary applications, notices, proxy statements, filings and other documents and to obtain as promptly as practicable all approvals of the Parent’s stockholders described in this Agreement and the Transaction Documents and all approvals, permits, consents and authorizations necessary or advisable to be obtained from the any third party and/or any governmental entity in order to consummate the Transactions and to effect the Amendment.
SECTION 5 REPRESENTATIONS BY THE COMPANY AND NFHI
Except as set forth in the Company Disclosure Schedule, NFHI and the Company represents and warrants to each the Buyer, Parent and Management Team that the statements contained in this Section 5 are true and correct as of the date hereof:
Section 5.1. Corporate Existence and Power.
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation or other entity and is in good standing in each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.
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(b) Section 5.1(b) of the Company Disclosure Schedule sets forth a true, correct and complete list of the Subsidiaries of the Company as of the date of this Agreement. Each of the Subsidiaries of Company (i) has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its organization; (ii) is duly licensed or qualified to do business and is in good standing as a foreign entity in all jurisdictions in which the conduct of its business or the activities it is engaged makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect; and (iii) has all requisite corporate power and authority to carry on its business as now conducted. The Company is not a participant in any joint venture, partnership or similar arrangement. Neither the Company nor any Subsidiaries of the Company has agreed or is obligated to, directly or indirectly, make any future investment in or capital contribution to any Person.
(c) The Company has made available to the Buyer accurate and complete copies of: (i) the organizational documents of the Company; and (ii) the equity ownership records of the Company. The minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the Company, the board of directors of the Company and all committees thereof, made available to the Buyer by the Company are accurate and complete in all material respects. There has not been any material violation of any of the provisions of the organizational documents of the Company, and the Company has not taken any action that is inconsistent in any material respect with any resolution adopted by its equity holders, the board of directors, or any committee thereof.
(d) Section 5.1(d) of the Disclosure Schedule lists any and all material Company products and any product or service currently under development by the Company or referencing the name of the Company.
Section 5.2. Corporate Authorization.
(a) Each NFHI and the Company has all requisite power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by NFHI and the Company of this Agreement has been duly authorized by all necessary action on the part of NFHI and the Company and their respective boards of directors or management committees. Assuming the due authorization, execution and delivery of this Agreement by the Buying Parties, this Agreement constitutes the legal, valid and binding obligation of NFHI and the Company, enforceable against NFHI and the Company in accordance with its terms, subject to (i) Laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of Law governing specific performance, injunctive relief and other equitable remedies.
(b) Required Stockholder Approval. The affirmative vote of the holders of a majority of the shares of outstanding Company Common Stock is the only vote of the holders of any class or series of Company Capital Stock necessary to adopt this Agreement and approve and consummate the Transactions.
Section 5.3. Governmental Authorization. The execution, delivery and performance by the Sellers and the Company of this Agreement and the consummation by the Sellers and the Company of the Transaction require no action by or in respect of, or filing with, any Governmental Authority other than (i) compliance with any applicable requirements of applicable U.S. state or federal securities Laws, and (ii) any actions or filings the absence of which would not be, individually or in the aggregate, material to the Sellers or the Company or impair the ability of the Sellers or the Company to consummate the Transaction.
Section 5.4. Non-Contravention. The execution, delivery and performance by the Sellers and the Company of this Agreement and the consummation of the Transaction do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of NFHI or the Company, (ii) assuming compliance with the matters referred to in Section 5.3, contravene, conflict with or result in a violation or breach of any provision of any applicable Law, (iii) assuming compliance with the matters referred to in Section 5.3, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company is entitled under any provision of any Material Contract binding upon the Company or any material permit affecting, or relating in any way to, the assets or business of the Company or (iv) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of the Company.
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Section 5.5. Capitalization; Subsidiaries.
(a) The issued and outstanding Shares of the Company, including the holders thereof, is set forth in Section 5.5(a) of the Company Disclosure Schedule. The Sellers own all such Shares, which comprise the only issued and outstanding equity securities of the Company, free and clear of any Liens (other than Permitted Liens). All outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no equity securities of the Company that remain subject to vesting or forfeiture restrictions. Except as otherwise set forth in Section 5.5(a) of the Company Disclosure Schedule, there are no outstanding equity securities or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for equity securities or voting securities of the Company, or (iii) options or other rights to acquire from the Company, or other obligations of the Company to issue, any equity securities, voting securities or securities convertible into or exchangeable for equity securities or voting securities of the Company. Schedule 5.5(a) sets forth the fully-diluted stock capitalization of the Company, including the exercise prices of derivative securities.
(b) All outstanding equity securities of the Company have been issued and granted in material compliance with (i) all applicable securities laws and other applicable Laws and (ii) all requirements set forth in applicable Material Contracts.
(c) The Company has never repurchased, redeemed or otherwise reacquired any of their securities and there are no outstanding rights or obligations of the Company to repurchase or redeem any of their securities.
(d) Section 5.5(d) of the Company Disclosure Schedule lists for each Subsidiary of the Company, the percentage of equity securities owned or controlled, directly or indirectly by the Company as of the date hereof. The Company is not bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold, any of its equity securities or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such equity security or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements. There are no outstanding contractual obligations of any Subsidiary of the Company to repurchase, redeem or otherwise acquire any of its capital stock or other equity interests. All of the shares of capital of each of the Subsidiaries of the Company are validly issued, fully paid (to the extent required under the applicable governing documents) and nonassessable and are owned by the Company or a Subsidiary of the Company, free and clear of any Liens.
Section 5.5.1. Purchased Company Assets. The Company and NFHI hereby represent and warrant to the Buying Parties that the Company Assets listed in Section 5.5.1 of the Disclosure Schedules constitute all of the property and assets (tangible and intangible) used, held and needed to operate the Company, in accordance with past practices and in the Ordinary Course of Business are adequate in all material respects for the Buying Parties to conduct the Company, as currently operated and conducted. The Company and NFHI further represent and warrant that as of the date of this Agreement, that the Company holds all right, title and interest in, to and under the Company Assets free and clear of any Liens, other than Permitted Liens.
Section 5.6. Financial Records. The books of account and other financial records of the Company have been kept accurately in the Ordinary Course of Business consistent with applicable Laws in all material respects, the Transactions entered therein represent bona fide transactions, and the revenues, expenses, assets and liabilities of the Company have been properly recorded therein in all material respects.
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Section 5.7. Absence of Certain Changes. Except as set forth in Schedule 5.7 of the Company Disclosure Schedule, since October 31, 2021, the business of the Company has been conducted in the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or facts that has had, individually or in the aggregate, a Material Adverse Effect;
(b) any material damage, destruction, abandonment, or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company;
(c) any amendment of the organizational documents (whether by merger, consolidation or otherwise) of the Company;
(d) any splitting, combination or reclassification of any shares of capital stock or other equity securities of the Company or declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any securities of the Company, or redemption, repurchase or other acquisition or offer to redeem, repurchase, or otherwise acquire securities of the Company;
(e) any issuance, delivery or sale, or authorization of the issuance, delivery or sale of, any shares of any capital stock or other equity securities of any the Company;
(f) any incurrence of any capital expenditures or any obligations or liabilities in respect thereof by the Company other than incurred in the Ordinary Course of Business consistent with past practice and in excess of $200,000 individually or $500,000 in the aggregate;
(g) any acquisition (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, by the Company of any material assets, securities, properties, interests or businesses;
(h) any sale, lease, license, or other transfer, or creation or incurrence of any Lien on, any material assets, securities, properties, interests or businesses of the Company, other than sales or licenses of Company products in the Ordinary Course of Business consistent with past practice;
(i) the making by the Company of any loans, advances or capital contributions to, or investments in, any other Person;
(j) the creation, incurrence or assumption by the Company of any Indebtedness, other than Intercompany Indebtedness and Indebtedness that has been incurred from time to time under the Company’s existing loan agreements in the Ordinary Course of Business;
(k) the entering into of any Material Contract that limits or otherwise restricts in any material respect the Company or any of its Affiliates or any successor thereto or that would reasonably be expected to, after the Closing, limit or restrict in any material respect the Company, Buyer or any of their respective Affiliates, from engaging or competing in any line of business (including any grant of exclusivity with respect to Intellectual Property or otherwise), in any location or with any Person or (ii) the entering into, amendment or modification in any material respect or termination of any Material Contract or waiver, release or assignment of any material rights, claims or benefits of the Company;
(l) the grant or increase of, or commitment to grant or increase, any form of compensation or benefits payable to any member, director, officer, advisor, consultant or employee of the Company, whose annual base compensation exceeds $150,000, including pursuant to any employee benefit plan, (ii) the hiring or termination of any employee, officer, director or consultant of the Company, whose annual base compensation exceeds $150,000, (iii) the adoption, entering into, modification or termination of any employee benefit plan, (iv) the acceleration of the vesting or payment of any compensation or benefits under any employee benefit plan, or (v) the grant of any equity or equity-linked awards or other bonus, commission or other incentive compensation to any director, officer, advisor, consultant or employee of the Company, other than, with respect to clauses (i) and (ii) above, in the Ordinary Course of Business consistent with past practice to any advisor, consultant or employee of the Company;
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(m) any change in the methods of accounting or accounting practices of the Company, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants;
(n) any settlement, or offer or proposal to settle, (i) any material Proceeding or claim involving or against the Company, (ii) any stockholder or member litigation or dispute against the Company or any of its members, officers or directors or (iii) any Proceeding that relates to the Transactions; or
(o) any agreement or commitment to take any of the actions referred to in clauses (a) through (n) above.
Section 5.8. No Undisclosed Liabilities. The Company has no liabilities or obligations of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than:
(a) liabilities that have been incurred by the Company in the Ordinary Course of Business and consistent with past practice;
(b) the liabilities or obligations identified in Schedule 5.8 of the Company Disclosure Schedule; and
(c) liabilities or obligations arising under this Agreement or that would not reasonably be expected to be material to the Company.
Section 5.9. Material Contracts. Set forth on Schedule 5.9 of the Company Disclosure Schedule is a list of all contracts between the Company and its (i) top five (5) vendors, (ii) landlords, and (iii) contact pursuant to which the Company may reasonably likely be entitled to receive or obligated to pay more than $25,000 in any calendar year that cannot be cancelled by the Company without penalty upon no more than ninety (90) days’ notice (each a “Contract” and collectively the “Contracts”). Each of the Contracts is a legal, valid, and binding obligation of the Company and of each other party thereto and each such Contract is in full force and effect. The Company and each other parties to the Contracts have performed all obligations required to be performed by each of them in all material respects under each Contract and are not in breach or default and are not alleged to be in breach or default, in any material respect under any of the Contracts. No event has occurred, and no condition or state of facts exists (or would exist upon the giving of notice or the lapse of time or both) that would become or cause a breach, default, or event of default under any of the Contracts or would give to any person the right to cause such a termination or would cause an acceleration of any liability under any of the Contracts. Neither the Company nor the Sellers have received any written notice of any actual, alleged, possible, or potential default, violation, cancellation, non-renewal, or change of a term with respect to any of the Contracts. Except as set forth in Schedule 5.9 of the Company Disclosure Schedule, since October 31, 2021, the Company has not received any written notice that any party intends to cancel any Contract or materially reduce the level of business it conducts with the Company.
Section 5.10. Compliance.
(a) The Company’s business is in compliance with all applicable municipal, county, state, and federal laws, regulations, statutes, ordinances, standards, and orders and all administrative or court rulings and with all municipal, health, building, land use, and zoning laws and regulations, except where any failure to comply therewith would not reasonably be expected have a Material Adverse Effect on the Company’s business, property, condition (financial or otherwise) or operations;
(b) There are no outstanding deficiencies or work orders of any authority having jurisdiction over the Company’s business or the premises requiring conformity to any applicable statute, regulation, ordinance, or bylaw;
(c) There are no outstanding claims, requirements, or demands of any licensing or certifying agency supervising or having authority over the Company’s business to rework or redesign any aspect thereof or to provide additional furniture, fixtures, equipment, or inventory so as to conform to or comply with any existing law, code, or standard;
(d) There has been no notice from any Governmental Authority claiming a violation of any building, zoning, environmental, or other law or ordinance;
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(e) The Company is not in material default or in material violation of, and no condition exists that with notice or lapse of time or both would constitute a material default or material violation of (i) any loan, Material Contract, note, instrument, or agreement, or (ii) law, rules or regulations applicable to the Company or the business and there are no orders, judgments, injunctions, decrees by any Governmental Authority rendered against or affecting the Company or the business; and
(f) Neither the execution and the delivery of this Agreement nor the consummation of the Transactions will: (i) violate any applicable constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court; or (ii) result in the imposition of any Lien or security interest upon any of the Company’s assets.
Section 5.11. Litigation. Except as set forth in Schedule 5.11 of the Company Disclosure Schedule, there are no actions, suits, investigations, or proceedings pending or threatened by or before any court, administrative agency, or other Governmental Authority or any arbitrator against or relating to the Shares, the Company, or the business of the Company.
Section 5.12. No Proceedings. There is no pending or threatened legal or administrative action by any Governmental Authority that would result in the dissolution of the Company or otherwise limit the Company’s right to perform its obligations under this Agreement.
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Section 5.13. Property. Except as shown on Schedule 5.13, the Company has good, clear, marketable, and exclusive title to all of the Company’s assets free and clear of any and all debts, Liens (other than Permitted Liens), encumbrances, claims, demands, third party rights, obligations, liabilities, security interests, mortgages, deeds of trust, burdens, adverse claims, charges, and other encumbrances of every kind and character, and all such property is located at the offices of the Company which are located in Round Rock, Texas. The Company is the authorized licensee of all computer software that it uses. The Company does not intend to and has not threatened to seek bankruptcy protection against the Company, or any of its assets. None of Sellers’ or the Company’s current or former affiliates, employees, independent contractors, agents, or representatives has any right, title, or interest in or to the business of the Company or any of the Company’s assets.
Section 5.14. Condemnation. There is presently no pending or contemplated or threatened condemnation of any portion of any real property owned or leased by the Company.
Section 5.15. Employees; Unions. Schedule 5.15 of the Company Disclosure Schedule is a schedule as of the respective dates set forth therein of all persons presently employed by the Company in the operation of the business, and the wages and other benefits presently paid to such employees, reflects all earned and accrued vacation, holiday and sick pay and retirement and severance benefits and earned bonuses due to and/or coming due to the employees of the Company as of the dates set forth therein, and lists all employment and severance agreements with employees of the Company (the “Employee Contracts”) and all confidentiality and inventions agreements signed by the corporate employees and contractors related to the Company. Schedule 5.15 of the Company Disclosure Schedule also separately lists the independent contractors who assist in the operation of the business with a brief description of the job of each such independent contractor. Neither Sellers nor the Company has received any written notice that any of the Company’s employees has any plan to terminate his/her employment. Except as reflected in the Employee Contracts, if any, all of the employees of the Company are at will employees. The Company (i) is not a party to and is not bound by any collective bargaining agreement, (ii) has not experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes, (iii) has not received any written notices asserting, and is not subject to any final decisions of any applicable labor board or authority finding, that it has committed any unfair labor practice, (iv) has no knowledge of any organizational efforts presently being made or threatened by or on behalf of any labor union with respect to its employees and (v) except as reflected in the Employee Contracts, if applicable, has no severance arrangements of any kind with any employee. There is no notice asserting, or final decision of any applicable labor board or authority finding, that the Company has committed any act that violates any local, state, or federal law governing employment. Except as set forth in Schedule 5.15 of the Company Disclosure Schedule, there is no claim or liability relating to the Company for any workers’ compensation, disability, or occupational diseases.
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Section 5.16. Taxes.
(a) The Company and the Sellers have filed on a timely basis all material tax returns that are or were required to be filed. All such material tax returns were correct and complete in all material respects. Neither NFHI nor the Company is the beneficiary of any extension of time within which to file any tax return. No claim has been made in writing by any taxing authority against the Company. The Company has withheld and paid all taxes required by law to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, owner, workers compensation costs, fees or insurance, or other person. In addition, and except as set forth on Schedule 5.16 of the Company Disclosure Schedule, the Company and NFHI have collected and remitted all required sales and use taxes with respect to the Business.
(b) No written claim has been made by a Taxing Authority in a jurisdiction where the Company or any of its Subsidiaries does not file a particular type of Tax Return, or pay a particular type of Tax, that the Company or any of its Subsidiaries is or may be subject to taxation of that type by, or required to file that type of Tax Return in, that jurisdiction, which claim has not been settled or resolved. The Income Tax Returns made available to the Buyer reflect all of the jurisdictions in which the Company and each of its Subsidiaries are required to file an Income Tax Return.
(c) There is no Tax Proceeding currently being conducted or pending with respect to any material Taxes or material Tax Returns of or with respect to the Company or any of its Subsidiaries, and, to the Knowledge of the Company, no such Tax Proceeding has been threatened that has not been settled or resolved. All material deficiencies for Taxes asserted or assessed in writing against the Company or any of its Subsidiaries have been fully and timely (taking into account applicable extensions) paid, settled or withdrawn, and, to the Knowledge of the Company, no such deficiency has been threatened or proposed against the Company or any Subsidiary.
(d) Neither the Company nor any of its Subsidiaries has agreed to (or has had agreed to on its behalf) any extension or waiver of the statute of limitations applicable to any Tax or Tax Return, or any extension of time with respect to a period of Tax collection, assessment or deficiency, which period (after giving effect to such extension or waiver) has not yet expired, and no request for any such waiver or extension is currently pending. Neither the Company nor any of its Subsidiaries is the beneficiary of any extension of time (other than an automatic extension of time not requiring the consent of the applicable Governmental Entity) within which to file any Tax Return not previously filed.
(e) No private letter ruling, administrative relief, technical advice, request for change of any method of accounting, or other similar ruling or request has been granted or issued by, or is pending with, any Governmental Entity that relates to any Taxes or Tax Returns of the Company or any of its Subsidiaries that would have a material adverse effect on the Company or any Subsidiary following the date of the Latest Balance Sheet.
(f) Neither the Company nor any of its Subsidiaries has been a party to any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2) (or any similar provision of U.S. state or local or non-U.S. Tax Law).
(g) The Company and each of its Subsidiaries is (and has been for its entire existence) properly treated for U.S. federal and all applicable state and local Income Tax purposes as the type of entity set forth opposite its name on the Company Disclosure Schedule.
(h) Neither the Company nor any of its Subsidiaries will be required to include any material item of income, or exclude any material item of deduction, for any period after the Closing Date (determined with and without regard to the Transactions) as a result of: (i) an installment sale transaction occurring on or before the Closing Date governed by Section 453 of the Code (or any similar provision of state, local or non-U.S. Laws); (ii) a transaction occurring on or before the Closing Date reported as an open transaction for U.S. federal Income Tax purposes (or any similar doctrine under state, local, or non-U.S. Laws); (iii) any prepaid amounts received or paid on or prior to the Closing Date or deferred revenue realized, accrued or received on or prior to the Closing Date, in each case, outside of the Ordinary Course of Business; (iv) a change in method of accounting with respect to a Pre-Closing Tax Period that occurs or was requested on or prior to the Closing Date (or as a result of an impermissible method used in a Pre-Closing Tax Period); (v) an agreement entered into with any Governmental Entity (including a “closing agreement” under Code Section 7121) on or prior to the Closing Date; or (vi) any intercompany transaction occurring or any excess loss account existing on or prior to the Closing Date, in each case described in Treasury Regulations under Code Section 1502 (or any similar provision of state, local, or non-U.S. Laws). Neither the Company nor any of its Subsidiaries uses the cash method of accounting for Income Tax purposes or will be required to make any payment after the Latest Balance Sheet Date as a result of an election under Code Section 965 (or any similar provision of state, local, or non-U.S. Laws). The Company does not have any “long-term contracts” that are subject to a method of accounting provided for in Code Section 460. Neither Company nor any of its Subsidiaries is party to or bound by any closing “agreement or similar agreement with any Taxing Authority the terms of which would have an effect on the Company or any of its Subsidiaries after the Latest Balance Sheet Date.
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(i) There is no Lien for material Taxes on any of the assets of the Company or any of its Subsidiaries, other than Liens described in clause (c) of the definition of Permitted Liens.
(j) Neither the Company nor any of its Subsidiaries has ever been a member of an affiliated group as defined in Section 1504 (or any analogous combined, consolidated or unitary group defined under state, local or non-U.S. Law) (other than a group the common parent of which is the Company or a Subsidiary thereof). Neither the Company nor any of its Subsidiaries has liability for material Taxes of any other Person as a result of Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-U.S. Laws), successor liability, transferee liability, joint or several liability, by contract, by operation of Law, or otherwise. Neither the Company nor any of its Subsidiaries is party to or bound by any tax sharing agreement.
(k) The unpaid Taxes of the Company and its Subsidiaries (i) did not, as of the date of the Latest Balance Sheet, exceed the reserves for Tax liabilities (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Latest Balance Sheet and any related unaudited income, equity or cash flow statements (but not including any notes thereto) and (ii) do not exceed such reserves as adjusted for the passage of time through the Closing Date in accordance with the past practices of the Companies and its Subsidiaries in filing their Tax Returns.
(l) Other than with respect to other U.S. states and localities, neither the Company nor any of its Subsidiaries (i) has or has had in the last five (5) years an office, permanent establishment, branch, agency or taxable presence outside the jurisdiction of its organization (other than such jurisdictions with respect to which such company has filed Income Tax Returns) or (ii) is or has been in the last five (5) years a resident for Tax purposes in any jurisdiction outside the jurisdiction of its organization (other than such jurisdictions with respect to which such company has filed Income Tax Returns).
(m) Neither the Company nor any of its Subsidiaries has distributed stock of another Person, nor has had its stock distributed by another Person, in a transaction that was governed, or intended or reported to be governed, in whole or in part by Section 355 or Section 361 of the Code in the past two (2) years or that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Code Section 355(e)) that includes the Transactions.
(n) Neither the Company nor any of its Subsidiaries has (i) elected to defer the payment of any “applicable employment taxes” (as defined in Section 2302(d)(1) of the CARES Act) pursuant to Section 2302 of the CARES Act, (ii) deferred payment of any Taxes (including withholding Taxes) pursuant to Internal Revenue Service Notice 2020-65 or any related or similar order or declaration from any Governmental Entity (including, without limitation, the Presidential Memorandum, dated August 8, 2020, issued by the President of the United States) or (iii) claimed any “employee retention credit” pursuant to Section 2301 of the CARES Act.
Section 5.17. Liens. There are no contractor’s or other mechanic’s liens presently claimed or for which any basis exists for a claim against the Company’s assets.
Section 5.18. Brokers or Finders. No broker, finder, investment banker, agent or other similar Person, is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement or such transactions, except for such fees or other commissions as to which the Sellers shall have full responsibility and, with respect to any such fees or commissions, neither Buyer nor the Company shall have any liability.
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Section 5.19. Insurance. Schedule 5.19 of the Company Disclosure Schedule is a true and complete schedule of current insurance coverage, the premiums payable therefor and a brief description of all policies or binders of property, liability, professional liability, bonding, crime, workmen’s compensation, vehicular and other insurance maintained by the Company. To NFHI’s Knowledge, all such policies are in full force and effect and neither the Sellers nor the Company has received any written notices or threats of cancellation, change, or modification of coverage. To NFHI’s Knowledge, since January 1, 2020, all premiums covering all periods up to and including the date hereof have been paid on such policies. To NFHI’s Knowledge, there is no state of facts, and there has not been the occurrence of any event, which, with notice or lapse of time or both, reasonably might form the basis for any claim against the Company which is not fully covered by the policies referred to on Schedule 5.19 of the Company Disclosure Schedule. Except as set forth in Schedule 5.19 of the Company Disclosure Schedule, the Company has not been refused any insurance nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last three (3) years.
Section 5.20. Licenses. The Company currently maintains all material local, state and federal licenses necessary for the lawful operation of the business of the Company (“Licenses”) and currently meets all material requirements that are applicable to the Licenses. A true and complete list of all of the Licenses held by the Company is set forth in Schedule 5.20 of the Seller’s Disclosure Schedule. There is no action pending or recommended by the appropriate local, state or federal agency having jurisdiction thereof, to terminate or rescind or not to renew any of the Licenses or any action of any other type with respect to the Licenses.
Section 5.21. Operational Assets. Except as set forth on Schedule 5.21 of the Seller’s Disclosure Schedule, the Company owns or leases all of the material assets, properties, and rights used in or necessary for the conduct of the business of the Company as conducted prior to the applicable Closing Date. Except as set forth on Schedule 5.21 of the Seller’s Disclosure Schedule, the consummation of the Transactions will not result in the Company losing any such assets, properties or rights.
Section 5.22. Employees of NFHI. Except for the employees that the Sellers identified on Schedule 5.22 of the Disclosure Schedule (the “Corporate Employees”), all of the individuals who provide services to the Company to enable the Company to conduct its business as conducted prior to the applicable Closing Date, are employees of the Company. Except as shown on Schedule 5.22 of the Company Disclosure Schedule, the Sellers have no written or oral Employment Contracts with employees who provide services to the Company. Neither the Seller nor the Company has received any written notice that any of the Sellers’ employees who provide services to the Company has any plan to terminate his or her employment.
Section 5.23. Proprietary Rights.
(a) The Company is the sole owner, free and clear of any claim or Lien (other than Permitted Liens), or has a valid license, to (i) all trademarks, service marks, logos, designs, trade names, Internet domain names and corporate names, and the goodwill of the business connected therewith and symbolized thereby; (ii) all copyrights; (iii) all computer software and all data files, databases, source code, object code, user interfaces, manuals and other specifications and documentation related thereto, and all intellectual property and proprietary rights incorporated therein, other than customary off-the-shelf licensed software (collectively, the “Software”); (iv) all web sites, web pages and related items, and all intellectual property and proprietary rights incorporated therein; (v) and all trade secrets, and know-how (“Trade Secrets”) and all proprietary and intellectual property rights, grants, registrations and applications relating thereto (collectively, the “Proprietary Rights”) necessary for the conduct of the business of the Company as now conducted; (b) the Company’s rights in the Proprietary Rights are valid and enforceable; (c) neither the Company or Sellers has received any written demand, claim, notice or inquiry from any Person in respect of the Proprietary Rights which challenges, threatens to challenge or inquires as to whether there is any basis to challenge, the validity of, or the rights of the Company in, any Proprietary Rights there is no basis for any such challenge; (d) neither the Company, nor the business of the Company, is in violation or infringement of, or has violated or infringed upon, any Proprietary Rights of any other Person; and (e) to the NFHI’s Knowledge, no Person is infringing any Proprietary Rights.
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(b) Schedule 5.23(b) of the Company Disclosure Schedules, contains a complete and accurate list, as of the date hereof, of all trademarks, trademark registrations, domain name registrations, corporate name registrations, and registered copyrights included in the Rights, all material software used by the Company in the operation of its business as now conducted and all license and other agreements relating thereto.
Section 5.24. Accounts Payable. The Company has paid all accounts payable in the Ordinary Course of Business consistent with the Company’s past practices.
Section 5.25. Employee Benefits.
(a) Schedule 5.25(a) of the Company Disclosure Schedule sets forth a list, as of the date hereof, of all “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), any bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stock option, employment, termination, change in control, retention, consulting, severance or other employee or fringe benefit plan, program, policy, arrangement and contract (all the foregoing being herein called “Benefit Plans”) sponsored, maintained, or required to be contributed to, by the Company for the benefit of any current or former directors, officers, employees or independent contractors of the Business. The Company have made available to Buyer complete and accurate copies of (i) each Benefit Plan (or, in the case of any unwritten Benefit Plan, a brief description thereof), (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to any Benefit Plan (if any such report was required) and (iii) each trust agreement and group annuity contract relating to any Benefit Plan.
Section 5.26. Financial Statements. The twelve (12) month period ended December 31, 2020, and the nine month period ended September 30, 2021, financial statements attached hereto as Schedule 5.26 (the “Financial Statements”) are true and correct copies of the Company’s unaudited balance sheet and income statement. The Financial Statements present fairly in all material respects the results of operations of the Company for the respective periods covered and the balance sheets present fairly in all material respects the financial condition of the Company as of their respective dates.
Section 5.27. Accounts Receivable. Schedule 5.27 is a list of all current accounts receivable as of the date hereof, including an account receivable aging. All accounts receivable of the Company included in the Financial Statements (the “Accounts Receivable”), represent sales actually made or services actually delivered in the Ordinary Course of Business. During the past ninety (90) days, the Company has collected accounts receivable only in the Ordinary Course of Business and has not offered discounts or incentives for early payment.
Section 5.28. No Additional Representations or Warranties. Except as expressly and specifically set forth in this Section 5, neither NFHI, the Company nor any of their respective Affiliates, nor any of their respective directors, officers, employees, stockholders, partners, members, advisors or other representatives has made, or is making, any representation or warranty whatsoever to either of the Buying Parties or any of their respective Affiliates and no such party shall be liable in respect of the accuracy or completeness of any information (including any projections on the future performance of the businesses of the Company) provided to the Buying Parties or any of their respective Affiliates, or any of their respective directors, officers, employees, stockholders, partners, members, advisors or other Representatives.
SECTION 6 REPRESENTATIONS OF THE BUYER AND PARENT.
As of the date hereof and as of the Closing Date, the Buyer and Parent, represent and warrant to the Sellers that all of the following statements are true.
Section 6.1. Authority. Each Buyer and Parent has full corporate power and authority to enter into this Agreement and to carry out the Transactions.
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Section 6.2. Authorization; Execution.
All corporate and other actions required to be taken by Buyer and Parent to authorize the execution, delivery and performance of this Agreement, all documents executed by Buyer and Parent which are necessary to give effect to this Agreement, and all Transactions, have been duly and properly taken or obtained by Buyer and Parent. No other corporate or other action on the part of Buyer and Parent is necessary to authorize the execution, delivery and performance of this Agreement, all documents necessary to give effect to this Agreement and all Transactions. This Agreement and all documents delivered hereunder have been duly and validly executed and delivered by Buyer and Parent, as applicable, and, assuming due and valid execution by, and enforceability against, Sellers, this Agreement and all documents delivered hereunder constitute the valid and binding obligations of Buyer and Parent enforceable in accordance with their respective terms subject to (i) applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally from time to time in effect and (ii) limitations on the enforcement of equitable remedies.
Section 6.3. Organization and Good Standing; No Violation.
(a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Both corporations have full power and authority to own, operate and lease their respective properties and to carry on their business as now conducted.
(b) The execution and delivery of this Agreement and the performance of the Transactions contemplated by this Agreement and all other instruments, agreements, certificates and documents contemplated hereby to which Buyer and Parent are or will be a party do not (i) to the actual knowledge of the Parent, violate any decree or judgment of any court or governmental authority which may be applicable to or bind Buyer or Parent;(ii) to the actual knowledge of the Parent, violate any law, rule or regulation applicable to Buyer or Parent which would have a material adverse effect on Buyer or Parent, respectively; (iii) to the actual knowledge of the Buyer or Parent, violate or conflict with, or result in a breach of, or constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or permit cancellation of, any material contract, lease, sales order, purchase order, indenture, mortgage, note, bond, instrument, license or other agreement to which Buyer and Parent is a party, or by which Buyer is bound, which would have a material adverse effect on Buyer or Parent; (iv) permit the acceleration of the maturity of any indebtedness of Buyer or Parent; or (v) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of Buyer or Parent.
Section 6.4. Capitalization; Subsidiaries.
(a) All outstanding equity securities of the Buyer and Parent have been duly authorized and validly issued and are fully paid and nonassessable. There are no equity securities of the Parent that remain subject vesting or forfeiture restrictions except as reflected in the Parent’s SEC Documents (as defined below). Except as set forth in the Parent’s SEC Documents, there are no outstanding equity securities or voting securities of the Parent, (ii) securities of the Parent convertible into or exchangeable for equity securities or voting securities of the Parent, or (iii) options or other rights to acquire from the Parent, or other obligations of the Parent to issue, any equity securities, voting securities or securities convertible into or exchangeable for equity securities or voting securities of the Parent. Schedule 6.4 sets forth the fully-diluted stock capitalization of the Parent, including the exercise prices of derivative securities. Notwithstanding any provision to the contrary contained in this Agreement, the representation in this Section 6.4(a) is accurate as of the date hereof and shall not survive the Closing.
(b) All outstanding equity securities of the Buyer and Parent have been issued and granted in material compliance with (i) all applicable securities laws and other applicable Laws and (ii) all requirements set forth in applicable contracts to which the Buyer is a party.
(c) Neither the Parent nor Buyer has repurchased, redeemed or otherwise reacquired any of their securities and there are no outstanding rights or obligations of the Parent or Buyer to repurchase or redeem any of their securities.
(d) The SEC Documents list for each Subsidiary of the Parent, the percentage of equity securities owned or controlled, directly or indirectly by the Parent as of the date hereof. The Parent is not bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold, any of its equity securities or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such equity security or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements. There are no outstanding contractual obligations of any Subsidiary of the Parent to repurchase, redeem or otherwise acquire any of its capital stock or other equity interests. All of the shares of capital of each of the Subsidiaries of the Parent are validly issued, fully paid (to the extent required under the applicable governing documents) and nonassessable and are owned by the Parent or a Subsidiary of the Parent, free and clear of any Liens.
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Section 6.5. Financial Records. To the actual knowledge of Parent, the books of account and other financial records of the Parent have been kept accurately in the Ordinary Course of Business consistent with applicable Laws in all material respects, the transactions entered therein represent bona fide transactions, and the revenues, expenses, assets and liabilities have been properly recorded therein in all material respects.
Section 6.6. SEC Documents.
(a) To the actual knowledge of the Parent, Parent has timely filed or furnished all material forms, reports, schedules, statements and other documents required to be filed by it with the SEC since the consummation of the initial public offering of the Parent’s securities, together with any material amendments, restatements or supplements thereto, and all such forms, reports, schedules, statements and other documents required to be filed or furnished under the Securities Act or the Securities Exchange Act (excluding Section 16 under the Securities Exchange Act) (all such forms, reports, schedules, statements and other documents filed with the SEC, the “SEC Documents”). As of their respective dates, each of the SEC Documents, as amended (including all financial statements included therein, exhibits and schedules thereto and documents incorporated by reference therein), complied in all material respects with the applicable requirements of the Securities Act, or the Securities Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such SEC Documents. To the actual knowledge of the Parent, none of the SEC Documents contained, when filed or, if amended prior to the Closing Date, as of the date of such amendment with respect to those disclosures that are amended, any untrue statement of a material fact omitted to state a 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.
(b) To the actual knowledge of the Parent, each of the financial statements of the Parent included in the SEC Documents, including all notes and schedules thereto, complied in all material respects, when filed or if amended prior to the Closing Date, as of the date of such amendment, with the rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in all material respects in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal year-end audit adjustments) the financial position of the Parent, as of their respective dates and the results of operations and the cash flows of the Parent, for the periods presented therein. To the actual knowledge of the Parent, each of the financial statements of the Parent included in the SEC Documents were derived from the books and records of the Parent, which books and records are, in all material respects, correct and complete and have been maintained in all material respects in accordance with commercially reasonable business practices.
(c) To the actual knowledge of the Parent, no written notice of any SEC review or investigation of the Parent or the SEC Documents has been received by the Parent. Since the consummation of its initial public offering, all comment letters received by the Parent from the SEC or the staff thereof and all responses to such comment letters filed by or on behalf of the Parent are publicly available on the SEC’s EDGAR website.
Section 6.7. Legal Proceedings. There is no order or action pending, or, to the knowledge of Parent, threatened, against or affecting Parent, or any of its respective properties or assets that would have a Material Adverse Effect on Parent’s ability to fulfill their respective obligations under this Agreement, except as disclosed on Parent’s public filings.
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Section 6.8. Solvency. Each Parent and Buyer is solvent and will not be rendered insolvent as a result of the consummation of any of the Transactions contemplated by this Agreement. For purposes hereof, the term “solvency” means that: (a) the fair salable value of the tangible assets of the Buying Parties is in excess of the total amount of their liabilities; (b) Each Parent and Buyer is able to pay its debts or obligations in the ordinary course as they mature; and (c) Each Parent and Buyer has capital sufficient to carry on its business and all businesses which it is about to engage.
Section 6.9. No Conflicts; Consents. To the actual knowledge of the Parent, the execution and delivery of this Agreement and the performance of the Transactions contemplated by this Agreement and all other instruments, agreements, and certificates referenced herein to which the Buying Parties are or will be a party do not (i) violate any decree or judgment of any court or governmental authority which is applicable to or binding upon the Buying Parties, (ii) violate any law, rule or regulation applicable to the Parent which would have a Material Adverse Effect on the Parent; (iii) violate or conflict with, or result in a material breach of, or constitute a material default (or an event which, with or without notice or lapse of time or both, would constitute a material default) under, any material contract, lease, sales order, purchase order, indenture, mortgage, note, bond, instrument, license or other agreement to which the Buyer or Parentis a party, or by which the Buyer or Parent is bound, and which would have a Material Adverse Effect on the Buyer or Parent; (iv) permit the acceleration of the maturity of any indebtedness of the Buyer; or (v) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of the Buyer.
Section 6.10. Brokers and Finders. No agent, broker, finder, or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Buying Parties, or any of their respective Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement or such transactions; except for such fees and other commissions as to which Buyer shall have full responsibility and, with respect to such fees or commissions, Sellers shall not have any liability.
Section 6.11. Tax Matters.
(a) The Parent and each of its Subsidiaries have timely filed all material Tax Returns required to be filed pursuant to applicable Laws (taking into account any extensions of time within which to file). All such Tax Returns are correct and complete in all material respects and have been prepared in compliance with all applicable Laws. All Taxes due and payable by the Parent and each of its Subsidiaries have been timely paid (whether or not shown as due and payable on any Tax Return). The Parent and each of its Subsidiaries have timely and properly collected or withheld and paid to the applicable Taxing Authority all material amounts of Taxes required to have been collected or withheld and paid by it in connection with any amounts received from or paid or owing to any employee, independent contractor, creditor, equity holder, customer or other third party, and has otherwise complied in all material respects with all applicable Laws relating to the withholding, collection and payment of such Taxes and collection and retention of applicable exemption certificates.
(b) No written claim has been made by a Taxing Authority in a jurisdiction where the Parent or any of its Subsidiaries does not file a particular type of Tax Return, or pay a particular type of Tax, that the Parent or any of its Subsidiaries is or may be subject to taxation of that type by, or required to file that type of Tax Return in, that jurisdiction, which claim has not been settled or resolved. The Income Tax Returns reflect all of the jurisdictions in which the Parent and each of its Subsidiaries are required to file an Income Tax Return.
(c) There is no Tax Proceeding currently being conducted or pending with respect to any material Taxes or material Tax Returns of or with respect to the Parent or any of its Subsidiaries, and, to the actual knowledge of the Parent, no such Tax Proceeding has been threatened that has not been settled or resolved. All material deficiencies for Taxes asserted or assessed in writing against the Parent or any of its Subsidiaries have been fully and timely (taking into account applicable extensions) paid, settled or withdrawn, and, to the knowledge of the Parent, no such deficiency has been threatened or proposed against the Parent or any Subsidiary.
(d) Neither the Parent nor any of its Subsidiaries have agreed to (or has had agreed to on its behalf) any extension or waiver of the statute of limitations applicable to any Tax or Tax Return, or any extension of time with respect to a period of Tax collection, assessment or deficiency, which period (after giving effect to such extension or waiver) has not yet expired, and no request for any such waiver or extension is currently pending. Neither the Parent nor any of its Subsidiaries are the beneficiary of any extension of time (other than an automatic extension of time not requiring the consent of the applicable Governmental Entity) within which to file any Tax Return not previously filed.
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(e) No private letter ruling, administrative relief, technical advice, request for change of any method of accounting, or other similar ruling or request has been granted or issued by, or is pending with, any Governmental Entity that relates to any Taxes or Tax Returns of the Parent or any of its Subsidiaries that would have a material adverse effect on the Buyer or any Subsidiary following September 30, 2021.
(f) Neither the Parent nor any of its Subsidiaries have been a party to any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2) (or any similar provision of U.S. state or local or non-U.S. Tax Law).
(g) The Parent and Buyer are (and has been for its entire existence) properly treated as corporations for U.S. federal and all applicable state and local Income Tax purposes. The Parent and each of its Subsidiaries is (and has been for its entire existence) properly treated for U.S. federal and all applicable state and local Income Tax purposes. No election has been made (or is pending) to change any of the foregoing.
(h) Neither the Parent nor any of its Subsidiaries will be required to include any material item of income, or exclude any material item of deduction, for any period after the Closing Date (determined with and without regard to the Transactions) as a result of: (i) an installment sale transaction occurring on or before the Closing Date governed by Section 453 of the Code (or any similar provision of state, local or non-U.S. Laws); (ii) a transaction occurring on or before the Closing Date reported as an open transaction for U.S. federal Income Tax purposes (or any similar doctrine under state, local, or non-U.S. Laws); (iii) any prepaid amounts received or paid on or prior to the Closing Date or deferred revenue realized, accrued or received on or prior to the Closing Date, in each case, outside of the Ordinary Course of Business; (iv) a change in method of accounting with respect to a Pre-Closing Tax Period that occurs or was requested on or prior to the Closing Date (or as a result of an impermissible method used in a Pre-Closing Tax Period); (v) an agreement entered into with any Governmental Entity (including a “closing agreement” under Code Section 7121) on or prior to the Closing Date; or (vi) any inter-Buyer transaction occurring or any excess loss account existing on or prior to the Closing Date, in each case described in Treasury Regulations under Code Section 1502 (or any similar provision of state, local, or non-U.S. Laws). Neither the Parent nor any of its Subsidiaries use the cash method of accounting for Income Tax purposes or will be required to make any payment after the Latest Balance Sheet Date as a result of an election under Code Section 965 (or any similar provision of state, local, or non-U.S. Laws). No Group Buyer has any “long-term contracts” that are subject to a method of accounting provided for in Code Section 460. Neither Parent nor any of its Subsidiaries are a party to or bound by any closing agreement or similar agreement with any Taxing Authority the terms of which would have an effect on the Parent or any of its Subsidiaries after September 30, 2021.
(i) There is no Lien for material Taxes on any of the assets of the Parent or any of its Subsidiaries, other than Liens described in clause (c) of the definition of Permitted Liens.
(j) Neither the Parent nor any of its Subsidiaries has ever been a member of an affiliated group as defined in Section 1504 (or any analogous combined, consolidated or unitary group defined under state, local or non-U.S. Law) (other than a group the common parent of which is the Parent or a Subsidiary thereof). Neither the Parent nor any of its Subsidiaries have liability for material Taxes of any other Person as a result of Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or non-U.S. Laws), successor liability, transferee liability, joint or several liability, by contract, by operation of Law, or otherwise. Neither the Parent nor any of its Subsidiaries are party to or bound by any Tax Sharing Agreement.
(k) The unpaid Taxes of the Parent and its Subsidiaries (i) did not, as of September 30, 2021, exceed the reserves for Tax liabilities (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Latest Balance Sheet and any related unaudited income, equity or cash flow statements (but not including any notes thereto) and (ii) do not exceed such reserves as adjusted for the passage of time through the Closing Date in accordance with the past practices of the Parent and its Subsidiaries in filing their Tax Returns.
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(l) Other than with respect to other U.S. states and localities, neither the Parent nor any of its Subsidiaries (i) have or have had in the last five (5) years an office, permanent establishment, branch, agency or taxable presence outside the jurisdiction of its organization (other than such jurisdictions with respect to which such company has filed Income Tax Returns) or (ii) is or has been in the last five (5) years a resident for Tax purposes in any jurisdiction outside the jurisdiction of its organization (other than such jurisdictions with respect to which such company has filed Income Tax Returns).
(m) Neither the Parent nor any of its Subsidiaries has distributed stock of another Person, nor has had its stock distributed by another Person, in a transaction that was governed, or intended or reported to be governed, in whole or in part by Section 355 or Section 361 of the Code in the past two (2) years or that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Code Section 355(e)) that includes the transactions contemplated by this Agreement.
(n) Neither the Parent nor any of its Subsidiaries have (i) elected to defer the payment of any “applicable employment taxes” (as defined in Section 2302(d)(1) of the CARES Act) pursuant to Section 2302 of the CARES Act, (ii) deferred payment of any Taxes (including withholding Taxes) pursuant to Internal Revenue Service Notice 2020-65 or any related or similar order or declaration from any Governmental Entity (including, without limitation, the Presidential Memorandum, dated August 8, 2020, issued by the President of the United States) or (iii) claimed any “employee retention credit” pursuant to Section 2301 of the CARES Act.
Section 6.12. Proxy Statements. The Proxy Statements will not, on the dates first mailed to stockholders and at the time of the Parent Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, that no representation is made as to information in the Proxy Statements that is provided or supplied by Sellers or their Affiliates or representatives. The Proxy Statements will comply as to form in all material respects with the applicable provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Section 6.13. Board Recommendation; Required Vote. The board of directors of the Parent, at a meeting duly called and held, has (i) in all respects approved the Transactions and the Amendment; (ii) resolved to recommend that the stockholders of the Company approve the Transactions and the Amendment; and (iii) directed that the approval of the Transactions and Amendment be submitted to stockholders of the Company for consideration in accordance with this Agreement, which resolutions as of the date of this Agreement, have not been subsequently rescinded, modified or withdrawn in any way (collectively, the “Board Recommendation”). The Required Shareholder Approval is the only vote of the holders of capital stock of the Company necessary to approve the Transactions and the Amendment.
SECTION 7 INDEMNIFICATION.
Section 7.1. Survival. All representations and warranties of the Sellers, Buyer and Parent shall terminate twelve months following the Closing Date, and shall thereafter be of no further force and effect; provided, however, that (i) all covenants and other agreements contained in this Agreement that by their terms are to be performed after the respective Closing shall survive the Closing Date until performed in full or the obligation to perform shall have expired (together with any right to assert a claim under Section 7) in accordance with the terms of this Agreement, (ii) the limitations set forth in this Section 7.1 shall not apply in the event of any Fraud on the part of the Indemnifying Party and any claims due to Fraud shall survive the Closing indefinitely, and (iii) the limitations set forth in this Section 7.1 shall not apply in the event that at the end of such survival period, an outstanding notice of a claim made in compliance with the terms of this Section 7.1, that such applicable period shall not end in respect of such claim until such claim is fully resolved by a settlement or final non-appealable court order addressing each matter included in the Litigation and any related aspects of those disputes.
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Section 7.2. Indemnification of the Buyer, Parent and Management Team by the Sellers.
(a) Indemnification. The Sellers, jointly and severally, shall keep and save the Management Team, Parent, Buyer and Company and their respective officers, directors, employees, agents and other representatives as the case may be (the “Buyer Indemnified Parties”) forever harmless from and shall indemnify and defend the Buyer Indemnified Parties against any and all obligations, judgments, liabilities, penalties, violations, fees, fines, claims, losses, costs, demands, damages, liens, encumbrances and expenses including reasonable attorneys’ fees (collectively, “Damages”), to the extent arising or resulting from (i) any breach of any representation or warranty of any of the Sellers contained in Section 5 of this Agreement related to the period prior to the Closing, (ii) any breach or default by any of the Sellers of any covenant or agreement of any of the Sellers under this Agreement, (iii) the Litigation, and (iv) any Fraud by the Sellers. No provision in this Agreement shall prevent the Sellers from pursuing any of its legal rights or remedies that may be granted to Sellers by law against any person or legal entity other than Buyer Indemnified Parties.
(b) Indemnification Limitations. Notwithstanding any provision to the contrary contained in this Agreement, NFHI shall be under no liability to indemnify a Buyer Indemnified Party under Section 7.2(a) and no claim under Section 7.2(a) shall be made:
(i) unless notice thereof shall have been given by or on behalf of a Buyer Indemnified Party to NFHI in the manner provided in Section 7.4, unless failure to provide such notice in a timely manner does not materially impair NFHI’s or Individual Stockholders ability to defend their rights, mitigate damages, seek indemnification from a third party or otherwise protect their interests;
(ii) to the extent related to a claim under Section 7.2(a)(i) for any of the Sellers’ breach of any Fundamental Representation under this Agreement, unless the liability of Sellers in respect of any single claim or multiple claims in the aggregate exceeds Five Hundred Thousand Dollars ($500,000) (the “Basket”), in which event the Buyer Indemnified Party shall be entitled to seek indemnification for the total amount of any Damages suffered by such Buyer Indemnified Party in excess of the Basket;
(iii) to the extent related to a claim under Section 7.2(a)(i) for any of the Sellers’ breach of any representation or warranty under this Agreement or any documents delivered pursuant hereto (other than a Fundamental Representation), unless the liability of Sellers in respect of single claim or multiple claims in the aggregate exceeds Five Hundred Thousand Dollars ($500,000) (a “Relevant Claim”), in which event the Buyer Indemnified Party shall be entitled to seek indemnification for the total amount of the Relevant Claim(s);
(iv) to the extent such claim relates to an obligation or liability for which the Buyer has agreed to indemnify the Sellers pursuant to Section 7.3; or
(v) to the extent that Buyer had actual written knowledge at or prior to the Closing Date of (A) the respective breach of a representation or warranty by any of the Sellers or (B) the breach of a covenant required to be performed or satisfied at or prior to the Closing Date.
(c) Damages Cap. Notwithstanding any provision to the contrary contained in this Agreement, the maximum aggregate liability of the Parties to each other under this Agreement shall not exceed the 20% of the value of the Preferred Stock Consideration on the Closing Date.
(d) The indemnification obligations of the Sellers under Section 7.2(a)(iii) shall continue until the settlement or final non-appealable court order addressing each matter included in the Litigation and any related aspects of those disputes.
Section 7.3. Indemnification of the Sellers by the Buyer.
(a) Indemnification. The Parent and the Buyer, jointly and severally, shall keep and save the Sellers and the Sellers’ officers, directors, managers, employees, agents and other representatives (the “Sellers Indemnified Parties”) forever harmless from and shall indemnify and defend the Sellers Indemnified Parties against any and all Damages, to the extent arising or resulting from (i) any breach of a Fundamental Representation of the Buying Parties included in Section 6 of this Agreement related to the period prior to the Closing, provided that such breach in respect of any single claim or multiple claims in the aggregate exceeds Five Hundred Thousand Dollars ($500,000), (ii) any material breach or default by Buying Parties under any covenant or agreement of Buyer under this Agreement, and (iii) any Fraud by the Buying Parties. No provision in this Agreement shall prevent the Buying Parties from pursuing any of their legal rights or remedies that may be granted to the Buying Parties by law against any person or legal entity other than Sellers Indemnified Parties.
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(b) Indemnification Limitations. Notwithstanding any provision to the contrary contained in this Agreement, the Parent and the Buyer shall be under no liability to indemnify the Sellers under Section 7.3(a) and no claim under Section 7.3(a) shall be made:
(i) Unless notice thereof shall have been given by or on behalf of the Sellers to the Buying Parties in the manner provided in Section 7.4, unless failure to provide such notice in a timely manner does not materially impair the Buying Parties’ ability to defend their rights, mitigate damages, seek indemnification from a third party or otherwise protect its interests;
(ii) to the extent related to a claim under Section 7.3(a)(i) related to the Parent’s or the Buyer’s breach of any representation or warranty of the Parent or the Buyer under Section 6 of this Agreement, unless and only to the extent that the actual liability of the Parent and the Buyer in respect of any single claim or multiple claims in the aggregate exceeds the Relevant Claim in which event the Sellers shall be entitled to seek indemnification for the total amount of such Damages; or
(iii) to the extent such claim relates to an obligation or liability for which the Sellers has agreed to indemnify the Buyer pursuant to Section 7.2.
Section 7.4. Method of Asserting Claims. All claims for indemnification under this Section 7 by any person entitled to indemnification (an “Indemnified Party”) under this Section 7 will be asserted and resolved as follows:
(a) In the event any claim or demand, for which a Party hereto (an “Indemnifying Party”) would be liable for the Damages to an Indemnified Party, is asserted against or sought to be collected from an Indemnified Party by a person other than the Sellers, Buyer or their Affiliates (a “Third Party Claim”), the Indemnified Party shall give a notice of its claim (a “Claim Notice”) to the Indemnifying Party within thirty (30) calendar days after the Indemnified Party receives written notice of such Third Party Claim; provided, however, that notice shall be given by the Indemnified Party to the Indemnifying Party within fifteen (15) calendar days after receipt of a complaint, petition or institution of other formal legal action against the Indemnified Party. Such notice by the Indemnified Party will describe the Third Party Claim in reasonable detail, will include the justification for the demand for indemnification under this Agreement with specificity, will include copies of all available material written evidence thereof, and will indicate the estimated amount, if reasonably practicable, of the Losses that have been or may be sustained by the Indemnified Party. If the Indemnified Party fails to provide the Claim Notice within such applicable time period after the Indemnified Party receives written notice of such Third Party Claim and thereby materially impairs the Indemnifying Party’s ability to protect its interests, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim. The Indemnifying Party will notify the Indemnified Party within thirty (30) calendar days after receipt of the Claim Notice (the “Notice Period”) whether the Indemnifying Party desires, at the sole cost and expense of the Indemnifying Party, to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within the Notice Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 7.4(a), then the Indemnifying Party will have the right to defend, at its sole cost and expense, such Third Party Claim by all appropriate proceedings, which proceedings will be prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party. The Indemnifying Party will have full control of such defense and proceedings, including any compromise or settlement thereof. Notwithstanding the foregoing, the Indemnified Party may, at its sole cost and expense, file during the Notice Period any motion, answer or other pleadings that the Indemnified Party may deem necessary or appropriate to protect its interests or those of the Indemnifying Party and which is not prejudicial, in the reasonable judgment of the Indemnifying Party, to the Indemnifying Party. Except as provided in Section 7.4(a)(ii) hereof, if an Indemnified Party takes any such action that is prejudicial and causes a final adjudication that is adverse to the Indemnifying Party, the Indemnifying Party will be relieved of its obligations hereunder with respect to the portion of such Third Party Claim prejudiced by the Indemnified Party’s action. If requested by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the person asserting the Third Party Claim, or any cross-complaint against any person (other than the Indemnified Party or any of its Affiliates). The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 7.4(a)(i), and except as specifically provided in this Section 7.4(a)(i), the Indemnified Party will bear its own costs and expenses with respect to such participation.
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(ii) If the Indemnifying Party fails to notify the Indemnified Party within the Notice Period that the Indemnifying Party desires to defend the Indemnified Party pursuant to this Section 7.4(a), or if the Indemnifying Party gives such notice but fails to prosecute diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Notice Period, then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be promptly and reasonably prosecuted by the Indemnified Party to a final conclusion or will be settled at the discretion of the Indemnified Party. The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the person asserting the Third Party Claim, or any cross-complaint against any person (other than the Indemnifying Party or any of its Affiliates). Notwithstanding the foregoing provisions of this Section 7.4(a)(ii), if the Indemnifying Party has notified the Indemnified Party with reasonable promptness that the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party’s defense pursuant to this Section 7.4(a)(ii). Subject to the above terms of this Section 7.4(a)(ii), the Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 7.4(a)(ii), and the Indemnifying Party will bear its own costs and expenses with respect to such participation. The Indemnified Party shall give sufficient prior notice to the Indemnifying Party of the initiation of any discussions relating to the settlement of a Third Party Claim to allow the Indemnifying Party to participate therein.
(b) In the event any Indemnified Party should have a claim against any Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from the Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice to the Indemnifying Party. The term “Indemnity Notice” shall mean written notification of a claim for indemnity under Section 7 hereof (which claim does not involve a Third Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to this Section 7.4, specifying the nature of and specific basis for such claim and the amount or the estimated amount of such claim. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby.
(c) If the Indemnifying Party does not notify the Indemnified Party within thirty (30) calendar days following its receipt of a Claim Notice or an Indemnity Notice that the Indemnifying Party disputes its liability to the Indemnified Party hereunder, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnified Party will be free to pursue such remedies as may be available to the Indemnified Party at the Indemnifying Party’s expense pursuant to the terms and subject to the provisions of this Agreement.
(d) The Indemnified Party agrees to give the Indemnifying Party reasonable access to the books and records and employees of the Indemnified Party in connection with the matters for which indemnification is sought hereunder, to the extent the Indemnifying Party reasonably deems necessary in connection with its rights and obligations hereunder.
(e) The Indemnified Party shall assist and cooperate with the Indemnifying Party in the conduct of litigation, the making of settlements and the enforcement of any right of contribution to which the Indemnified Party may be entitled from any person or entity in connection with the subject matter of any litigation subject to indemnification hereunder. In addition, the Indemnified Party shall, upon request by the Indemnifying Party or counsel selected by the Indemnifying Party (without payment of any fees or expenses to the Indemnified Party or an employee thereof), attend hearings and trials, assist in the securing and giving of evidence, assist in obtaining the presence or cooperation of witnesses, and make available its own personnel; and shall do whatever else is reasonably necessary and appropriate in connection with such litigation. The Indemnified Party shall not make any demand upon the Indemnifying Party or counsel for the Indemnifying Party in connection with any litigation subject to indemnification hereunder, except a general demand for indemnification as provided hereunder. If the Indemnified Party shall fail to perform such obligations as Indemnified Party hereunder or to cooperate fully with the Indemnifying Party in Indemnifying Party’s defense of any suit or proceeding, such cooperation to include, without limitation, attendance at all depositions and the provision of all documents relevant to the defense of any claim, then, except where such failure does not have an adverse effect on the Indemnifying Party’s defense of such claims, the Indemnifying Party shall be released from all of its obligations under this Agreement with respect to that suit or proceeding and any other claims which had been raised in such suit or proceeding.
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(f) Following indemnification as provided for hereunder, the Indemnifying Party shall be subrogated to all rights of the Indemnified Party with respect to all persons or entities relating to the matter for which indemnification has been made.
Section 7.4.1. Right of Offset. In addition to any other rights provided under this Agreement, the Buying Parties shall be entitled to offset the amount of any indemnification claims against the Sellers that have been resolved against any payments due under this Section 7. Any claims that have been asserted on or before a payment date under this Section 7 but are not resolved prior to the payment date may be offset against the payment then due if either Buyer or Parent shall deposit such withheld funds in an escrow account with a national bank to be held until receipt of joint disbursement directions signed by the Sellers and Buyer or upon the resolution of such unresolved claims. The rights of offset described in this Section 7.4.1. shall not be the sole and exclusive remedy of Buyer or Parent.
Section 7.5. Exclusive Remedy. Other than claims for Fraud or equitable relief, any claim for indemnification arising under this Agreement shall, unless otherwise specifically stated in this Agreement, be governed solely and exclusively by the provisions of this Section 7. If the Sellers, the Parent and the Buyer cannot resolve such claim by mutual agreement, such claim shall be determined by adjudication by a court or similar tribunal in accordance with the provisions of this Section 7.
Section 7.6. Release. The Sellers hereby release the Company of and from any claims that it may be able to assert for indemnity for acts performed in its capacity as the owner of the Company; provided, however, that such release shall not apply to any of the indemnification obligations arising under this Agreement. Following the Closing, the Buyer, for itself and on behalf of the Parent and the Company, hereby releases the Sellers from any claims that the Company may have against the Sellers for acts performed by the Sellers in their capacity as the owners of the Company; provided, however, that such release shall not apply to any of the indemnification obligations arising under this Agreement.
Section 7.7. Termination.
(a) Termination. This Agreement may be terminated and the Transaction may be abandoned at any time prior to the Closing (it being agreed that the Party hereto terminating this Agreement pursuant to this Section 7.7 shall give prompt written notice of such termination to the other Party or Parties hereto):
(i) by mutual written agreement of the Buying Entities and the Sellers’ Representative;
(ii) by either the Buying Entities, on the one hand, or the Sellers’ Representative, on the other hand, if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any final, nonappealable order that has the effect of making the consummation of the Transactions illegal or that otherwise prohibits the consummation of the transactions contemplated hereby;
(iii) by the Buying Entities, if (a) there has been a material violation, breach or failure to perform by the Company, Sellers of any of their representations, warranties, covenants or agreements contained in this Agreement which, if capable of being cured, has not been cured within five (5) Business Days after written notice thereof from the Buying Entities to the Sellers’ Representative or waived in writing by Parent;
(iv) by the Sellers’ Representative, if (a) there has been a material violation, breach or failure to perform by the Buying Entities of any of their representations, warranties, covenants or agreements contained in this Agreement which, if capable of being cured, has not been cured within five (5) Business Days after written notice thereof from the Sellers’ Representative to the Buying Entities or waived in writing by the Sellers’ Representative;
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(v) by the Buying Entities, on the one hand, or the Sellers’ Representative, on the other hand, if either (i) after the Parent Stockholder Meeting, the Transactions do not receive the Required Stockholder Approval or the Majority of the Minority Approval or the Transactions do not receive all requisite approvals of the Company’s stockholders, or (ii) if the Transactions have not been consummated by 5:00 p.m. Eastern Time on July 1, 2022, (the “Outside Date”), or such other date as the Buying Entities and the Sellers’ Representative shall agree upon in writing; provided, however, that each Party may not terminate this Agreement pursuant to this Section 7.7(a)(v) if the respective Party is in material breach of this Agreement.
(b) Notice of Termination; Effect of Termination.
(i) Any proper and valid termination of this Agreement pursuant to Section 7.7(a) shall be effective immediately upon the delivery of written notice of the terminating Party to the other Party or Parties hereto, as applicable.
(ii) In the event of the termination of this Agreement pursuant to Section 7.7(a), this Agreement shall be of no further force or effect and no Party (or any partner, owner, director, officer, employee, affiliate, agent or other representative of such Party) shall have any liability to any other Party or Parties hereto, as applicable, except (a) if such termination results from the willful breach of any of a Party’s representations, warranties, covenants or agreements set forth in this Agreement prior to such termination, such party will be liable for all damages actually incurred or suffered by the other Party as a result of such willful breach, (b) with respect to the obligations of the Parties under Section 8 that survive the termination of this Agreement, (c) Sections 10.9-10.14 to the extent such clauses relate to subsections (a) and (b) of this Section 7.7.
SECTION 8 AGREEMENT OF NON-DISCLOSURE; NON-SOLICITATION
During the period from the date of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with its terms, and following the termination of this Agreement should the Closing not occur, the Parties will be subject to the terms of an Agreement of Confidentiality, substantially in the form of Exhibit G attached hereto (the “NDA”). Following the termination of this Agreement should the Closing not occur, for a period of 18 months following such termination, neither Party shall, and shall not permit its respective Affiliates or agents to, solicit, induce or attempt to solicit or induce any of the suppliers, directors, officers, or corporate officers of the other Party to discontinue such person’s relationship with the other Party. The foregoing shall not prohibit the Parent from advertising for employees in the ordinary course of business; provided such advertisements are not directed at Company employees.
SECTION 9 TAX MATTERS
Section 9.1. Treatment of Transaction. Each of the Parties acknowledges and agrees that for U.S. federal and as applicable, state and local Tax purposes, they each intend that the acquisition of the Company shall be treated as a ‘reorganization’ under Section 368(a) of the Code. Each of the Parties hereto agrees that they will report the Transactions for U.S. federal and applicable state and local tax purposes, and will each file all Tax Returns (and cause each of their affiliates to file all Tax Returns) in a manner consistent with the intentions described in this paragraph, unless otherwise required by a Taxing Authority as a result of a “determination” within the meaning of Section 1313(a) of the Code.
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Section 9.2. Preparation of Tax Returns. The Parent shall prepare, or cause to be prepared, at the cost and expense of the Company all Income Tax Returns of the Company and any of its Subsidiaries for any taxable period during the current tax year of the Company ending on or before the Closing Date and any Straddle Period, in each case, that are due after the Closing Date (taking into account applicable extensions). Each such Tax Return shall be prepared in a manner consistent with the Companies’ and its Subsidiaries’ past practices except to the extent not “more likely than not” to be upheld under applicable Law. Each such Tax Return shall be submitted to the Sellers for review no later than 30 days prior to the due date for filing such Tax Return (taking into account applicable extensions). The Parent shall incorporate, or cause to be incorporated, all comments received from the Sellers no later than five (5) days prior to the due date for filing any such Tax Return (taking into account applicable extensions) and the Buyer will cause such Tax Returns to be timely filed and will provide a copy of such filed Tax Returns to the Sellers.
Section 9.3. Tax Cooperation. Each Party shall reasonably cooperate (and cause its Affiliates to reasonably cooperate) as and to the extent reasonably requested by each other Party, in connection with the preparation and filing of Tax Returns and any examination or other Proceeding with respect to Taxes or Tax Returns of the Company or any of its Subsidiaries. Such cooperation shall include the provision of records and information that are reasonably relevant to any such audit or other Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Following the Closing, the Company, its Subsidiaries, and the Sellers shall (and the Sellers shall cause its Affiliates to) retain all books and records with respect to Tax matters pertinent to the Company and its Subsidiaries relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by the Company, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority. Each Party shall furnish the other Parties with copies of all relevant correspondence received from any Taxing Authority in connection with any Tax audit or information request with respect to any Taxes for which the other may have an indemnification obligation under this Agreement. The Sellers shall (and shall cause its Affiliates to) provide any information reasonably requested to allow the Parent or the Company or any of its Subsidiaries to comply with any information reporting or withholding requirements contained in the Code or other applicable Laws or to compute the amount of payroll or other employment Taxes due with respect to any payment made in connection with this Agreement. For the avoidance of doubt, this Section 9.3 shall not apply to any dispute or threatened dispute among the Parties.
Section 9.4. Audits and Tax Adjustments.
(a) The Sellers shall be responsible for the cost of defending and the cost of any tax payments for any tax adjustments relating to any periods prior to Closing. The Sellers agree to jointly and severally, indemnify, save and hold the Parent and any of its Subsidiaries harmless from and against any and all losses incurred in connection with, arising out of, resulting from or incident to (i) any Taxes of the Company or any of its Subsidiaries with respect to any Pre-Closing Tax Period, (ii) Taxes of the Sellers (including, without limitation, capital gains Taxes arising as a result of the transactions contemplated by this Agreement) or any of their Affiliates (excluding the Company and its Subsidiaries) for any Tax period; (iii) Taxes attributable to any breach or inaccuracy of any representation in Section 5.16 or any failure to comply with any covenant or agreement of Seller (including any obligation to cause the Company or any of its Subsidiaries to take, or refrain from taking, any action under this Agreement); (iv) Taxes attributable to any restructuring or reorganization undertaken by the Sellers, the Company or any of its Subsidiaries prior to the Closing; (v) Taxes for which the Company or any of its Subsidiaries (or any predecessor of the foregoing) is held liable under Section 1.1502-6 of the United States Treasury Regulations (or any similar provision of state, local or non-U.S. Law) by reason of such entity being included in any consolidated, affiliated, combined or unitary group at any time on or before the Closing Date; and (vi) Taxes imposed on or payable by third parties with respect to which the Company or any of its Subsidiaries has an obligation to indemnify such third party pursuant to a transaction consummated on or prior to the Closing.
(b) In the event of any proposed audit, adjustment, assessment, examination, claim or other controversy or proceeding relating for any Pre-Closing Tax Period (a “Tax Contest”), the Parent will, or will cause the Company or its applicable Subsidiary, within fifteen (15) days of becoming aware of such Tax Contest, notify Seller of such Tax Contest; provided, that no failure or delay of the Parent in providing such notice shall reduce or otherwise affect the obligations of Seller pursuant to this Agreement, except to the extent that Seller is materially and adversely prejudiced as a result of such failure or delay. The Parent or the Company or its applicable Subsidiary shall endeavor in good faith to include, to the extent reasonably practicable, in such notice any written notice or other documents received from any Taxing Authority with respect to such Tax Contest. Seller will control the contest or resolution of any such Tax Contest.
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(c) Payment in full of any amount due from the Sellers Indemnifying Parties under this Section 9.4 shall be made to the Parent in immediately available funds at least ten (10) days before the date payment of the Taxes to which such payment relates is due, or, if no Tax is payable, within fifteen (15) days after written demand is made for such payment. The provisions of this Section 9.4 shall survive Closing and remain in effect for a period of three (3) years following Closing.
SECTION 10 MISCELLANEOUS.
Section 10.1. Entire Agreement. This Agreement, the Company Disclosure Schedules, the Exhibits and the documents referred to in this Agreement contain the entire understanding between the Parties with respect to the Transactions and supersede all prior or contemporaneous agreements, understandings, representations and statements, oral or written, between the Parties on the subject matter hereof (the “Superseded Agreements”), which Superseded Agreements shall be of no further force or effect.
Section 10.2. Further Assurances and Cooperation. Each Party shall execute, acknowledge and deliver to the other Party any and all other assignments, consents, approvals, conveyances, assurances, documents and instruments reasonably requested by the other Party at any time and shall take any and all other actions reasonably requested by the other Party at any time for the purpose of more effectively assigning, transferring, granting, conveying and conferring to Buyer, the Company. After consummation of the Transactions contemplated in this Agreement, the Parties agree to cooperate with each other and take such further actions as may be necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement, the documents referred to in this Agreement and the Transactions.
Section 10.3. Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the respective successors and assigns of the Parties hereto; provided, however, that no Party hereto may assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other Party, except that Parent may assign any of its rights or delegate any of its duties under this Agreement to any subsidiary or other entity that is wholly-owned, directly or indirectly, by Parent.
Section 10.4. Amendments. This Agreement may not be amended other than by a written instrument signed by the Parties hereto.
Section 10.5. Construction. This Agreement has been drafted jointly by the Parties and must be construed in accordance with the fair meaning hereof.
Section 10.6. Severability. Any provision hereof held to violate any law or public policy in any jurisdiction is, as to that jurisdiction only, ineffective only to the extent of the invalidity, without affecting any other provision hereof, and each provision hereof is valid and enforceable to the fullest extent permitted by law.
Section 10.7. Waivers. No waiver of any provision hereof shall be valid unless in writing and signed by the Party granting such waiver nor shall any waiver of any provision be a waiver of any other provision or breach.
Section 10.8. Time is of the Essence. Time is of the essence with respect to the full performance by each Party of its duties and obligations arising hereunder.
Section 10.9. Transaction Expenses. Each party will pay their own fees and expenses incurred in connection with the parties’ consideration and discussion or negotiation of this Transaction, including but not limited to, payment of their advisors, and relevant corporate and securities counsel.
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Section 10.10. Notices. Any notice, demand or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered, when received by facsimile or overnight courier, or five (5) calendar days after being deposited in the United States mail, with postage prepaid thereon, certified or registered mail, return receipt requested, addressed as follows:
If to Sellers or, prior to the Closing, the Company:
If to Buyer or Parent, to:
with a copy (which will not constitute notice) to:
or at such other address for a Party as such Party may designate by notice hereunder to the other Parties.
Section 10.11. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER AND AGREES THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 10.12. Calculation of Time Periods. Unless otherwise specified, in computing any period of time described herein, the day of the act or event on which the designated period of time begins to run shall not be included and the last day of the period so computed shall be included, unless such last day is a Saturday, Sunday or legal holiday, in which event the period shall run until the next day which is not a Saturday, Sunday or a legal holiday.
Section 10.13. Third Party Beneficiary. The provisions of this Agreement are not intended to confer any benefits upon any person or entity not a Party to this Agreement or successor or assign thereto.
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Section 10.14. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of Laws thereof. Each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) such court does not have subject matter jurisdiction, any other court of the state of Delaware or the United States District Court for the District of Delaware, in any action or proceeding arising out of or relating to this Agreement (except as otherwise provided in Section 1.3). Each of the parties hereto agrees that, subject to rights with respect to post-trial motions and rights of appeal or other avenues of review, a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in the Delaware Court of Chancery or any other state court of the State of Delaware or the United States District Court for the District of Delaware. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 10.15. Captions. The captions of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.
Section 10.16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement, binding on all of the Parties hereto.
Section 10.17. Legal Privilege and other Matters.
(i) The Buying Entities, for themselves and their Affiliates, and their respective successors and assigns, hereby irrevocably acknowledges and agrees that as to all communications between the Buying Entities, JW Management and their counsel, Lucosky Brookman, LLP (“Lucosky Brookman”) and the Sellers, made in connection with the negotiation, preparation, execution, delivery and closing under this Agreement the attorney-client privilege and expectation of client confidence are property of the Sellers and belong solely to the Buying Entities, and neither the Sellers nor any of their Affiliates (including the Company after Closing), nor any Person purporting to act on behalf of or through the Sellers or any of their Affiliates, will seek to use the same to the extent it remains privileged following the Closing.
(ii) Each of the Parties acknowledges and agrees that Lucosky Brookman has acted as counsel to the Buying Entities in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. The Parties agree that, following consummation of the Transaction, such prior representation of the Buying Entities by Lucosky Brookman shall not preclude Lucosky Brookman from serving as counsel to the Buying Entities or any director, member, stockholder, partner, officer or employee of the Buying Entities, in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the Transaction. Each of the Parties hereto hereby consents thereto and waives any conflict of interest arising solely from such prior representation.
Section 10.18. Construction. Capitalized terms used in this Agreement but not otherwise defined have the meanings ascribed to such terms in Schedule A. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires,
(i) The defined terms used in this Agreement shall include the plural as well as the singular.
(ii) All accounting terms not otherwise defined herein have the meanings assigned under GAAP.
(iii) All references in this Agreement to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement.
(iv) Pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms.
(v) The words “including” and “include” shall be deemed to mean in each instance “including, without limitation,” except as stated otherwise herein. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole, including the Exhibits and Schedules attached hereto, and not to any particular Article, Section or other subdivision.
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IN WITNESS WHEREOF, the Parties hereby execute this First Amended and Restated Stock Purchase Agreement as of the day and year first written above.
| JUPITER WELLNESS, INC.: | ||
| /s/ Brian John | ||
| Name: | Brian John | |
| Title: | Chief Executive Officer | |
| JUPITER WELLNESS INVESTMENTS, INC.: | ||
| /s/ Brian John | ||
| Name: | Brian John | |
| Title: | Chief Executive Officer | |
| NEXT FRONTIER PHARMACEUTICALS, INC.: | ||
| /s/ Shannon Soqui | ||
| Name | Shannon Soqui | |
| Title: | Executive Chairman | |
| Next Frontier Holdings, Inc. | ||
| Number of Company shares: 88,000,000 | ||
| Pro-rata percentage of Company shares: 84.6% | ||
| Address: 3950 N. Mays St. Round Rock, TX 78665 | ||
| /s/ Shannon Soqui | ||
| Name: | Shannon Soqui | |
| Title: | Executive Chairman | |
(Signature Page to the Stock Purchase Agreement)
| SUD AGARWAL | ||
| Number of Company shares: 10,000,000 | ||
| Pro-rata percentage of Company shares: 9.6% | ||
| Address: 3950 N. Mays St., Round Rock, TX 78665 | ||
| /s/ Sud Agarawl | ||
| Name: | Sud Agarwal | |
(Signature Page to the Stock Purchase Agreement)
sCHEDULE A
DefinED TERMS
“Actual Knowledge of the Buyer” means the actual knowledge of Brian S. John.
“Actual Knowledge of the Parent” means the actual knowledge of Brian S. John.
“Affiliate” means any Person directly or indirectly controlling, controlled by or under common control with a second Person. The term “Control” (including the terms “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Business” means the business of the Company.
“Certificate of Designation” means the Certificate of Designation of Preferred Stock of the Buyer, the form of which is attached hereto as Exhibit E.
“Closing Indebtedness Certificate” shall mean a certificate executed by an officer of the Company certifying on behalf of the Company an itemized list of all outstanding Indebtedness as of the Closing Date and the Person to whom such outstanding Indebtedness is owed and an aggregate total of such outstanding Indebtedness.
“Code” means the Internal Revenue Code of 1986, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that Section regardless of how numbered or classified.
“Common Stock” means the common stock of the Parent, par value $0.001 per share, authorized pursuant to the Parent’s Certificate of Incorporation, as may be amended from time to time.
“Company Assets” means all of the assets, rights, properties and business, of every kind and description, owned, held or used primarily in the conduct of the business of the Company, as the same shall exist on the date hereof.
“Consumer Products Contribution” shall have the meaning set forth in the Contribution Agreement.
“Corporate Employees” means employees of the Company.
“Company Subsidiaries” means Treehouse Bioscience, Inc. a Delaware corporation and Benuvia.
“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof or related or associated epidemics, pandemics or disease outbreaks.
“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, order, directive, guideline, pronouncement, or recommendation promulgated by any industry group or any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, or an industry group providing for business closures, in each case, in connection with or in response to COVID-19, including the Coronavirus Aid, Relief, and Economic Security Act of 2020 and the Families First Coronavirus Response Act of 2020 (FFCRA).
“Employment Agreements” means the employment agreements between each of the Company and the Management Team, as the parties to this Agreement have previously agreed upon.
| Schedule A – Page 1 |
“Executives” means the Management Team.
“Fraud”: means actual (and not constructive) fraud, consisting of an intentionally and knowingly false misrepresentation of material and existing fact by one Party to another Party in the making of the representations and warranties in Section 5 or Section 6, as applicable, made with the specific intent to deceive the complaining Party, upon which the complaining Party actually and justifiably relied to its detriment, and which is the proximate cause of material, non-speculative financial losses to the complaining Party.
“Fundamental Representations” means, collectively, the representations and warranties (i) of the Sellers contained in Section 5.1 (Corporate Existence and Power), Section 5.2 Corporate Authorization), Section 5.5 (Capitalization; Subsidiaries), Section 5.16 (Taxes), and Section 5.18 (Brokers or Finders) and (ii) of the Buyer contained in Section 6.1 (Authority), Section 6.2 (Authorization/Execution), Section 6.3 (Organization and Good Standing; No Violation), and Section 6.10 (Brokers and Finders).
“Governmental Authority” means any (i) national, federal, state, provincial, county, municipal or local government, foreign or domestic; (ii) political subdivision of any of the foregoing; or (iii) entity, authority, agency, ministry or other similar body exercising any legislative, executive, judicial, regulatory or administrative authority or functions of or pertaining to government, including any commission, tribunal or other quasi-governmental entity established to perform any such function.
“Governing Documents” means (a) in the case of a corporation, its certificate of incorporation (or analogous document) and bylaws; or (b) in the case of a Person other than a corporation or limited liability company, the documents by which such Person (other than an individual) establishes its legal existence, or which govern its internal affairs.
“Governmental Entity” means any nation or government, any state, province or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any court, arbitrator (public or private) or other body or administrative, regulatory or quasi-judicial authority, agency, department, board, commission or instrumentality of any federal, state, local or foreign jurisdiction.
“Income Tax Returns” means Tax Returns relating to Income Taxes.
“Income Taxes” means Taxes (a) imposed on, or with reference to, net income or gross receipts, or (b) imposed on, or with reference to, multiple bases including net income or gross receipts.
“Indebtedness” means, without duplication, obligations of the Company for (i) the outstanding principal amount of, and accrued (but unpaid) interest arising for, borrowed money owed to a third party, whether or not due or payable; (ii) indebtedness evidenced by any note, bond, debenture or other debt security; (iii) capitalized lease obligations of the Company under leases that have been recorded as finance leases in accordance with GAAP; (iv) all change-in-control bonuses, transaction bonuses and similar bonus or change of control or transaction payments payable to the any Company employees, to the extent payable solely as a result of the consummation of the Transactions contemplated herein (and not any other event, whether occurring before or after the Closing) and not entered into by or at the direction of Buyer or any of its Affiliates; provided, that in no event shall the foregoing clauses include: (a) any contingent reimbursement obligations in respect of letters of credit, performance bonds, surety bonds and similar obligations of the Company; (b) any redemption premium, prepayment penalty or similar payment with respect to the capitalized leases described above to the extent such leases are not by their terms required to be repaid in full at the Closing; (c) payment of earn outs or similar contingent consideration in connection with the acquisition of any business or enterprise; or (d) any fees expenses, liabilities or obligations to the extent incurred by or at the direction of Buyer or otherwise relating to Buyer.
| Schedule A – Page 2 |
“Intellectual Property” means all of the following in any jurisdiction throughout the world: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice) and invention disclosures, all improvements thereto, and all patents, utility models and industrial designs and all applications for any of the foregoing, together with all reissuances, provisionals, continuations, continuations-in-part, divisions, extensions, renewals and reexaminations thereof, (b) all trademarks, service marks, certification marks, trade dress, logos, slogans, trade names, corporate and business names, and other indicia of source, including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith (collectively, “Trademarks”), (c) Internet domain names and social media accounts; (d) all works of authorship, copyrightable works, all copyrights and rights in databases, and all applications, registrations, and renewals in connection therewith and all moral rights associated with any of the foregoing, (e) all trade secrets and confidential business information (including confidential ideas, research and development, know-how, formulas, compositions, algorithms, source code, data analytics, manufacturing and production processes and techniques, technical data and information, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), and (f) all Software.
“Intercompany Indebtedness” means any debt whatsoever between NFHI and the Company, which shall be eliminated by the Closing.
“Internal Restructuring” shall have the meaning set forth in the Distribution Agreement.
“Knowledge” as used in the phrase “to the Knowledge of the Company” “to the Company’s Knowledge, “to the NFHI’s Knowledge,”, “to the Knowledge of the NFHI,” or phrases of similar import means either the constructive or actual knowledge of any of the executives of the NFHI.
“Latest Balance Sheet” means the unaudited combined balance sheet of the Company and its Subsidiaries and certain Affiliates of the Company identified in the notes thereto.
“Laws” means all laws, acts, statutes, constitutions, treaties, ordinances, codes, rules, regulations and rulings of a Governmental Entity, including common law. All references to “Laws” shall be deemed to include any amendments thereto, and any successor Law, unless the context otherwise requires.
“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by the Company or any of its Subsidiaries.
“Liability” or “Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, known or unknown, absolute or contingent, matured or unmatured or determined or determinable.
“Lien(s)” means, with respect to any specified asset, any and all liens, mortgages, hypothecations, claims, encumbrances, options, pledges, licenses, rights of priority, easements, covenants, restrictions and security interests thereon.
“Litigation” means those litigation matters involving the Company, of which there are none.
“Management Team” has the meaning ascribed to in in the Preamble.
“Material Adverse Change” or “Material Adverse Effect,” when used with respect to the Company shall mean any change, event, occurrence or effect, individually or when aggregated with other changes, events, occurrences or effects, that has had or would reasonably be expected to have a material adverse effect on (a) the condition (financial or otherwise), assets, liabilities, business, or results of operations of the Company, or (b) the ability of the Company to timely perform any of its or their respective covenants or obligations under this Agreement or any agreement signed in connection with it or to consummate the Transactions; provided that, in the case of clause (a) only, no change, event, occurrence or effect to the extent resulting from or arising out of any of the following shall be deemed to constitute a Material Adverse Effect or be taken into account in determining whether there has been a Material Adverse Effect: (i) changes in general U.S. or global economic conditions, including changes in interest rates or economic, political, business, financial, commodity, currency or market conditions generally, (ii) changes in applicable U.S. GAAP, or authoritative interpretations thereof, in each case, first introduced after the date hereof, (iii) acts of war, sabotage, terrorism, natural or man-made disasters, epidemics, pandemics (including COVID-19), or acts of God, or (iv) COVID-19 Measures; provided, however, in the case of clauses (i) through (iv), in the event that the Company is materially and disproportionately affected by such change, event, occurrence or effect relative to other participants in the business and industries in which it operates to the extent such change, event, effect, development or occurrence has a disproportionate effect on the Company, relative to other participants in the business and industries in which it operates.
| Schedule A – Page 3 |
“Owned Real Property” means all land, together with all buildings, structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto, owned by the Company.
“Ordinary Course of Business” means, with respect to any Person, (a) any action taken or not taken by such Person in the ordinary course of business consistent with past practice, and (b) any other action taken or not taken by such Person in response to the actual or anticipated effect on such Person’s business of COVID-19 or any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shut down, closure, sequester or any other Law, order, directive, guideline or recommendation by any Governmental Entity, in each case with respect to this clause (b) in connection with or in response to COVID-19.
“Permitted Liens” means (a) Liens securing obligations under capital leases, (b) easements, permits, rights of way, restrictions, covenants, reservations or encroachments, minor defects, irregularities in and other similar Liens of record affecting title to the property which do not materially impair the use or occupancy of such Real Property in the operation of the business of the Company or of its Subsidiaries as currently conducted thereon, (c) Liens for Taxes, assessments or governmental charges or levies imposed with respect to property which are not yet due and payable or which are being contested in good faith, (d) Liens in favor of suppliers of goods for which payment is not yet due or delinquent, (e) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carriers’ and other similar Liens arising or incurred in the Ordinary Course of Business which are not yet due and payable or which are being contested in good faith, (f) Liens arising under workers’ compensation Laws or similar legislation, unemployment insurance or similar Laws, (g) Liens arising under municipal bylaws, development agreements, restrictions or regulations, and zoning, entitlement, land use, building or planning restrictions or regulations, in each case, promulgated by any Governmental Entity, (h) in the case of Leased Real Property, any Liens to which the underlying fee interest in the leased premises (or the land on which or the building in which the leased premises may be located) is subject, including rights of the landlord under the Lease and all superior, underlying and ground Leases and renewals, extensions, amendments or substitutions thereof, (i) Securities Liens, (j) non-exclusive licenses to Intellectual Property, and (k) those Liens set forth on the Company Disclosure Schedule.
“Person” means any natural person, partnership, corporation, limited liability company, association, trust or other legal entity.
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion of any Straddle Period through and including the Closing Date.
“Preferred Stock” means the shares of Series B Preferred Stock, par value $0.001 per share, of the Parent, entitled to the rights, privileges and preferences set forth in the Certificate of Designation of the Series B Preferred Stock filed with the Delaware Secretary of State and effective and made a part of the Parent’s Certificate of Incorporation.
“Proceeding” means any action, suit, charge, litigation, arbitration, notice of violation or citation received, or other proceeding at law or in equity (whether civil, criminal or administrative) by or before any Governmental Entity.
“Real Property” means the Owned Real Property and the Leased Real Property.
“Requisite Parent Stockholder Approval” means any (i) stockholder approval contemplated by NASDAQ Listing Standard Rule 5635 with respect to the issuance of shares of Common Stock upon conversion of the Preferred Stock in contravention of the limitations imposed by such rule; provided, however, that the Requisite Parent Stockholder Approval will be deemed to be obtained if, due to any amendment or binding change in the interpretation of the applicable listing standards of The NASDAQ Stock Market, any such stockholder approval is no longer required for the Company to settle all conversions of the Convertible Preferred Stock in shares of Common Stock without regard to Section 6(a) of the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock in connection with the Transaction.
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“Schedules” means the schedules to this Agreement.
“Securities Liens” means Liens arising out of, under or in connection with (a) applicable federal, state and local securities Laws and (b) restrictions on transfer, hypothecation or similar actions contained in any Governing Documents.
“Sellers’ Representative” means Shannon Soqui.
“Software” means all computer software programs (and all versions, releases, fixes, upgrades and updates thereto, as applicable), including software compilations, development tools, compilers, application programming interfaces, and algorithms related thereto, whether in source code, object code or human readable form.
“Straddle Period” means any taxable period that begins on or before (but does not end on) the Closing Date.
“Subsidiaries” means, of any Person, any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than fifty percent (50%) of the voting power or equity is owned or controlled directly or indirectly by such Person, or one (1) or more of the Subsidiaries of such Person, or a combination thereof.
“Tax” or “Taxes” means (i) all net or gross income, net or gross receipts, net or gross proceeds, payroll, employment, excise, severance, stamp, occupation, windfall or excess profits, profits, capital stock, withholding, social security, unemployment, disability, real property, personal property (tangible and intangible), sales, use, transfer, value added, alternative or add-on minimum, capital gains, user, leasing, lease, natural resources, ad valorem, franchise, capital, estimated, goods and services, fuel, interest equalization, registration, recording, premium, turnover, environmental or other taxes, including all interest, penalties, assessments and additions imposed with respect to the foregoing, imposed by (or otherwise payable to) any Governmental Entity, (ii) any Liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated group as defined in Section 1504 (or any analogous combined, consolidated or unitary group defined under state, local or non-U.S. Law) for any taxable period, and (iv) any Liability for the payment of any amounts of the type described in clause (i) or (ii) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to assume such Taxes or to indemnify any other Person, including by operation of Law.
“Tax Proceeding” means any audit, examination, claim or Proceeding with respect to Taxes.
“Tax Returns” means returns, declarations, reports, claims for refund, information returns, elections, disclosures, statements, or other documents (including any related or supporting schedules, attachments, statements or information, and including any amendments thereof) required to be filed with a Taxing Authority in connection with, or relating to, Taxes.
“Taxing Authority” means any Governmental Entity having jurisdiction over the assessment, determination, collection, administration or imposition of any Tax.
“Transaction Documents” means this Agreement, the Transition Advisory Agreements, the Voting Agreement, the Stockholders Agreement, the Distribution Agreement, the Confidentiality Agreement and the Shares Assignment Agreement.
“Transfer Taxes” means all transfer, documentary, sales, use, value added, goods and services, stamp, registration, notarial fees and other similar Taxes and fees incurred in connection with the transactions contemplated by this Agreement.
“Transition Advisory Agreements” means the agreements for management services by and between (i) Brian S. John and Parent; (ii) Ryan Allison and Parent; (iii) Dr. Glynn Wilson and Parent, and (iv) Richard Miller and Parent.
“Treasury Regulations” means the United States Treasury Regulations promulgated under the Code, and any reference to any particular Treasury Regulation section shall be interpreted to include any final or temporary revision of or successor to that Section regardless of how numbered or classified.
Capitalized terms used in this Agreement shall have the definitions assigned to such terms elsewhere in this Agreement.
| Schedule A – Page 5 |
Exhibit 10.1
EXEXUTION VERSION
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of January 7, 2022, is entered into by and among Jupiter Wellness, Inc., a Delaware corporation (the “Jupiter Wellness”), the Management Team, and the major individual stockholders of Next Frontier Pharmaceuticals, Inc., a Delaware corporation (“Next Frontier Pharmaceuticals”) as listed below (the “Primary Stockholders”). All capitalized terms used but not otherwise defined herein shall have the respective meanings attributed to them in the Purchase Agreement (later defined). Each of the parties to this Agreement referred to individually as a “Party” and, jointly, as the “Parties”.
WITNESSETH:
WHEREAS, Jupiter Wellness has entered into an agreement for the acquisition of the shares of common stock of Next Frontier Pharmaceuticals (the “Next Frontier Acquisition”) through Jupiter Wellness Investments, Inc., a Florida corporation and wholly-owned subsidiary of Jupiter Wellness (the “Buyer” and, together with Jupiter Wellness, collectively, the “Buying Parties”) and related transactions as reflected in that certain First and Amended Stock Purchase Agreement dated as of January 7, 2022 (the “Purchase Agreement”), by and among Jupiter Wellness, Buyer, Next Frontier Pharmaceuticals, Next Frontier Holdings, Inc., a Delaware corporation (“NFHI”), and the stockholders listed on Schedule 1 therein (the “Individual Stockholders”, and together with NFHI, collectively, the “Sellers”). Each of the parties constituting the Buying Parties and the Sellers are hereinafter referred to individually as a “Party” and, jointly, as the “Parties.”; and
WHEREAS, as a condition and inducement to the Buying Parties’ willingness to enter into the Purchase Agreement, Jupiter Wellness has required the each of the Management Team members and the Primary Stockholders to enter into this Agreement, and that the Primary Stockholders enter into a lock-up agreement substantially in the form of Exhibit A attached hereto;
NOW, THEREFORE, in consideration of the mutual promises of the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and among Jupiter Wellness, the Management Team and the Primary Stockholders as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Definitions. As used in this Agreement, the following terms have the following meanings:
“Affiliate” means, with respect to any Person, any other Person which is controlling, controlled by, or under common control with (directly or indirectly through any Person) the Person referred to. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Business Day” means any day of the year on which national banking institutions in New York, New York are open to the public for conducting business and are not required or authorized to close.
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“Closing” shall have the meaning as set forth in the Purchase Agreement.
“Common Stock” means the common stock, par value $0.001 per share, of Jupiter Wellness and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization.
“Company Shares” means issued and outstanding shares of Common Stock of Jupiter Wellness.
“Management Team” means, collectively, Brian S. John, Ryan Allison, Richard Miller and Dr. Glynn Wilson and any of their respective Affiliates that are or become the holders of any Jupiter Wellness Shares.
“Parties” means the Jupiter Wellness, the Management Team and the Primary Stockholders.
“Person” means any individual, sole proprietorship, partnership, joint venture, limited liability company, limited liability partnership, trust, estate, unincorporated organization, association, corporation, institution or other entity.
“Primary Stockholders” means, collectively, Next Frontier Holdings, Inc. and Sud Agarwal.
“Sale” means, (a) any consolidation, merger or recapitalization of the Jupiter Wellness, or any sale, exchange, conveyance or other disposition of Company Shares in a single transaction or a series of transactions, in which the equity holders of the Company immediately prior to such consolidation, merger, recapitalization, sale, transaction or first of such series of transactions, own less than fifty percent (50%) of Jupiter Wellness’ or any successor entity’s issued and outstanding Company Shares immediately after such consolidation, merger, recapitalization, sale, transaction or series of such transactions (provided that, for the avoidance of doubt, the IPO shall not constitute a “Sale of the Company”); or (b) any sale, lease or other disposition of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Subsidiary” of any Person means any Person (i) of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by such first Person or any Subsidiary of such first Person or (ii) with respect to which such Person or any of its Subsidiaries is a general partner or managing member or is allocated or has the right to be allocated (through partnership interests or otherwise) a majority of such second Person’s gains or losses.
Section 1.02. Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection and Section references are to this Agreement unless otherwise specified.
(c) The term “including” is not limiting and means “including without limitation.”
(d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.
(e) Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.
(f) For all purposes under this Agreement, when determining the percentage represented by the number of Company Shares owned by the Management Team at any time relative to the number of Company Shares owned by the Management Team as of immediately following the Closing, such determination shall be (i) aggregated such that all Company Shares held or acquired by Affiliates of the Management Team are treated together for the purpose of determining the availability of any rights under this Agreement and (ii) equitably adjusted to appropriately account for any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Shares occurring after the Closing and prior to such determination, to the extent necessary to provide the parties with the same effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
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ARTICLE II
APPROVAL RIGHTS
Section 2.01. Approval Rights.
(a) For a period from the date hereof to the date that is one year following the Closing, the Primary Stockholders shall not take or commit to take, and (to the extent applicable) shall not cause or permit any of its affiliates to take or commit to take, directly or indirectly, whether by amendment, merger, consolidation, reorganization or otherwise, any of the following stockholder actions without the approval of each of the Management Team members:
(i) effect any Sale of Jupiter Wellness or liquidation or dissolution of Jupiter Wellness, or sell, transfer or otherwise dispose of any of the material assets or properties of Jupiter Wellness or any of its Subsidiaries;
(ii) merge with or into, or consolidate with, another entity or effect any recapitalization, reorganization, change of form of organization, forward or reverse split, dividend or similar transaction;
(iii) acquire any corporation, business concern or other material assets or property for consideration in excess of 19.9% of the market value of Jupiter Wellness, whether by acquisition of assets, capital stock or otherwise, and whether in consideration of the payment of cash, the issuance of capital stock or otherwise or make any investment in any Person in an amount in excess of such amount;
(iv) amend the Certificate of Incorporation or Bylaws, as amended, of Jupiter Wellness or the organizational documents of any Subsidiary in a material adverse manner to the Management Team members;
(v) take any action that would cause the voluntary bankruptcy or insolvency of the Company or its Subsidiaries, confess judgment against such Person, or make an assignment for the benefit of the creditors of all or substantially all of the assets of the Company or its Subsidiaries;
(vi) take any action to initiate, to cause or that would result in, the dissolution, liquidation, winding up or termination of the Company or its Subsidiaries (or the business or affairs thereof); or
(vii) enter into any agreement to do any of the foregoing.
Section 2.02. Consents; Next Frontier Pharmaceuticals Acquisition Related Costs and Expenses. The Primary Stockholders agree to obtain the signatures of all Next Frontier Pharmaceuticals stockholders, including all instrument holders convertible into the Next Frontier Pharmaceuticals common stock, to the Purchase Agreement. All costs and expenses related to obtaining signatures of the Purchase Agreement, and other certain related costs and expenses in connection with the solicitation costs, regulatory costs and legal fees and expenses for any matter related to this Section 2.02 or claim asserted by any non-signor of the Purchase Agreement, if any, shall be for the sole cost of the Primary Stockholders, jointly and severally.
ARTICLE III
MISCELLANEOUS
Section 3.01. Termination. This Agreement shall terminate automatically (without any action by any Party) following the one-year anniversary of the Closing.
Section 3.02. Amendments. The terms and provisions of this Agreement may be modified or amended at any time and from time to time only by approval of the Management Team and Jupiter Wellness.
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Section 3.03. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same, or (iv) electronically via email. The addresses and email addresses for such communications shall be as set forth in the Purchase Agreement.
Section 3.04. Governing Law; Jurisdiction. This Agreement and any dispute arising out of, relating to or in connection with this Agreement, shall be construed (both as to validity and performance), interpreted and enforced in accordance with the laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the laws of any other jurisdiction. Any action against any party relating to the foregoing shall be brought exclusively in the Chancery Court of the State of Delaware located in Wilmington, Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state court located in Wilmington, Delaware or the United States District Court for the District of Delaware) and appellate courts thereof. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of venue of any such action brought in such court or any defense of inconvenient forum for the maintenance of such action. Each party agrees that service of summons and complaint or any other process that might be served in any action may be made on such party by sending or delivering a copy of the process to the party to be served by registered mail, return receipt requested, at the address of the party provided for the giving of notices in Section 3.03. Nothing in this Section 3.04, however, shall affect the right of any party to serve legal process in any other manner permitted by law.
Section 3.05. Entire Agreement. This Agreement embodies the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the Parties with respect to the subject matter hereof.
Section 3.06. Waivers. No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is made expressly in writing and executed and delivered by the party against whom such waiver is claimed. No waiver of any breach shall be deemed to be a further or continuing waiver of such breach or a waiver of any other or subsequent breach. Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.
Section 3.07. Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 3.08. Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Facsimile, .pdf and other electronic signatures to this Agreement shall have the same effect as original signatures.
Section 3.09. Binding Effect; Assignment. Except as otherwise provided in this Agreement to the contrary, this Agreement shall be binding upon and inure to the benefit of Jupiter Wellness, the Management Team, the Primary Stockholders and their respective heirs, legal representatives, executors, administrators, successors and permitted assigns. The rights and obligations of Jupiter Wellness under this Agreement shall not be assignable without the prior written consent of the Management Team and any attempted assignment of rights or obligations in violation of this Section 3.09 shall be null and void.
Section 3.10. Specific Performance. It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the Parties fail to comply with any of the obligations herein imposed on them and that, in the event of any such failure, an aggrieved Party will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
Section 3.11. Time of the Essence. The parties agree that time shall be of the essence in the performance of this Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
| MANAGEMENT TEAM: | |
| BRIAN S. JOHN | |
| /s/ Brian John | |
| RYAN ALLISON | |
| /s/ Brian John | |
| RICHARD MILLER | |
| /s/ Richard Miller | |
| DR. GLYNN WILSON | |
| /s/ Glynn Wilson | |
| PRIMARY STOCKHOLDERS: | |
NEXT FRONTIER HOLDINGS, INC. | |
| /s/ Shannon Soqui | |
| Name: Shannon Soqui | |
| Title: Executive Chairman |
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| SUD AGARWAL | ||
| JUPITER WELLNESS, INC. | ||
| /s/ Brian John | ||
| Name: | Brian S. John | |
| Title: | Chief Executive Officer | |
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
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EXHIBIT A
FORM OF LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this “Agreement”) is made and entered into as of January [●], 2022, by and among (i) Jupiter Wellness, Inc., a Delaware corporation (“Jupiter Wellness”), and (ii) the undersigned (“Holder”). Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Purchase Agreement.
WHEREAS, on December 8, 2021, Jupiter Wellness entered into an agreement for the acquisition of the shares of common stock of Next Frontier Pharmaceuticals, Inc., a Delaware corporation (“Next Frontier Pharmaceuticals”) through Jupiter Wellness Investments, Inc., a Florida corporation and wholly-owned subsidiary of Jupiter Wellness (the “Buyer” and, together with Jupiter Wellness, collectively, the “Buying Parties”) and related transactions as reflected in that certain stock purchase agreement (the “Purchase Agreement”), by and among Jupiter Wellness, Buyer, Next Frontier Pharmaceuticals, Next Frontier Holdings, Inc., a Delaware corporation (“NFHI”), and the stockholders listed on Schedule 1 therein (the “Individual Stockholders”, and together with NFHI, collectively, the “Sellers”), pursuant to which, among other matters, upon the consummation of the transactions contemplated thereby (the “Closing”), Sellers will be entitled to 500,000 Series B Preferred Stock of Jupiter Wellness, convertible to 65,000,000 shares of Common Stock of Jupiter Wellness (the “Convertible Preferred Stock”), all upon the terms and subject to the conditions set forth in the Purchase Agreement and in accordance with the applicable provisions of the DGCL and other legal requirements (the “Next Frontier Pharmaceuticals Acquisition”); and
WHEREAS, pursuant to the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties desire to enter into this Agreement, pursuant to which Convertible Preferred Stock and Common Stock underling the Convertible Preferred Stock of Jupiter Wellness to be received by Holder as consideration in the Next Frontier Pharmaceuticals Acquisition, shall become subject to limitations on disposition as set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, which are incorporated in this Agreement as if fully set forth below, and intending to be legally bound hereby, the parties hereby agree as follows:
1. Lock-Up Provisions.
(a) Holder hereby agrees not to, without the prior written consent of Jupiter Wellness in accordance with Section 2(h), during the period (the “Lock-Up Period”) commencing from the Closing and ending on the earlier of (x) the six (6) month anniversary of the date of the Closing and (y) the date after the Closing on which Jupiter Wellness consummates a liquidation, merger, share exchange, reorganization, tender offer or other similar transaction that results in all of Jupiter Wellness’s stockholders having the right to exchange their equity holdings in Jupiter Wellness for cash, securities or other property: (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, and the rules and regulations of the SEC promulgated thereunder, with respect to any Restricted Securities owned by Holder, (ii) 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 Restricted Securities owned by Holder, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii) (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities owned by Holder (I) by gift, will or intestate succession upon the death of Holder, (II) to any Permitted Transferee (as defined below), (III) by operation of law or pursuant to a court order, such as a qualified domestic relations order, divorce decree or separation agreement or (IV) in connection with Jupiter Wellness’s consummation of a liquidation, merger, share exchange, reorganization, tender offer or other similar transaction that results in all of Jupiter Wellness’s stockholders having the right to exchange their equity holdings in Jupiter Wellness for cash, securities or other property; provided, however, that in any of cases (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to Jupiter Wellness and the Company an agreement, in substantially the same form of this Agreement, stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Agreement applicable to Holder, and there shall be no further transfer of such Restricted Securities except in accordance with this Agreement. As used in this Agreement, the term “Permitted Transferee” shall mean: (A) the members of Holder’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse or domestic partner, the siblings of such person and his or her spouse or domestic partner, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouses or domestic partners and siblings), (B) any trust for the direct or indirect benefit of Holder or the immediate family of Holder, (C) if Holder is a trust, the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, and (D) if Holder is an entity, any direct or indirect partners, members or equity holders of Holder, any affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of Holder or any related investment funds or vehicles controlled or managed by such persons or entities or their respective affiliates. Holder further agrees to execute such agreements as may be reasonably requested by Jupiter Wellness that are consistent with the foregoing or that are necessary to give further effect thereto.
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(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Agreement, such purported Prohibited Transfer shall be null and void ab initio, and Jupiter Wellness shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 1, Jupiter Wellness may impose stop-transfer instructions with respect to the Restricted Securities of Holder (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period, except in compliance with the foregoing restrictions.
(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the form set forth in Section 4.3 to the Purchase Agreement.
(d) For the avoidance of any doubt, Holder shall retain all of its rights as a stockholder of Jupiter Wellness during the Lock-Up Period, including the right to vote any Restricted Securities.
2. Miscellaneous.
(a) Termination of Purchase Agreement. This Agreement shall be binding upon Holder upon Holder’s execution and delivery of this Agreement, but this Agreement shall only become effective upon the Closing. Notwithstanding anything to the contrary contained herein, in the event that the Purchase Agreement is terminated in accordance with its terms prior to the Closing, this Agreement and all rights and obligations of the parties hereunder shall automatically terminate and be of no further force or effect.
(b) Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and all obligations of Holder are personal to Holder and may not be transferred or delegated by Holder at any time without the prior written consent of Jupiter Wellness in accordance with Section 2(h). Each of Jupiter Wellness and the Company may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity (whether by merger, consolidation, equity sale, asset sale or otherwise) without obtaining the consent or approval of Holder.
(c) Third Parties. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person or entity that is not a party hereto or thereto or a successor or permitted assign of such a party.
(d) Governing Law; Jurisdiction; Waiver of Jury Trial. Sections 10.11 and 10.14 of the Purchase Agreement shall apply to this Agreement mutatis mutandis.
(e) Interpretation. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, 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.
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(f) Notices. All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by email during normal business hours, (iii) by FedEx or other nationally recognized overnight courier service or (iv) after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, and otherwise on the next Business Day, addressed as follows (or at such other address for a party as shall be specified by like notice):
If to Jupiter Wellness prior to the Closing, to:
|
With a copy (which will not constitute notice) to:
|
If to Jupiter Wellness from and after the Closing, to:
|
With copies (which shall not constitute notice) to:
[●] [●] [ADDRESS] Attention: [●] Email: [●]
and
|
|
If to Holder, to: the address set forth below Holder’s name on the signature page to this Agreement.
| |
(g) Amendments and Waivers. This Agreement may be amended or modified only with the written consent of the Jupiter Wellness and Holder. The observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the party against whom enforcement of such waiver is sought. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
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(h) Authorization on Behalf of Jupiter Wellness. The parties acknowledge and agree that notwithstanding anything to the contrary contained in this Agreement, any and all determinations, actions or other authorizations under this Agreement on behalf of Jupiter Wellness from and after the Closing, including enforcing Jupiter Wellness’s rights and remedies under this Agreement, or providing any waivers or amendments with respect to this Agreement or the provisions hereof, shall solely be made, taken and authorized by the Management Team.
(i) Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a court of competent jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
(j) Specific Performance. Holder acknowledges that its obligations under this Agreement are unique, recognizes and affirms that in the event of a breach of this Agreement by Holder, money damages will be inadequate and Jupiter Wellness will have no adequate remedy at law, and agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Holder in accordance with their specific terms or were otherwise breached. Accordingly, Jupiter Wellness shall be entitled to an injunction or restraining order to prevent breaches of this Agreement by Holder and to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.
(k) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled; provided, that, for the avoidance of doubt, the foregoing shall not affect the rights and obligations of the parties under the Purchase Agreement or any Transaction Documents. Notwithstanding the foregoing, nothing in this Agreement shall limit any of the rights or remedies of Jupiter Wellness or any of the obligations of Holder under any other agreement between Holder and Jupiter Wellness or any certificate or instrument executed by Holder in favor of Jupiter Wellness, and nothing in any other agreement, certificate or instrument shall limit any of the rights or remedies of Jupiter Wellness or any of the obligations of Holder under this Agreement.
(l) Further Assurances. From time to time, at another party’s request and without further consideration (but at the requesting party’s reasonable cost and expense), each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.
(m) Counterparts; Facsimile. This Agreement may also be executed and delivered by facsimile signature or by email in portable document format in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
{Remainder of Page Intentionally Left Blank; Signature Pages Follow}
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IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Jupiter Wellness: | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Lock-Up Agreement]
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IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
Holder:
Name of Holder: [________________]
| By: | ||
| Name: | ||
| Title: |
| Number and Type of Jupiter Wellness Securities: | |
| Jupiter Wellness Series B Preferred Stock: | |
| Jupiter Wellness Common Stock: | |
| Address for Notice: | |
| Address:________________________________________ | |
| Telephone No.:____________________________________ | |
| Email:___________________________________________ |
[Signature Page to Lock-Up Agreement]
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Exhibit 10.2
EXECUTION VERSION
VOTING AGREEMENT
This VOTING AGREEMENT (this “Agreement”), dated as of 7, 2022 (the “Effective Date”), is entered into between Jupiter Wellness, Inc., a Delaware corporation (the “Company”), and all of the signatories to this agreement (the “Stockholders”), to which parties may be added after the date hereof. Each of the parties to this Agreement referred to individually as a “Party” and, jointly, as the “Parties”.
WHEREAS, the Company has entered into an agreement for the acquisition of the shares of common stock of Next Frontier Pharmaceuticals, Inc. (“Next Frontier Pharmaceuticals”) (the “Next Frontier Acquisition”) through Jupiter Wellness Investments, Inc., a Florida corporation and wholly-owned subsidiary of Jupiter Wellness (the “Buyer” and, together with Jupiter Wellness, collectively, the “Buying Parties”) and related transactions as reflected in that certain First Amended and Restated Stock Purchase Agreement dated as of January 7, 2022 (the “Purchase Agreement”), by and among Jupiter Wellness, Buyer, Next Frontier Pharmaceuticals, Next Frontier Holdings, Inc., a Delaware corporation (“NFHI”), and the stockholders listed on Schedule 1 therein (the “Individual Stockholders”, and together with NFHI, collectively, the “Sellers”);
WHEREAS, pursuant to the terms and subject to satisfaction or waiver of the conditions set forth in the Purchase Agreement, Sellers shall become majority stockholders of the Company (the “Majority Stockholders”) and will be the beneficial owners of 500,000 shares of convertible preferred stock of the Company, par value $0.001 per share (the “Common Stock”), representing approximately 60% of the total outstanding pro forma Common Stock on a fully-diluted basis as of the date hereof; and
WHEREAS, as a condition and inducement to enter into the Purchase Agreement, Parent has required that Majority Stockholders and the Management Team (“Stockholders”) agree, and each Stockholder is willing to agree, to the matters set forth herein; and
NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the Parties hereto hereby agree as follows:
ARTICLE 1
VOTING AGREEMENT; GRANT OF PROXY
Section 1.01. Voting Agreement. Each Stockholder hereby agrees to vote (or cause to be voted) all of the Securities, (which such Securities include (i) shares of Common Stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of Common Stock or voting securities of the Company or (iii) options or other rights to acquire from the Company any Common Stock, voting securities or securities convertible into or exchangeable for Common Stock or voting securities of the Company), which such Stockholder has the right to so vote at the Stockholder Meeting in favor of the approval and adoption Transactions and any actions required in furtherance thereof. In addition, from the date hereof and until the termination of this Agreement each Stockholder hereby agrees to vote (or cause to be voted) at any annual, special or other meeting of the stockholders of the Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise, all of the Securities which such Stockholder has the right to so vote:
| a) | against any action or agreement that would reasonably be expected to result in a breach in any material respect of any covenant, representation or warranty or any other obligation of the Company under the Purchase Agreement; | |
| b) | against any action that might impede, frustrate, interfere with, delay, postpone or adversely affect the Transactions, Transaction Documents or the constitutive documents of the Company (including the articles of incorporation and bylaws of the Company) that would materially and adversely affect the rights of the Management Team; and | |
| c) | against any action that might impede, frustrate, interfere with, delay, postpone or adversely affect the rights of the Management Team under Section 2.01 of the Stockholders Agreement. |
Any vote required to be cast or consent required to be executed pursuant to this Section 1.01 shall be cast or executed in accordance with the applicable procedures related thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present (if applicable) and for purposes of recording the results of that vote or consent; and if any action is taken by written consent rather than at a meeting of the stockholders of the Company, consent shall be given or withheld by each Stockholder with respect to the Securities held by such Stockholder in the same manner as if such Securities were voted at a meeting in accordance with the provisions of Section 1.01.
Section 1.02. Irrevocable Proxy. In furtherance of each Stockholder’s agreement in Section 1.01 above, each Stockholder hereby irrevocably grants to, and appoints, Parent and any designee thereof and each of Parent’s officers, as such Stockholder’s attorney, agent and proxy (such grants and appointment, the “Irrevocable Proxy”), with full power of substitution, to vote and otherwise act with respect to all of such Stockholder’s Securities at any meeting of the stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting), and in any action by written consent of the shareholders of the Company, on the matters and in the manner specified in Section 1.01. THIS PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE (UNTIL THE TWO YEAR ANNIVERSAIRY OF THE CLOSING) AND COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE PROXY AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM SHAREHOLDER MAY TRANSFER ANY OF ITS SECURITIES IN BREACH OF THIS AGREEMENT. Each Stockholder hereby revokes all other proxies and powers of attorney with respect to all of such Stockholder’s Securities that may have heretofore been appointed or granted, and no subsequent proxy (whether revocable or irrevocable) or power of attorney shall be given (and if given, shall not be effective) by such Stockholder with respect thereto on the matters covered by Section 1.01. Each Stockholder hereby affirms that the irrevocable proxy set forth in this Section 1.01 is given in connection with the execution of the Purchase Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to the Company:
Section 2.01. Authorization. The Stockholder has duly executed and delivered this Agreement, and the execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby are within the powers and legal capacity of the Stockholder and have been duly authorized by all necessary action. Assuming accuracy of the representation set forth in Section 3.01, this Agreement is a valid and binding agreement of the Stockholder, enforceable against the Stockholder in accordance with its terms, except to the extent enforceability may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws affecting or relating to creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law).
Section 2.02. Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate any law, rule, regulation, judgment, injunction, order or decree applicable to the Stockholder, (ii) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration or to a loss of any benefit to which the Stockholder is entitled in respect of the Securities under any provision of any agreement or other instrument binding on the Stockholder or (iii) result in the imposition of any Lien on any of the Securities (other than the Lien created hereunder).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Stockholder:
Section 3.01. Authorization. The Company has duly executed and delivered the Purchase Agreement and this Agreement, and the execution, delivery and performance by the Company of the Purchase Agreement and this Agreement and the consummation by the Company of the Transactions and actions contemplated thereby and hereby are within the corporate powers of the Company and have been duly authorized by all necessary corporate action. Each of the Purchase Agreement and this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent enforceability may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws affecting or relating to creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law).
ARTICLE 4
COVENANTS OF EACH STOCKHOLDER
Each Stockholder hereby covenants and agrees that so long as this Agreement is in effect:
Section 4.01. No Proxies for or Encumbrances on Securities. Except pursuant to the terms of this Agreement and the Purchase Agreement, the Stockholder shall not, without the prior written consent of each Party of this Agreement, directly or indirectly, grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any of the Securities. The Stockholder shall not seek or solicit any such assignment, encumbrance or other arrangement or understanding and agrees to notify the Company promptly, and to provide all details requested by the Company, if the Stockholder shall be approached or solicited, directly or indirectly, by any Person with respect to any of the foregoing.
ARTICLE 5
MISCELLANEOUS
Section 5.01. Further Assurances. The Company and the Stockholder will each execute and deliver, or cause to be executed and delivered, all further documents and instruments and use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement.
Section 5.02. Amendments; Termination. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective. This Agreement shall continue in full force and effect until such date that is six months following the Effective Date upon which date all rights and obligations of the parties under this Agreement shall immediately terminate, except as provided in Section 5.12 hereof.
Section 5.03. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.
Section 5.04. Successors and Assigns; Obligations of Each Stockholder. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto.
Section 5.05. Governing Law; Venue. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws. The parties hereby irrevocably submit to the jurisdiction of the courts of the State of Delaware and the federal courts located in the State of Delaware in respect of the interpretation and enforcement of the provisions of this Agreement.
Section 5.06. Entire Agreement. This Agreement, together with the Purchase Agreement and other documents incorporated therein, appended thereto or contemplated thereby, constitutes the complete, final and exclusive statement of the agreement between the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.
Section 5.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective as between the Company, on the one hand, and the Stockholder, on the other hand, when each such party shall have received counterparts hereof signed by each such other party.
Section 5.08. Severability. If any term, provision or covenant of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
Section 5.09. Specific Performance. The parties hereto agree that the Company would suffer irreparable damage in the event any provision of this Agreement is not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedy to which they are entitled at law or in equity.
Section 5.10. Capitalized Terms. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Purchase Agreement.
Section 5.11. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) when personally delivered or transmitted by electronic means, such as electronic mail, on a business day during normal business hours where such notice is to be received at the address or number designated below, (b) on the business day when verification of delivery is obtained when sent by fully paid overnight courier, or (c) on the business day that is three (3) days following the date of mailing by courier, fully prepaid, addressed to such address, whichever shall first occur. The addresses for such communications shall be:
| If to the Company or the Management Team: | |
| With a copy to (which shall not constitute notice): | |
| If to the Majority Stockholders: |
Any Party hereto may from time to time change its address for notices under this Section 5.11 by giving at least five (5) days’ notice of such changed address to the other Party hereto.
Section 5.12. Stockholder Capacity. Each Stockholder signs solely in the Stockholder’s capacity as the record holder or beneficial owner of the Securities and nothing in this Agreement shall limit or affect any actions taken by the Stockholder in the Stockholder’s capacity as an officer or director of the Company. This Section 5.12 shall survive termination of this Agreement.
[Remainder of this page is intentionally blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian John | |
| Name: | Brian John | |
| Title: | Chief Executive Officer | |
| STOCKHOLDERS: | ||
| By: | /s/ Brian John | |
| Name: | Brian John | |
| By: | /s/ Ryan Allison | |
| Name: | Ryan Allison | |
| By: | /s/ Glynn Wilson | |
| Name: | Dr. Glynn Wilson | |
| By: | /s/ Richard Miller | |
| Name: | Richard Miller | |
| MAJORITY STOCKHOLDERS: | ||
| NEXT FRONTIER HOLDINGS, INC. | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Executive Chairman | |
| SUD AGARAWL | ||
| By: | /s/ Sud Agarawl | |
| Name: | Sud Agarwal | |
| Title: | Chairman | |
Exhibit 10.3
EXECUTION VERSION
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (this “Agreement”) is made and entered into this 7 day of January, 2022 by and between Jupiter Wellness, Inc., a Delaware corporation (“Jupiter Wellness” or the “Company”), and Next Frontier Pharmaceuticals, Inc., a Delaware corporation (“Next Frontier Pharmaceuticals”).
WHEREAS, Jupiter Wellness and Next Frontier Pharmaceuticals have been engaging in and are furnishing each other with certain information in connection with that certain First and Amended Stock Purchase Agreement dated January 7, 2022, by and among Next Frontier Pharmaceuticals, the listed individuals named therein and Jupiter Wellness’s Affiliate (defined below), Jupiter Investments, Inc. (“Jupiter Investments”, Next Frontier Pharmaceuticals and Jupiter Wellness being sometimes referred to collectively as the “Parties” and individually as a “Party”) (the “Transaction”); and
WHEREAS, in order to facilitate the consideration and negotiation of the Transaction, each Party has requested access to certain non-public information regarding the other Party (each Party, in its capacity as a provider of information, is referred to in this Agreement as the “Provider”; and each Party, in its capacity as a recipient of information, is referred to in this Agreement as the “Recipient”). This Agreement sets forth the Parties’ obligations regarding the use and disclosure of such information and regarding various related matters.
WHEREAS, in connection with the evaluation of the Transaction, the parties will be receiving, reviewing, and analyzing certain information which is confidential, proprietary or otherwise not generally available to the public with respect to the other party’s (including its Affiliates) business operations and services, the marketing or manufacturing, developing and promotion of products and services, business policies and practices, technical, financial and strategic information and other matters.
NOW, THEREFORE, The Parties, intending to be legally bound, acknowledge and agree as follows:
1. Limitations on Use and Disclosure of Confidential Information. Other than as specifically provided in Sections 2 and 4 below, Recipient will not, and will direct the Recipient’s Representatives (as defined in Section 15 below) not to, at any time, directly or indirectly:
(a) make use of any of the Provider’s Confidential Information (as defined in Section 12 below), except for the specific purpose of considering, evaluating, negotiating or consummating the Transaction; or
(b) disclose any of the Provider’s Confidential Information to any Person (as defined in Section 15 below), including, for the avoidance of doubt and without limitation, any Representative of the Recipient unless in compliance with Section 4 below).
The Recipient will be liable and responsible for any breach of this Agreement by any of its Representatives, except that Recipient shall not be responsible for any breach of this Agreement by those of its Representatives who have otherwise entered into a confidentiality agreement directly with the Company consistent with the confidentiality provisions of this Agreement.
2. Party Contact. Each of Recipient’s Representatives shall have been directed to abide by the provisions of this Agreement expressly applicable to Representatives.
3. Intentionally Omitted.
4. Permitted Disclosures.
(a) Notwithstanding the limitations set forth in Section 1 above:
(i) the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider if and to the extent that the Provider consents in writing to the Recipient’s (or, if applicable, any of its Representative’s) disclosure thereof;
(ii)subject to Section 2 and Section 4(b), the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider to any Representative of the Recipient, but only to the extent such Representative (A) reasonably needs to know such Confidential Information for the purpose of helping the Recipient consider, evaluate, negotiate or consummate a Transaction, and (B) has been directed to, and has agreed to, abide by the provisions of this Agreement expressly applicable to Representatives; and
(iii)subject to Section 4(c) below, the Recipient (and, if applicable, its Representatives) may disclose Confidential Information of the Provider to the extent required by any law, rule, or regulation, including in connection with any legal, regulatory, judicial, or administrative process (including any deposition, interrogatory, oral questioning, information or document request, subpoena, court order, regulatory filing, civil investigative demand or other similar process) or any audit or inquiry by a regulator, bank examiner or auditor, self-regulating organization or pursuant to mandatory professional ethics rules (collectively, “Law”).
(b) If prior to the disclosure of certain Confidential Information, the Provider delivers to the Recipient a written notice stating that such Confidential Information of the Provider may be disclosed only to specified Representatives of the Recipient (e.g. outside counsel only), then, notwithstanding anything to the contrary contained in Section 4(a)(ii) above, the Recipient (and, if applicable, such specified Representatives) will not thereafter disclose or permit the disclosure of any of such designated Confidential Information to any other Representative of the Recipient.
(c) Notwithstanding the provisions of Section 4(a)(iii), if the Recipient or any of the Recipient’s Representatives is requested or required by Law to disclose any of the Provider’s Confidential Information to any Person, then the Recipient will, and will direct its Representatives to, as soon as reasonably practicable, provide the Provider with written notice (email being sufficient) of the applicable request or requirement so that the Provider may seek, at its sole expense, a protective order or other appropriate remedy to prevent, limit or delay such disclosure or the nature and scope thereof; provided, that notice to the Provider is not required if an information request is made by a bank, securities, tax or other regulatory, governmental or supervisory authority in the course of a routine, ordinary course examination of Recipient’s or its Representatives’ books and records by such authority, or in response to any request by such authority that is not targeted at the Confidential Information, Provider or the Transaction. The Recipient will, and will direct its Representatives to, fully cooperate with the Provider and the Provider’s Representatives, at the Provider’s sole expense, in any attempt by the Provider to obtain any such protective order or other remedy, except to the extent that such efforts involve litigation against the Recipient or any of its Representatives. In the absence of such protective order or other remedy in connection with any request or requirement that the Recipient or any of its Representatives, as applicable and as required by Law, disclose Confidential Information of the Provider, the Recipient or such Representative receives advice from legal counsel confirming that the disclosure of such Confidential Information is required by Law, then the Recipient or any such Representatives, as applicable and as required by Law, may disclose such Confidential Information solely to the extent required by Law; provided, however, that the Recipient and its Representatives will fully cooperate with the Provider’s efforts, at the Provider’s sole expense, to ensure that such Confidential Information is treated confidentially by each Person to whom it is disclosed.
5. Return of Confidential Information. Upon receipt of the Provider’s written request, the Recipient will, and will direct the Recipient’s Representatives to, promptly deliver to the Provider or destroy, at the Provider’s option, any of the Provider’s Confidential Information (and all copies thereof) obtained or possessed by the Recipient or any of the Recipient’s Representatives. Notwithstanding the delivery to the Provider (or the destruction by the Recipient) of Confidential Information of the Provider pursuant to this Section 5, the Recipient and its Representatives will continue to be bound by their confidentiality obligations and other obligations under this Agreement for the term of this Agreement. In addition, notwithstanding this Section 5, (i) Recipient and its Representatives may retain secured copies of the Provider’s Confidential Information solely to the extent required to comply with Law, legal or regulatory requirements, established document retention policies or demonstrate compliance with this Agreement, (ii) Recipient and its Representatives shall not be required to destroy any computer files stored securely by them that are created during automatic system back-up and shall be entitled to retain such Confidential Information as they are required to retain by Law or any professional standard applicable to them (any such retained Confidential Information pursuant to clauses (i) through (ii), “Retained Confidential Information”).
6. Limitation on Soliciting Employees and Distributors. During the twelve (12) month period commencing on the date of this Agreement, Next Frontier Pharmaceuticals will not, directly or indirectly solicit, induce, encourage or attempt to solicit, induce or encourage any Covered Person (as defined herein) to terminate such Covered Person’s relationship with the other Party in order to become an employee, consultant, distributor or independent contractor, to or for Next Frontier Pharmaceuticals; provided, however, that the foregoing provision will not be deemed to prevent (a) Next Frontier Pharmaceuticals or its Representatives from conducting bona fide general solicitations of employment published in a journal, newspaper or other publication of general circulation or in trade publications or other similar media or through the use of search firms or the internet and which, in any case, are not directed specifically toward the Company or its employees or (b) the employment of any such Person (i) if such Person first approaches Next Frontier Pharmaceuticals on an unsolicited basis or (ii) following cessation of such Person’s employment with the Company without any prior solicitation or encouragement by Next Frontier Pharmaceuticals in violation of this Agreement. For purposes of this Agreement, “Covered Person” shall mean any Person who is a manager or executive employee of the Company as of the date of this Agreement or who becomes a manager or executive employee of the Company before the termination of discussions regarding a Transaction, and either (i) with whom Next Frontier Pharmaceuticals has direct interaction during discussions and negotiations regarding the Transaction or (ii) about whom the Company has provided Confidential Information to Next Frontier Pharmaceuticals in advance of any solicitation by Next Frontier Pharmaceuticals (other than basic employee census data or other generalized information).
7. Limitation on Soliciting Customers, Vendors and Suppliers. During the twelve (12) month period commencing on the date of this Agreement, Next Frontier Pharmaceuticals will not (a) directly or indirectly solicit, induce, encourage or attempt to solicit, induce or encourage any known customer of, vendor or supplier to the Company to cease or materially alter its relationship with the Company, nor (b) contact any known customer of, vendor or supplier to the Company regarding any of the Company’s Confidential Information or a Transaction; provided, however, the covenants contained in this Agreement shall not limit any contacts made by Next Frontier Pharmaceuticals or its Representatives (i) in respect of such Persons in the ordinary course of business consistent with past practice (ii) in the course of conducting commercial or market due diligence in connection with a Transaction on a no-names basis with the prior consent of Provider or (iii) with Representatives (acting in their capacity as such).
8. Intentionally Omitted.
9. No Waiver. No failure or delay by either Party or any of its Representatives in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, and no single or partial exercise of any such right, power or privilege will preclude any other or future exercise thereof or the exercise of any other right, power or privilege under this Agreement. No provision of this Agreement can be waived or amended except by means of a written instrument that is validly executed on behalf of both of the Parties and that refers specifically to the particular provision or provisions being waived or amended.
10. Remedies. Each Party acknowledges that money damages may not be a sufficient remedy for any breach of this Agreement by such Party or by any of such Party’s Representatives and that the other Party may suffer irreparable harm as a result of any such breach. Accordingly, each Party will also be entitled to equitable relief, including injunction and specific performance, as a remedy for any breach or threatened breach of this Agreement by the other Party or any of the other Party’s Representatives. The equitable remedies referred to above will not be deemed to be the exclusive remedies for a breach of this Agreement, but rather will be in addition to all other remedies available at law or in equity to the Parties.
11. Successors and Assigns; Applicable Law; Jurisdiction and Venue. Neither Party may assign its rights or obligations hereunder without the prior written consent of the other Party; provided, however, that a Provider may assign its rights hereunder to any acquiror of or other successor in interest to the Provider. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to principles of conflicts of laws). Each Party and its Representatives: (a) irrevocably and unconditionally consent and submit to the jurisdiction of the state and federal courts located in the County of Newcastle in the State of Delaware for purposes of any action, suit or proceeding arising out of or relating to this Agreement; (b) agree that service of any process, summons, notice or document by U.S. registered mail to the address and email addresses set forth at the end of this Agreement shall be effective service of process for any action, suit or proceeding brought against such Party or any of such Party’s Representatives; (c) irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement in any state or federal court located in the County of Newcastle in the State of Delaware; and (d) irrevocably and unconditionally waive the right to plead or claim, and irrevocably and unconditionally agree not to plead or claim, that any action, suit or proceeding arising out of or relating to this Agreement that is brought in any state or federal court located in the County of Newcastle in the State of Delaware has been brought in an inconvenient forum.
12. Confidential Information. For purposes of this Agreement, the Provider’s “Confidential Information” will be deemed to include:
(a) any information (including, without limitation, any technology, know-how, patent application, test result, research study, business plan, budget, forecast or projection) relating directly or indirectly to the business of the Provider, any predecessor entity or any subsidiary or other Affiliate of the Provider (whether prepared by the Provider or by any other Person and whether or not in written form) that is or has been made available to the Recipient or any Representative of the Recipient by or on behalf of the Provider or any Representative of the Provider on or after the date hereof in connection with the consideration, evaluation or negotiation of a Transaction;
(b) such portion of any memorandum, analysis, compilation, summary, interpretation, study, report or other document, record or material that is or has been prepared by or for the Recipient or any Representative of the Recipient and that contains, or reflects in any reasonably apparent manner any information of the type referred to in clause “(a)” of this Section 12;
(c) the existence and terms of this Agreement, and the fact that information of the type referred to in clause “(a)” of this Section 12 has been made available to the Recipient or any of its Representatives; and
(d) the fact that discussions or negotiations are or may be taking place with respect to a Transaction involving the Parties, and the proposed terms of any such Transaction.
However, the Provider’s “Confidential Information” will not be deemed to include:
any information that is or becomes generally available to the public or generally known in the industry in which the Company operates other than as a direct or indirect result of the disclosure of any of such information by the Recipient or by any of the Recipient’s Representatives in breach of this Agreement;
any information that was in the Recipient’s or any of its Representatives’ possession prior to the time it was first made available to the Recipient or any of the Recipient’s Representatives by or on behalf of the Provider or any of the Provider’s Representatives, provided that the source of such information was not and is not known by the Recipient to be bound by any contractual or other obligation of confidentiality, directly or indirectly, to the Provider with respect to any of such information;
any information that is or becomes available to the Recipient or any of its Representatives’ on a non-confidential basis from a source other than the Provider or any of the Provider’s Representatives, provided that such source is not known by the Recipient to be bound by any contractual or other obligation of confidentiality, directly or indirectly, to the Provider with respect to any of such information; or
is or was independently developed by the Recipient or its Representatives with no use of Confidential Information.
13. Trading in Securities. Next Frontier Pharmaceuticals acknowledges and agrees that it is aware (and that the its Representatives are aware or will be advised by Next Frontier Pharmaceuticals) that Confidential Information being furnished by the Company contains material, non-public information regarding the Company and that the United States securities laws prohibit any Person who has such material, non-public information from purchasing or selling securities of the Company on the basis of such information or from communicating such information to any Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities on the basis of such information.
14. Standstill. In an event that the Transaction has not been consummated, Next Frontier Pharmaceuticals agrees that, for a period of twelve (12) months from the date of this Agreement, unless specifically invited in writing by the board of directors of the Company, neither Next Frontier Pharmaceuticals nor any Person with whom Next Frontier Pharmaceuticals may be deemed to be acting in concert, will in any manner, directly or indirectly: (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or cause or participate in or in any way assist, facilitate or encourage any other Person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof), or rights or options to acquire any securities (or beneficial ownership thereof), or any assets, indebtedness or businesses of the Company or any of its subsidiaries, (ii) any tender or exchange offer, merger or other business combination involving the Company or, any of the subsidiaries or assets of the Company constituting a significant portion of the consolidated assets of the Company and its subsidiaries, (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its subsidiaries, or (iv) any “solicitation” of “proxies” (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of the Company; (b) form, join or in any way participate in a “group” (as defined under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) with respect to the Company or otherwise act in concert with any Person in respect of any such securities; (c) otherwise act, alone or in concert with others, to seek representation on or to control or influence the management, board of directors or policies of the Company or to obtain representation on the board of directors of the Company; (d) take any action which would or would reasonably be expected to force the Company to make a public announcement regarding any of the types of matters set forth in (a) above; or (e) enter into any discussions or arrangements with any third party with respect to any of the foregoing. Next Frontier Pharmaceuticals also agrees during such period not to request (in any manner that would reasonably be likely to cause the Company to disclose publicly) that the Company or any of its Representatives, directly or indirectly, amend or waive any provision of this paragraph (including this sentence); provided, that in the event that the Company or any of its subsidiaries issues any securities after the date hereof, the Company shall, as soon as reasonably practicable, provide Next Frontier Pharmaceuticals notice of such issuance so that Next Frontier Pharmaceuticals may seek to comply with the terms of this Section 14 that are applicable to such newly issued securities. The term “securities”, as used in this Agreement, shall include, without limitation, any securities of the Company and any derivative, swap or other transaction the purpose or effect of which is to give Next Frontier Pharmaceuticals or any Person with whom Next Frontier Pharmaceuticals may be deemed to be acting in concert, economic risk similar to ownership of shares of any class or series of the Company, including due to the fact that the value of such derivative, swap or other transaction is determined by reference to the price, value or volatility of any shares of any class or series of the Company, or which derivative, swap or other transaction provides, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Company.
15. Miscellaneous.
(a) For purposes of this Agreement, a Party’s “Representatives” will be deemed to include each Person that is or during the term of this Agreement becomes (i) a subsidiary or other Affiliate of such Party, or (ii) an officer, director, member, manager, executive partner, employee, partner, advisor (including without limitation accountants, attorneys, financial advisors and consultants), agent or other representative, of such Party or of any of such Party’s subsidiaries or other Affiliates, or (iii) only upon prior written approval of other Party, any debt financing source to be used in connection with a potential Transaction; provided, that the term “Representatives” shall only include those who actually receive Confidential Information from Recipient or one of Recipient’s other Representatives or otherwise in connection with Recipient’s consideration of a Transaction.
(b) The term “Person,” as used in this Agreement, will be broadly interpreted to include any individual and any corporation, partnership, entity, group, tribunal or governmental authority.
(c) The term “Affiliate” has the meaning given to it under the 1934 Act.
(d) The bold-faced captions appearing in this Agreement have been included only for convenience and shall not affect or be taken into account in the interpretation of this Agreement.
(e) Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
(e) By making Confidential Information or other information available to the Recipient or the Recipient’s Representatives, the Provider is not, and shall not be deemed to be, granting (expressly or by implication) any license or other right under or with respect to any patent, trade secret, copyright, trademark or other proprietary or intellectual property right.
(f) To the extent that any Confidential Information includes materials or other information that may be subject to the attorney-client privilege, work product doctrine or any other applicable privilege or doctrine concerning any pending, threatened or prospective action, suit, proceeding, investigation, arbitration or dispute, it is acknowledged and agreed that the Parties have a commonality of interest with respect to such action, suit, proceeding, investigation, arbitration or dispute and that it is their mutual desire, intention and understanding that the sharing of such materials and other information is not intended to, and shall not, affect the confidentiality of any of such materials or other information or waive or diminish the continued protection of any of such materials or other information under the attorney-client privilege, work product doctrine or other applicable privilege or doctrine. Accordingly, all Confidential Information that is entitled to protection under the attorney-client privilege, work product doctrine or other applicable privilege or doctrine shall remain entitled to protection thereunder and shall be entitled to protection under the joint defense doctrine, and the Parties agree to take reasonable measures necessary to preserve, to the fullest extent possible, the applicability of all such privileges or doctrines.
(g) This Agreement constitutes the entire agreement between the Recipient and the Provider regarding the subject matter hereof and supersedes any prior agreement between the Recipient and the Provider regarding the subject matter hereof. This Agreement also applies to Confidential Information accessed through any electronic data room made available in connection with a Transaction and supersedes any “click through” acknowledgement or agreement associated with any such electronic data room.
(h) This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.
(i) This Agreement shall expire and cease to have any force or effect on the earlier of (i) the eighteen (18) month anniversary of the date hereof and (ii) the date the Transaction is consummated; provided, however, that (A) with respect to any Retained Confidential Information retained pursuant to Section 5 of this Agreement, each Party will and will direct its Representatives to continue to undertake all necessary precautions (consistent with the precautions such Party or such Representative ordinarily takes to safeguard its own confidential information) to keep such Retained Confidential Information confidential for the term of this Agreement; and (B) the termination of this Agreement shall not relieve any Party from any liability with respect to any violation or breach of any provision contained in this Agreement.
Signature page follows
| Jupiter Wellness, Inc. | ||
| By: | /s/ Brian John | |
| Name: | Brian S. John | |
| Title: | Chief Executive Officer | |
| Next Frontier Pharmaceuticals, Inc. | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Chief Executive Officer | |
Exhibit 10.4
TRANSITION ADVISORY AGREEMENT
THIS TRANSITION ADVISORY AGREEMENT (this “Agreement”) is made and entered into as of January _____, 2022 (the “Effective Date”), between Jupiter Wellness, Inc., a Delaware corporation, whose principal place of business is 1061 E. Indiantown Road, Suite 110. Jupiter, FL. 33477 (the “Company”) and ___________, an individual whose mailing address is ____________ (the “Executive”). The Executive is a member of the Management Team. It is anticipated that all members of the Management Team will execute an agreement that is identical (other than with respect to work duties and compensation) to this Agreement. All capitalized terms not defined herein are used as defined in the Stock Purchase Agreement (defined below).
RECITALS
WHEREAS, the Company has entered into an agreement for the acquisition of the shares of common stock of Next Frontier Pharmaceuticals, Inc. (“Next Frontier Pharmaceuticals”) (the “Next Frontier Acquisition”) through Jupiter Wellness Investments, Inc., a Florida corporation and wholly-owned subsidiary of Jupiter Wellness (the “Buyer” and, together with Jupiter Wellness, collectively, the “Buying Parties”) and related transactions as reflected in that certain First Amended and Restated Stock Purchase Agreement dated as of 7, 2022 (the “Purchase Agreement”), by and among Jupiter Wellness, Buyer, Next Frontier Pharmaceuticals, Next Frontier Holdings, Inc., a Delaware corporation (“NFHI”), and the party listed therein (the “Individual Stockholders”, and together with NFHI, collectively, the “Sellers”). Each of the parties constituting the Buying Parties and the Sellers are hereinafter referred to individually as a “Party” and, jointly, as the “Parties.”;
WHEREAS, the Executive currently serves as the ________of the Company;
WHEREAS, the Executive and the Company desire to provide for an orderly transition to the Executive’s successor as ________ of the Company upon the Closing of the Transactions; and
WHEREAS, the Company desires to retain to retain the Executive with respect to the services described herein and to enter into an advisory arrangement upon the termination of the Executive’s employment with the Company following the Closing of the Transactions;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein incorporated by reference.
2. No Change to Employment Unless and Until Closing. Unless and until the Closing of the Transactions, the Executive shall remain employed by the Company under the terms of his employment arrangement that existed immediately before the Effective Date (“Employment Term”). If the Transactions are not consummated for any reason, the Executive’s current employment terms shall remain in effect under their present terms.
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3. Transition Upon Closing. Effective upon the Closing of the Transactions, the Executive shall resign from his positions as officer and director of the Company (“Resignation”). Because the Executive had a contractual right to continue to work for the Company, his Resignation at the request of the Company confers valuable consideration upon the Company.
4. Compensation and Benefits During the Advisory Period.
4.1. Advisory Period. The Company agrees to engage the Executive as an advisor of the Company effective as of the Closing of the Next Frontier Acquisition, and the Executive agrees to render services as an advisor to the Company as of such date on the terms and conditions set forth below. The term of service as an advisor to the Company will continue until the two-year anniversary date of the Closing of the Next Frontier Acquisition, unless terminated earlier as provided in Section 5 (“Advisory Period”).
4.2. Advisory Duties. During the Advisory Period, the Executive will use his good faith efforts to perform such services to the best of his abilities. The Executive agrees that he will devote a reasonable amount of time performing such duties on behalf of the Company as from time to time may be assigned to him by the Board, which may include, (i) assistance with the transition of the new _______ Officer, (ii) identification, support, negotiation and analysis of acquisitions and dispositions by the Company or its subsidiaries, and (iii) other services for the Company upon which the Company and the Executive agree. Notwithstanding any provision of this Agreement to the contrary, the Company understands and acknowledges that Executive services under this Agreement are not exclusive and that Executive is permitted to be employed full-time at other entities while rendering services under this Agreement.
4.3. Advisory Fees. In exchange for the Resignation, during the Advisory Period, and provided that the Executive is not in breach of his obligations under this Agreement, the Executive will be paid an Advisory fee at an annualized rate of $________ for the Advisory Period (the “Advisory Annual Compensation”). Executive shall be entitled to be paid a lump sum payment in the aggregate amount of $_________ as advance compensation for the services to be rendered by Executive for the first twelve months of the Advisory Period (the “First Year Services Payment”). the Lump Sum Payment will be remitted in cash by wire transfer of immediately available funds to one or more accounts designated in writing by the Executive. Starting at the one year anniversary of the Advisory Period, the Company pay to Executive on a monthly basis in equal installments as compensation for his second year of services under this Agreement (the “Second Year Services Payment”). The Second Year Services Payment will be remitted in cash by wire transfer of immediately available funds to one or more accounts designated in writing by the Executive.
4.4. Bonus. During the Advisory Period, Executive will be eligible to receive bonus, awards and other incentive equity grants, at the discretion of the Company’s board of directors.
4.5 Advisory Expenses. During the Advisory Period, the Executive shall be entitled to receive proper reimbursement for all reasonable, out-of-pocket expenses incurred by the Executive (in accordance with the policies and procedures established by the Company for its senior executive officers) in performing services hereunder, provided the Executive properly accounts therefor.
4.6 Independent Contractor Status. The Executive will be performing Advisory services as an independent contractor during the Advisory Period, and not as an employee or officer of the Company. The Executive will be responsible for all taxes and non-reimbursable expenses attributable to the rendition of his advisory services. The advisory arrangement shall not be deemed to constitute a partnership or joint venture between the Company and the Executive, nor shall the advisory arrangement be deemed to make the Executive an agent of the Company.
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4.7. Incentive, Savings and Retirement Plans. During the Advisory Period, the Executive shall be eligible to participate in any savings and retirement plans, practices, policies and programs established, or to be established and executed by the Company as if he were an employee.
4.8. Welfare Benefit Plans. During the Advisory Period, the Executive shall be eligible for participation in and shall receive all benefits as if here he were an employee under welfare benefit plans, practices, policies and programs provided by the Company and its subsidiaries (including, without limitation, medical, prescription, dental, disability, remuneration continuance, employee life, group life, accidental death and travel accident insurance plans and programs), at least as favorable as the most favorable of such plans, practices, policies and programs.
4.9. Vacation. During the Advisory Period, the Executive shall be entitled to be paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its subsidiaries as in effect at any time hereafter, but in no event shall Executive be entitled to fewer than 15 business days paid vacation per year, as well as pay for all holidays observed by the Company.
5. Termination of Advisory Services.
5.1 Termination for Cause. Notwithstanding anything contained to the contrary in this Agreement, this Agreement may be terminated by the Company for Cause. The Executive’s advisory services hereunder may be terminated immediately at any time by the Company without any liability owing to Executive or Executive’s beneficiaries under this Agreement, except for (i) earned, accrued and unpaid First Year Services Payment and Second Year Services Payment, (ii) any earned and unpaid bonus from the year immediately preceding the year of Executive’s termination, (iii) any unreimbursed business expenses incurred in accordance with Section 4.5, and (vi) any rights of indemnification set forth in this Agreement or otherwise. For the avoidance of doubt, this Section 5 applies only to Executive’s advisory services rendered during the Advisory Period. As used in this Agreement, “Cause” shall only mean:
(a) committing or participating in an injurious act resulting from a willful malfeasance, bad faith or gross negligence on his part in the performance of his duties or from reckless disregard by him of his obligations and duties under this Agreement;
(b) subject to the following sentences, repeated violation by the Executive of the Executive’s material obligations under this Agreement which are demonstrably willful, persistent and deliberate on the Executive’s part and which are not remedied in a reasonable period of time after receipt of written notice from the Company’s Board of Directors; or
(c) the conviction of the Executive for any crime involving material dishonesty or fraud.
Upon any reasonable and good faith determination by the majority of the independent members of the Company’s the Board of Directors that Cause exists under clause (a) of the preceding sentence or clause (b) of the preceding sentence (to the extent the violation under said clause (b) has not been cured by the Executive), the Company shall cause a special meeting of the Board to be called and held at a time mutually convenient to the Board and Executive, but in no event later than ten (10) business days after Executive’s receipt of the notice contemplated by clauses (a) or (b). Executive shall have the right to appear before such special meeting of the Board with legal counsel of his choosing to refute any determination of Cause specified in such notice, and any termination of Executive’s service by reason of such Cause determination shall not be effective until Executive is afforded such opportunity to appear. Any termination for Cause pursuant to clause (a) or (b) of the first sentence of this Section 5.1 shall be made in writing to Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination.
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5.2 Disability. Notwithstanding anything contained in this Agreement to the contrary, the Company, by written notice to the Executive, shall at all times have the right to terminate this Agreement, and the Executive’s service hereunder, if the Executive shall, as the result of mental or physical incapacity, illness or disability, fail to perform all of his duties and responsibilities provided for herein for a period of more than two hundred (200) consecutive days in any 12-month period. Upon any termination pursuant to this Section 5.2, the Executive shall be entitled to the remaining total amount earned but not then-yet paid to the Executive under this Agreement, which shall equal of the Annual Compensation for the entire Advisory Period and any Bonus, within 30 days after the date of termination. In addition, the Executive shall be entitled to reimbursement for all business expenses incurred prior to his disability. Payment under this Section 5.2 and any reimbursement amounts owed to the Executive, as set forth in the preceding sentence, shall be paid remitted to Executive in cash by wire transfer of immediately available funds to one or more accounts designated in writing by the Executive’s legal representative.
5.3 Death. In the event of the death of the Executive during the Advisory Period, the Company shall pay to the estate of the deceased Executive the compensation, bonuses and benefits as detailed in Section 5.4 “Termination without Cause” below, within 30 days after the date of Executive’s death.
5.4 Termination without Cause. At any time, the Company shall have the right to terminate Executive’s advisory services hereunder by written notice to Executive; provided, however, that the Company shall:
(a) pay to Executive sum cash payment, within 30 days after the date of termination, equal to (i) the First Year Services Payment (which equals $_____), (ii) earned, accrued and unpaid portion of the Second Year Services Payment (in an event the Executive was terminated during the second year of this Agreement); (iii) reimbursement for all business expenses incurred prior to the termination, and (iv) all the benefits given hereunder, for the remaining period of this Agreement, and will further allow to receive all bonuses under Section 4.4 above for the entire Advisory Period that would be payable had Executive completed his service under this Agreement;
(b) continue to pay the Executive’s health and disability insurance for the longer of a period of twenty-four (24) months or the remaining term of this Agreement.
(c) The Company shall be deemed to have terminated this Agreement pursuant to this Section 5.4 if such service is terminated by the Company without Cause, by the Executive voluntarily for Good Reason, or as a result of a Charge in Control.
(d) For purposes of this Agreement, “Good Reason” means: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities or any reduction in the Executive’s compensation terms pursuant to Section 4 or subsections thereof, of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 4 of this Agreement; (iii) the Company’s requiring the Executive to be based at any office or location more than fifty (50) miles from the Executive’s current offices, except for travel reasonably required in the performance of the Executive’s responsibilities; (iv) any change in the designation of the particular Executive that the Executive is obligated to report to under Section 4.2 hereof; (v) any purported termination by the Company of the other than as expressly permitted by this Agreement; or (vi) any termination by the Executive for any reason during the twenty-four period following the effective date of any Change in Control.
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(e) For purposes of this Agreement, “Change in Control” means: (i) The acquisition (other than by or from the Company), at any time after the Closing of the Next Frontier Acquisition, by any person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; (ii) Approval by the stockholders of the Company of (A) a reorganization, merger or consolidation with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 30% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then out-standing voting securities, (B) a liquidation or dissolution of the Company, or (C) the sale of all or substantially all of the assets of the Company, unless the approved reorganization, merger, consolidation, liquidation, dissolution or sale is subsequently abandoned; or (iii) The approval by the Company’s Board of the sale, distribution and/or other transfer or action (and/or series of sales, distributions and/or other transfers or actions from time to time or over a period of time), that results in the Company’s ownership of less than 70% of the Company’s current assets.
6. Indemnity; Exculpation; Insurance.
6.1 Indemnity. The Company shall indemnify, defend, and hold Executive harmless, at Company’s own expense, from and against any and all losses, liability, obligations, damages, third-party claims, demands, causes of action, costs and expenses of whatever form or nature (each a “Claim” and collectively, “Claims”), including all outside attorney’s fees and other costs of legal defense, arising out of or related to: (i) the Executive’s rendering of services under this Agreement and the Executive’s employment with the Company. (ii) an actual or alleged breach of any of the representations, warranties or covenants of this Agreement by the Company; (iii) Company’s negligence, willful misconduct, or willful misrepresentation; or (iv) any other act or omission by or attributable to Company in connection with this Agreement except to extent such indemnity is prohibited by law. Company shall give prompt written notice to the Executive of any proposed settlement of any Claim. Company may not, without the Executive’s prior written consent condition or delay, settle or compromise any claim or consent to the entry of any judgment regarding which indemnification is being sought hereunder unless such settlement, compromise or consent: (X) includes an unconditional release of the Executive from all liability arising out of such claim; (Y) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Executive; and (Z) does not contain any equitable order, judgment or term (other than the fact of payment or the amount of such payment) that in any manner affects, restrains or interferes with the business of the Executive. Provided, however, that the indemnity agreement contained in this Section 6.1 shall not apply to any such losses, claims, related expenses, damages or liabilities arising out of gross negligence, willful misconduct or fraud of the Executive, or a material breach of the Executive’s representations and warranties hereunder.
6.2 Exculpation. Notwithstanding anything to the contrary herein, the Executive shall, to the greatest extent permitted by law at the time this clause is construed, be exculpated from any liability whatsoever for any alleged abuse of discretion, tort, breach of fiduciary duty or breach of trust caused by any act or omission in connection with this Agreement. As a consequence, the Executive shall under no circumstances ever be held personally liable to any other person, firm or corporation for any damages directly or indirectly arising out of any act or omission committed in connection with this Agreement. This exculpation shall not, however, protect the Executive from any liability for a breach of trust committed intentionally or in bad faith. Even if this Section 6.2 shall not protect the Executive due to the foregoing sentence, in no event shall the Executive ever be liable for any punitive or exemplary damages for any act or omission committed in connection with this Agreement hereunder regardless of whether such act or omission constituted an act committed intentionally or in bad faith.
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6.3 Insurance. The Company has procured, and shall continue to maintain, policies of insurance that provides to the same coverage to Executive as is provided to any officer and director of the Company.
7. Notices. Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed telecopy, in the case of the Executive to the Executive’s last place of business or residence as shown on the records of the Company, or in the case of the Company to its principal office as set forth in the first paragraph of this Agreement, or at such other place as the Executive may designate.
8. Waiver. Unless agreed in writing, the failure of either party, at any time, to require performance by the other of any provisions hereunder shall not affect its right thereafter to enforce the same, nor shall a waiver by either party of any breach of any provision hereof be taken or held to be a waiver of any other preceding or succeeding breach of any term or provision of this Agreement. No extension of time for the performance of any obligation or act shall be deemed to be an extension of time for the performance of any other obligation or act hereunder.
9. Completeness and Modification. This Agreement constitutes the entire understanding between the parties hereto superseding all prior and contemporaneous agreements or understandings among the parties hereto concerning the Employment Agreement. This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties or, in the case of a waiver, by the party to be charged.
10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute but one agreement.
11. Binding Effect; Assignment. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns. This Agreement shall not be assignable by either party Executive but shall be assignable by the Company in connection with the sale, transfer or other disposition of its business or to any of the Company’s affiliates controlled by or under common control with the Company.
12. Governing Law and Venue. This Agreement shall become valid when executed and accepted by Company. The parties agree that it shall be deemed made and entered into in the State of Florida and shall be governed and construed under and in accordance with the laws of the State of Florida. Anything in this Agreement to the contrary notwithstanding, the Executive shall conduct the Executive’s business in a lawful manner and faithfully comply with applicable laws or regulations of the state, city or other political subdivision in which the Executive is located. The Company and the Executive acknowledge and agree that the 15th Judicial Circuit of Florida shall be the venue and exclusive proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts.
13. Further Assurances. All parties hereto shall execute and deliver such other instruments and do such other acts as may be necessary to carry out the intent and purposes of this Agreement.
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14. Headings. The headings of the sections are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.
15. Survival. Any termination of this Agreement shall not, however, affect the ongoing provisions of this Agreement which shall survive such termination in accordance with their terms.
16. Severability. The invalidity or unenforceability, in whole or in part, of any covenant, promise or undertaking, or any section, subsection, paragraph, sentence, clause, phrase or word or of any provision of this Agreement shall not affect the validity or enforceability of the remaining portions thereof.
17. Enforcement. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable attorneys’ fees at all trial and appellate levels, expenses and costs.
18. Construction and Understanding by the Executive. This Agreement shall be construed within the fair meaning of each of its terms and not against the party drafting the document. THE EXECUTIVE ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, THE EXECUTIVE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| THE COMPANY | ||
| JUPITER WELLNESS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| THE EXECUTIVE | ||
| By: | ||
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Exhibit 10.5
NEXT FRONTIER PHARMACEUTICALS, INC.
SECURED PROMISSORY NOTE
Boulder, Colorado
| January 7, 2022 | $5,000,00.00 |
FOR VALUE RECEIVED, NEXT FRONTIER PHARMACEUTICALS, INC., a corporation incorporated under the laws of the State of Delaware and located at 3950 N. Mays St., Round Rock, Texas 78665 (the “Borrower”), hereby promises to pay to the order of JUPITER WELLNESS, INC., a corporation incorporated under the laws of the State of Delaware and located at 1061 E. Indiantown, Suite 110, Jupiter, Florida 33477, or its successors or assigns (the “Lender”), the principal amount of up to Five Million Dollars (US$5,000,000.00) or, if less, the outstanding principal balance owing to the Lender by the Borrower, on the earlier of (i) 6-months from the issuance date of this Note, (ii) the occurrence of an Event of Default (as defined below), or (iii) such date as a new third party lender advances a loan to the Borrower (such earliest date is hereinafter referred to as the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) per annum commencing on the date hereof (the “Issuance Date”), in accordance with the terms hereof. This Promissory Note, as may be amended or supplemented from time to time, shall be referred to herein as the “Note”.
1. Payments of Principal and Interest.
(a) Payment of Principal. The outstanding principal amount of this Note shall be paid to the Lender on the Maturity Date.
(b) Payment of Interest. Interest on the outstanding principal balance of this Note shall accrue at a rate of eight percent (8%) per annum commencing on the Issuance Date. Interest shall be computed on the basis of a 360-day year and paid for the actual number of days elapsed. Interest shall be paid on the Maturity Date.
(c) Payment of Default Interest. Any amount of principal or interest on this Note which is not paid when due shall bear interest until such past due amount is paid at the highest non-usurious rate allowable per applicable law (the “Default Rate”).
(d) General Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Lender may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of New York are authorized or required by law or executive order to remain closed.
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(e) Optional Prepayment. At any time, the Borrower may pre-pay this Note without penalty and, upon such prepayment in full, the Lender shall have no further rights under this Note, including no rights of conversion.
(f) Revolving Note. Principal under this Note may be borrowed, repaid and re-borrowed, at the Lender’s sole and absolute discretion. Lender may endorse the amount and the date of the making of each Principal advance evidenced hereby and each payment of principal hereunder on the grid annexed hereto and made a part hereof as Schedule A, which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that any failure to endorse such information on such grid shall not in any manner affect the obligation of Borrower to make payment of principal and interest in accordance with the terms of this Promissory Note.
2. Guarantee. The obligations underlying this Note are guaranteed by the Borrower’s parent company, Next Frontier Holdings, Inc., a Delaware corporation (“NFH”), and the Borrower’s subsidiaries, Benuvia Manufacturing, Inc., a Delaware corporation (“BM”), Benuvia Therapeutics, LLC, a Delaware limited liability company (“BT”), Benuvia Manufacturing LLC, a Delaware limited liability company (“BM LLC”), and Benuvia Therapeutics IP LLC (“BT IP LLC” and together with NFH, BM, BT, and BM LLC, collectively, the “Guarantors”). The Guarantors hereby guarantee and become surety to Buyer for the full, prompt and unconditional payment and performance of the Obligations (as defined below), when and as the same shall become due, whether at the stated maturity date, by acceleration or otherwise, and the full, prompt and unconditional performance of each term and condition to be performed by Borrower under the Note. This guaranty is a primary obligation of each Guarantor and shall be a continuing inexhaustible guaranty. This is a guaranty of payment and not of collection. The Lender may require the Guarantors to pay and perform its liabilities and obligations and may proceed immediately against any Guarantor without being required to bring any proceeding or take any action against the Borrower or any other Guarantor prior thereto; the liability of Guarantor hereunder being independent of and separate from the liability of Borrower, any other guarantor, any other person, and the availability of other collateral security for the Note. “Obligations” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Borrower and the Guarantors to the Lender, including, without limitation, all obligations under the Note, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Lender as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (a) principal of, and interest on the Note and the loans extended pursuant thereto; (b) any and all other fees, indemnities, costs, obligations and liabilities of the Borrower or any Guarantor from time to time under or in connection with this Note; and (c) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower or any Guarantor.
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3. Security Interest. In order to secure the full and complete payment and performance of the Obligations when due, the Borrower and the Guarantors hereby grant to the Lender, a priority security interest in all of the Borrower’s and Guarantor’s rights, titles, and interests in and to the Collateral (the “Security Interest”) and, pledges, collaterally transfers, and assigns the Collateral to the Lender, all upon and subject to the terms and conditions of this Note. If the grant, pledge, or collateral transfer or assignment of any specific item of the Collateral is expressly prohibited by any contract or by law, then the Security Interest created hereby nonetheless remains effective to the extent allowed by the Uniform Commercial Code as in effect in the State of New York (the “UCC”) or other applicable laws. The Borrower and the Guarantors each hereby authorizes the Lender, at the Lender’s option and without any obligation to do so, and regardless of whether the Collateral is in possession of the Lender, to file or record any document necessary, convenient, required or reasonably advisable to perfect, continue, amend or terminate the security interest created under this Note, including, without limitation, any financing statements, pledge, mortgage, trust, assignments of credits including amendments, authorized to be filed under the UCC. The Company hereby consents to the filing of any documents previously filed or recorded by the Lender regarding the Collateral, including, without limitation, any and all previously filed financing statements. “Collateral” means and includes all assets and property of the Borrower and each Guarantor, including, without limitation, any and all of the Borrower’s and the Guarantors’ right, title, or interest in all assets and property, now owned or later acquired by the Borrower or any Guarantor, wherever located.
4. Defaults and Remedies.
(a) Events of Default. An “Event of Default” means: (i) a default in payment of principal or interest on this Note; (ii) failure by the Borrower or any Guarantor to comply with any material provision of this Note; (iii) the Borrower or any Guarantor, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Borrower or any Guarantor in an involuntary case; (B) appoints a Custodian of the Borrower or any Guarantor for all or substantially all of its property; or (C) orders the liquidation of the Borrower or any Guarantor, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
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(b) Remedies. If an Event of Default occurs and is continuing, the Lender, may declare all of this Note to be due and payable immediately. The Lender, shall have all rights available to it at law or in equity. Upon the occurrence of an Event of Default, the interest on this Note shall immediately accrue at the Default Rate. The Lender, may assess reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred or anticipated by the Lender in collecting or enforcing payment hereof (whether such fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and together with all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws, and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Lender at law, in equity, or under this Note. In connection with the Lender’s rights hereunder upon an Event of Default, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender, may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it in equity or under applicable law. Lender shall be permitted to exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Note, at law, in equity, or otherwise, including, without limitation, (a) requiring the Company to assemble all or part of the Collateral and make it available to the Lender at a place to be designated by the Lender which is reasonably convenient to the Borrower, (b) surrendering any policies of insurance on all or part of the Collateral and receiving and applying the unearned premiums as a credit on the Obligation, (c) applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and the Company hereby consents to any such appointment), and (d) applying to the Obligation any cash held by Lender under this Note.
5. Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Lender to the Borrower in a form reasonably acceptable to the Borrower and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note.
6. Cancellation. After all principal and accrued interest at any time owed on this Note has been paid in full and the Lender declares that no further borrowing shall be permitted hereunder, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued.
7. Waiver of Notice. To the extent permitted by law, the Borrower hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of New York, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in New York City in the State of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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9. Indemnity and Expenses. The Borrower and each Guarantor agrees:
(a) To indemnify and hold harmless the Lender and each of its partners, employees, agent and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and
(b) To pay and reimburse the Lender upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Lender may reasonably incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Borrower or any Guarantor to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note.
10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity.
11. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Lender and shall not be construed against any person as the drafter hereof.
12. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
13. Notice. Notice shall be given to each party at the address indicated in the preamble or at such other address as provided to the other party in writing.
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14. Consent of Senior Creditor. The Lender, the Borrower, the Guarantors, and Benuvia Holdings, LLC, a Delaware limited liability company (“Senior Lender”), among others, are currently party to that certain Intercreditor and Subordination Agreement, dated December 8, 2021 (the “Intercreditor Agreement”). The Senior Lender hereby consents to the entry of this Note by the Borrower and the Guarantors and the principal advances evidenced hereby. The amounts advanced hereunder shall constitute additional Junior Liabilities (as defined in the Intercreditor Agreement) and, by their execution hereof, the parties hereto shall be bound by the terms and conditions contained in the Intercreditor Agreement, provided, however, the Borrower and the Guarantors shall be permitted to repay the Lender all principal and interest owing hereunder in full on the Maturity Date, notwithstanding any restrictions which may otherwise be contained in the Intercreditor Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Note to be executed on and as of the Issuance Date.
| BORROWER: | ||
| NEXT FRONTIER PHARMACEUTICALS, INC. | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Executive Chairman | |
| LENDER: | ||
| JUPITER WELLNESS, INC. | ||
| By: | /s/ Brian John | |
| Name: | Brian John | |
| Title: | Chief Executive Officer | |
[ signature page to Promissory Note ]
| 7 |
| GUARANTORS: | ||
| NEXT FRONTIER HOLDINGS, INC. | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Executive Chairman | |
| BENUVIA MANUFACTURING, INC. | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Executive Chairman | |
| BENUVIA THERAPEUTICS, LLC | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Managing Member | |
| BENUVIA MANUFACTURING, LLC | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Managing Member | |
| BENUVIA THERAPEUTICS IP LLC | ||
| By: | /s/ Shannon Soqui | |
| Name: | Shannon Soqui | |
| Title: | Managing Member | |
[ signature page to Promissory Note ]
| 8 |
| CONSENT AND AGREEMENT: | ||
| With respect to Section 14 hereto: | ||
| BENUVIA HOLDINGS LLC | ||
| By: | /s/ Todd Davis | |
| Name: | Todd Davis | |
| Title: | Managing Member | |
[ signature page to Promissory Note ]
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