Exhibit 1.1

 

[•] Shares

 

Snail, Inc.

 

Class A Common Stock, Par Value $0.0001 Per Share

 

UNDERWRITING AGREEMENT

 

[•], 2022

 

US Tiger Securities, Inc. (“US Tiger”)

437 Madison Ave., 27th Floor

New York, NY 10022

 

EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”)

590 Madison Avenue, 39th Floor

New York, NY 10022

 

As representatives of the several Underwriters named in Schedule I hereto (the “Representatives”)

 

Ladies and Gentlemen:

 

Snail, Inc., a Delaware corporation (the “Company”), proposes, subject to the terms and conditions in this agreement (the “Agreement”), to issue and sell to the several underwriters listed in Schedule I hereto (collectively, the “Underwriters”) an aggregate of [•] shares of Class A Common Stock (the “Firm Shares”), par value $0.0001 per share, of the Company. At the option of the Underwriters, the Company agrees, subject to the terms and conditions herein, to issue and sell to the Underwriters up to an aggregate of [•] additional shares of Class A Common Stock of the Company (the “Option Shares”). The respective number of Shares to be purchased by each Underwriter is set forth opposite its name in Schedule I hereto. In addition, the Company has agreed to issue warrants to the Representatives to purchase a number of shares of Class A Common Stock of the Company equal to four percent (4%) of the total number of shares of Firm Shares (the “Underwriters’ Warrants”). The Firm Shares, the Option Shares, and the shares of Class A Common Stock to be issued pursuant to Underwriters’ Warrants are herein referred to collectively as the “Shares.”

 

The Shares to be outstanding after giving effect to the sales contemplated hereby and the Reorganization Transactions (as defined herein), together with the shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), of the Company are hereinafter referred to as the “Common Stock”.

 

To the extent the context requires, any reference in this Agreement to the “Reorganization Transactions” shall refer to the following: in connection with the offering contemplated by this Agreement and the Reorganization Transactions, the stockholders of Snail Games USA Inc., a California corporation (“Snail Games USA”), will contribute their interests to the Company in exchange for a proportional amount of, in the case of all stockholders other than Mr. Hai Shi and Ms. Ying Zhou, Class A Common Stock of the Company and, in the case of Mr. Shi and Ms. Zhou, Class B Common Stock of the Company. As a result of the Reorganization Transactions, (i) the Company will be a holding company, with its principal asset consisting of all of the shares of common stock of Snail Games USA, and (ii) the Company will control the business and affairs of Snail Games USA and its subsidiaries.

 

 

As used in this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate” has the meaning set forth in Rule 405 under the Securities Act.

 

“Applicable Time” means [•] New York State time on the date of this Agreement when the first time that sales of the Shares are made by the Underwriters.

 

“Bona Fide Electronic Road Show” means a “bona fide electronic road show” (as defined in Rule 433(h)(5) under the Securities Act) that the Company has made available without restriction by “graphic means” (as defined in Rule 405 under the Securities Act) to any person.

 

“Business day” means a day on which the Nasdaq (as defined below) is open for trading and on which banks in New York are open for business and not permitted by law or executive order to be closed.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Emerging Growth Company” means an “emerging growth company” (as defined in Section 2(a) of the Securities Act).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Final Prospectus” means the prospectus in the form first filed with the Commission pursuant to and within the time limits described in Rule 424(b) under the Securities Act.

 

“Free Writing Prospectus” has the meaning set forth in Rule 405 under the Securities Act.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

 

“Issuer Free Writing Prospectus” means an “issuer free writing prospectus” (as defined in Rule 433(h)(1) under the Securities Act).

 

“Preliminary Prospectus” means any preliminary prospectus included in the Registration Statement, as originally filed or as part of any amendment or supplement thereto, or filed with the Commission pursuant to Rule 424 under the Securities Act.

 

“Pricing Disclosure Package” means the Pricing Prospectus collectively with the documents and pricing information set forth in Schedule II hereto.

 

“Pricing Prospectus” means the Preliminary Prospectus included in the Registration Statement immediately prior to the Applicable Time.

 

“Prospectus Delivery Period” means such period of time after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters a prospectus relating to the Shares is required by law to be delivered (or required to be delivered but for Rule 172 under the Securities Act) in connection with sales of the Shares by any Underwriter or dealer.

 

 

“Registration Statement” means (a) the registration statement on Form S-1 (File No. 333-267483), including a prospectus, registering the offer and sale of the Shares under the Securities Act as amended at the time the Commission declared it effective, including each of the exhibits, financial statements and schedules thereto, (b) any Rule 430A Information, and (c) any Rule 462(b) Registration Statement.

 

“Rule 430A Information” means the information deemed, pursuant to Rule 430A under the Securities Act, to be part of the Registration Statement at the time the Commission declared the Registration Statement effective.

 

“Rule 462(b) Registration Statement” means an abbreviated registration statement to register the offer and sale of additional shares of Class A Common Stock pursuant to Rule 462(b) under the Securities Act.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Written Communication” has the meaning set forth in Rule 405 under the Securities Act.

 

1.             Representations and Warranties of the Company.

 

The Company hereby represents and warrants to, and agrees with, each Underwriter that:

 

(a)            Registration Statement.

 

(i)            The Company has prepared and filed the Registration Statement with the Commission under the Securities Act. The Commission has declared the Registration Statement and any amendment or supplement thereto effective under the Securities Act. The Commission has not issued any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any order preventing or suspending the use of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus, and no proceedings for such purpose or pursuant to Section 8A of the Securities Act against the Company or related to the offering of the Shares have been initiated, are, to the Company’s knowledge, pending before or threatened by the Commission. The Company has complied with each request, if any, from the Commission for additional information.

 

(ii)           The Registration Statement, at the time it became effective, did not contain, and any post-effective amendment thereto, as of the effective date of such amendment, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

 

(iii)          Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective and at the date hereof, complied and will comply with the Securities Act and the applicable rules and regulations of the Commission thereunder.

 

(b)            Pricing Disclosure Package. The Pricing Disclosure Package and any post-effective amendment thereto, as of the Applicable Time, did not, and as of the Closing Date (as defined below) and as of any Additional Closing Date (as defined below), as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(c)            Final Prospectus.

 

(i)            The Final Prospectus and any amendments or supplements thereto, as of its date, as of the time it was filed with the Commission pursuant to Rule 424(b) under the Securities Act, as of the Closing Date and as of any Additional Closing Date, as the case may be, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in reliance upon and in conformity with information furnished to the Company in writing with respect to the Underwriters by the Representatives expressly for use in the Registration Statement, the Pricing Prospectus or the Final Prospectus or any amendment thereof or supplement thereto. The parties hereto acknowledge and agree that such information furnished to the Company by the Representatives consists solely of (x) the names of the Underwriters in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus and (y) the following sub-captions under “Underwriting” in the final Prospectus: “Electronic Distribution,” “Price Stabilization, Short Positions and Penalty Bids,” “Other Relationships,” and “Selling Restrictions.” (collectively, the “Underwriter Information”).

 

(ii)           Each of the Final Prospectus and any amendments or supplements thereto, at the time it was filed with the Commission pursuant to Rule 424(b) under the Securities Act, as of the Closing Date and as of any Additional Closing Date, as the case may be, complied and will comply with the Securities Act.

 

(d)            [Reserved].

 

(e)            Issuer Free Writing Prospectuses.

 

(i)            Each Issuer Free Writing Prospectus, when considered together with the Registration Statement, Preliminary Prospectus or Pricing Disclosure Package, or delivered prior to the delivery of the Final Prospectus, did not, as of the date of such Issuer Free Writing Prospectus, and will not, as of the Closing Date and as of any Additional Closing Date, as the case may be, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made as to the Underwriter Information.

 

 

(ii)           Any Free Writing Prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each Issuer Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company (i) complies or will comply with the Securities Act and the applicable rules and regulations of the Commission thereunder and (ii) does not conflict and will not conflict with information contained in the Registration Statement, Pricing Disclosure Package or Final Prospectus, including any preliminary or other prospectus deemed to be a part thereof, that has not been superseded or modified.

 

(iii)          The Company has filed, or will file, with the Commission, if any, within the time period specified in Rule 433(d) under the Securities Act, any Free Writing Prospectus it is required to file pursuant to Rule 433(d) under the Securities Act. The Company has made available any Bona Fide Electronic Road Show used by it in compliance with Rule 433(d)(8)(ii) under the Securities Act such that no filing of any “road show” (as defined in Rule 433(h) under the Securities Act) (“Road Show”) is required in connection with the offering of the Shares. Each Bona Fide Electronic Road Show, when considered together with the Registration Statement, the Preliminary Prospectus or the Pricing Disclosure Package, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made as to the Underwriter Information.

 

(iv)          Except for the Issuer Free Writing Prospectuses, if any, and electronic Road Shows, if any, each furnished to the Representatives before first use, the Company has not prepared, used, authorized the use of, referred to or participated in the planning for use of, and will not, without the prior consent of the Representatives, prepare, use, authorize the use of, refer to or participate in the planning for use of, any Free Writing Prospectus. The Company has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic Road Show.

 

(f)             No Other Disclosure Materials. Other than the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, each Preliminary Prospectus, and each Issuer Free Writing Prospectus (if any), the Company (including its agents and representatives) has not, directly or indirectly, distributed, prepared, used, authorized, approved or referred to, and will not distribute, prepare, use, authorize, approve or refer to, any offering material in connection with the offering and sale of the Shares.

 

 

(g)            Ineligible Issuer. The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act, without taking into account any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer.

 

(h)            EGC Status and Testing-the-Waters Communication.

 

(i)            From the time of the initial confidential submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.

 

(ii)           The Company has not engaged in any Testing-the-Waters Communication or distributed any Written Testing-the-Waters Communications. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.

 

(i)             Due Authorization.

 

(i)            The Company has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby has been duly and validly taken.

 

(ii)           The Registration Statement, the Preliminary Prospectus, the Pricing Prospectus, the Pricing Disclosure Package, the Final Prospectus and any Issuer Free Writing Prospectus, and the filing of the Registration Statement, the Preliminary Prospectus, the Pricing Prospectus, the Pricing Disclosure Package, the Final Prospectus and any Issuer Free Writing Prospectus with the Commission have been duly authorized by and on behalf of the Company, and the Registration Statement has been duly executed pursuant to such authorization by and on behalf of the Company.

 

(j)             Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto, constitutes a valid and legally binding agreement of the Company, enforceable in accordance with its terms, except as (i) the enforcement hereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) relating to enforceability and (ii) rights to indemnification and contribution hereunder may be limited by applicable law and public policy considerations, which exceptions in subsections (i) and (ii) above are referred to as the “Enforceability Exceptions.”

 

 

(k)            Underwriters’ Warrants. Each of the Underwriters’ Warrants has been duly authorized and, when executed and delivered by the Company, will constitute a valid and legally binding agreement of the Company, enforceable in accordance with its terms, subject to Enforceability Exceptions.

 

(l)             No Material Adverse Change. Except as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, since the date of the most recent audited financial statements included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus: (i) there has been no material adverse change, or any development or event that would result in a material adverse change, in or affecting the condition (financial or otherwise), earnings, business, properties, management, financial position, shareholder’s equity or results of operations, whether or not arising from transactions in the ordinary course of business, of the Company and its Subsidiaries (as defined below), considered as one entity, or adversely affect the performance by the Company of its obligations under this Agreement (a “Material Adverse Change”); (ii) there has been no change in the share capital (other than the issuance of shares of Class A Common Stock upon the exercise or settlement (including any “net” or “cashless” exercises or settlements) of share options, restricted share units or warrants described as outstanding, and the Reorganization Transactions, as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or material adverse change in the revenue, net current assets, net assets, short-term debt or long-term debt of the Company or any of its Subsidiaries, considered as one entity; (iii) the Company and its Subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent (whether or not in the ordinary course of business); nor entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its Subsidiaries, considered as one entity; (iv) there has been no dividend or distribution of any kind declared, set aside for payment, paid or made by the Company or any of its Subsidiaries on any class of share capital, or no repurchase or redemption by the Company or any of its Subsidiaries of any class of share capital; (v) neither the Company nor any of its Subsidiaries has (1) entered into or assumed any material transaction or agreement, (2) incurred, assumed or acquired any material liability or obligation, direct or contingent, (3) acquired or disposed of or agreed to acquire or dispose of any business or any other asset; or (4) agreed to take any of the foregoing actions; and (vi) neither the Company nor any of its Subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood, typhoon, or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree.

 

(m)            Organization and Good Standing of the Company and its Subsidiaries.

 

(i)            The Company has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification (to the extent that good standing is recognized by such jurisdiction), and has all power and authority (corporate and other) necessary to own, lease or hold its properties and to conduct the business in which it is engaged as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus. The amended and restated certificate of incorporation of the Company to be adopted on or before the Closing Date, filed as Exhibit 3.1 to the Registration Statement, immediately following closing on the Closing Date of the Shares offered and sold hereunder, will be in full force and effect. Complete and correct copies of all constitutive documents of the Company and all amendments thereto have been delivered to the Representatives; except for the adoption of the amended and restated certificate of incorporation of the Company on the Closing Date, no change will be made to any such constitutive documents on or after the date of this Agreement through and including the Closing Date.

 

 

(ii)           Each of the Company’s direct and indirect subsidiaries (as such term is defined in Rule 405 under the Securities Act) (each a “Subsidiary” and collectively, the “Subsidiaries”) has been identified in Exhibit 21.1 to the Registration Statement. Each of the Subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation (to the extent that good standing is recognized by the jurisdiction of its incorporation), has the corporate power and authority to own its property and to conduct its business as described in the Registration Statement and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification (to the extent that good standing is recognized by such jurisdiction). Apart from the Subsidiaries, the Company has no direct or indirect subsidiaries or any other company over which it has direct or indirect effective control.

 

(n)           Capitalization.

 

(i)            Immediately following the Reorganization Transactions, the authorized share capital of the Company will conform as to legal matters to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus. All of the outstanding shares of Common Stock of the Company have been or will be duly authorized and validly issued and are fully paid and non-assessable. The Shares have been or will be duly authorized and, when issued and paid for as contemplated herein, will be validly issued, fully paid and non-assessable. Immediately following the Reorganization Transactions, the Company will have the duly authorized and outstanding capitalizations as set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus under the heading “Capitalization” and “Description of Capital Stock,” and as of the Closing Date, the Company shall has authorized and outstanding capitalizations as set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus under the heading “Capitalization” and “Description of Capital Stock.”

 

 

(ii)           None of the outstanding shares of Common Stock or other equity interests in the Company or the Subsidiaries was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company or the Subsidiaries. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to acquire, or instruments convertible into or exchangeable or exercisable for, or any obligation of the Company to issue, any shares of Common Stock, or other equity interests in, the Company or any of its Subsidiaries. Except as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, all of the outstanding shares of common stock of, or other equity interests in, each of the Company’s Subsidiaries (i) have been duly authorized and validly issued, (ii) are fully paid and non-assessable and (iii) are owned by the Company, directly or indirectly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, charge, claim or restriction on voting or transfer (collectively, “Liens”).

 

(iii)          The shares of Class A Common Stock issuable upon exercise of the Underwriters’ Warrants (the “Warrant Shares”) will be duly authorized and validly reserved for issuance upon exercise of the Underwriters’ Warrants in a number sufficient to meet the exercise requirement thereunder and, when fully paid for and issued in accordance with the terms of the Underwriters’ Warrants, such Warrant Shares will be validly issued, fully paid and non-assessable, free and clear of any Liens, and the issuance of such Warrant Shares will not be subject to any preemptive rights, resale rights, rights of first refusal or similar rights.

 

(iv)          The shares of Class B Common Stock to be issued by the Company pursuant to the Reorganization Transactions have been duly authorized for issuance, and, when issued and delivered by the Company against payment therefor, will be validly issued, fully paid and non-assessable, and the issuance and sale of the shares of Class B Common Stock is not subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase shares of Class B Common Stock.

 

(o)            No Violation or Default. Neither the Company nor any of its Subsidiaries is: (i) in breach or violation of its certificate of incorporation, bylaws or similar constitutional or organizational documents, except as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement, contract, undertaking or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any property, right or asset of the Company or any of its Subsidiaries is subject; or (iii) in breach or violation of any laws, statutes, rules, regulations, judgments, orders, decrees or writs, guidelines or notices of any court, arbitrator, governmental or regulatory authority, administrative agency or other authority, body or agency having jurisdiction over the Company or any of its Subsidiaries, or any of their respective properties, operations or assets (each a “Governmental Entity”) (including, but not limited to, any applicable laws or regulations concerning the dissemination of information over the Internet and user privacy protection), except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Change.

 

 

(p)            No Conflicts. None of (i) the execution, delivery and performance of this Agreement by the Company, (ii) the issuance, sale and delivery of the Shares , (iii) the application of the proceeds of the offering as described under “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or (iv) the consummation of the transactions contemplated herein will: (x) result in any breach or violation of the terms or provisions of the certificate of incorporation or similar constitutional or organizational documents of the Company or any of its Subsidiaries; (y) conflict with, result in a breach or violation of any of the terms or provisions of, constitute a default under, result in the termination, modification, or acceleration of, or result in the creation or imposition of any Lien upon any property, right or asset of the Company or any of its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement, note agreement, contract, undertaking or other agreement, obligation, condition, covenant or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any property, right or asset of the Company or any of its Subsidiaries is subject; or (z) result in the breach or violation of any law, statute, judgment, order, rule, decree or writ, regulation, guideline or notice of any Governmental Entity having jurisdiction over the Company or any of its Subsidiaries or any of their respective properties, rights or assets, except, in the case of clauses (y) and (z) above, for any such conflict, breach, violation, default, and Liens that would not, individually or in the aggregate, have a Material Adverse Change.

 

(q)            No Consents Required. No consent, approval, authorization, order, filing, registration, license or qualification of or with any Governmental Entity is required for (i) the execution, delivery and performance by the Company of this Agreement; (ii) the issuance, sale and delivery of the Shares; or (iii) the consummation of the transactions contemplated herein, except for such consents, approvals, authorizations, orders, filings, registrations or qualifications as (x) have already been obtained or made or will have been obtained or made by the effective date of the Registration Statement and are or will on such effective date be in full force and effect, as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, and (y) may be required under applicable state securities laws in connection with the purchase, distribution and resale of the Shares by the Underwriters.

 

(r)             Independent Accountants. BDO USA LLP, which expressed its unqualified opinion with respect to the consolidated financial statements (which term as used in this Agreement includes the related notes thereto) and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, is an independent registered public accounting firm with respect to the Company within the meaning of the rules and regulations of the Commission and the Public Company Accounting Oversight Board and as required by the Securities Act.

 

 

 

(s)            Financial Statements and Other Financial Data. The financial statements, together with the related notes and schedules, included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus comply in all material respects with the applicable requirements of the Securities Act and the related rules and regulations adopted by the Commission and present fairly the consolidated financial position of Snail Games USA and the Subsidiaries as of and at the dates indicated and the consolidated results of operations, cash flows and changes in shareholders’ equity of the Company for the periods specified. Such financial statements, notes and schedules have been prepared in conformity with the United States generally accepted accounting principles (the “GAAP”) applied on a consistent basis throughout the periods involved. The historical financial data set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus under the captions “Summary Financial and Other Information,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to the extent such historical financial data are extracted or derived from the consolidated financial statements and the related schedules and notes thereto have been duly extracted or derived from the consolidated financial statements and present fairly in all material aspects the information set forth therein on a basis consistent with that of the audited consolidated financial statements included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus. The other financial data contained in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus are accurately and fairly presented in all material aspects and prepared on a basis consistent with the financial statements and books and records of Snail Games USA; and Snail Games USA and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations) not described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus.

 

(t)            [Reserved]

 

(u)            Statistical and Market-Related Data. The statistical, industry-related and market-related data included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus are based on or derived from sources that the Company in good faith believes to be accurate and reliable, and such data agree with the sources from which they are derived, and the Company has obtained the written consent for the use of such data from such sources to the extent required.

 

(v)            Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) included in the Registration Statement, the Pricing Disclosure Package or the Final Prospectus (including all amendments and supplements thereto) has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

(w)            Legal Proceedings. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, (i) there are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings (collectively, “Actions”) pending, or to the Company’s knowledge, threatened or contemplated by the Governmental Entity to which the Company or any of its Subsidiaries is or may be a party or to which any property, right or asset of the Company or any of its Subsidiaries is or may be the subject; and (ii) there are no such Actions that are required to be described in the Registration Statement or the Pricing Disclosure Package or the Final Prospectus and are not so described; and there are no contracts, agreements, or other documents that are required to be described in the Registration Statement or the Pricing Disclosure Package or the Final Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.

 

 

(x)            Labor Disputes. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, no labor disturbance by or material dispute with the employees or third-party contractors of the Company or any of its Subsidiaries exists or is threatened or contemplated; and the Company is not aware of any existing, threatened or contemplated labor disturbance by the employees of any of the principal customers and suppliers.

 

(y)           Intellectual Property Rights.

 

(i)            Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or as would not, singly or in the aggregate have a Material Adverse Change, the Company and its Subsidiaries own, possess, have the full right to use all patents, patent applications, trademarks, service marks, trade names, trademark and service mark applications, domain names and other source indicators, copyrights and copyrightable works, technology and know-how, trade secrets, inventions, licenses, approvals, proprietary or confidential information and all other intellectual property and related proprietary rights, interests and protection (collectively, the “Intellectual Property Rights”) necessary to conduct their respective businesses in all applicable jurisdictions, or can acquire sufficient Intellectual Property Rights on reasonable terms.

 

(ii)            Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or as would not singly or in the aggregate have a Material Adverse Change, (A) there are no rights of third parties to any of the Intellectual Property Rights owned by the Company or its Subsidiaries; (B) to the Company’s knowledge, there is no infringement, misappropriation, breach, default or other violation, or the occurrence of any event that with notice or the passage of time would constitute any of the foregoing, by the Company or its Subsidiaries or third parties of any of the Intellectual Property Rights of the Company or its Subsidiaries; (C) there are no pending Actions, nor Actions threatened in writing, or other Actions to the Company’s knowledge, by others challenging the Company’s or the Subsidiaries’ rights in or to, or the violation of any of the terms of, any of their Intellectual Property Rights; (D) there are no pending Actions, nor Actions threatened in writing, or other Actions to the Company’s knowledge, by others challenging the validity, enforceability or scope of any such Intellectual Property Rights; and (E) none of the Intellectual Property Rights used by the Company or its Subsidiaries in their businesses has been obtained or is being used by the Company or its Subsidiaries in violation of any contractual obligation binding on the Company or its Subsidiaries.

 

 

(z)            Licenses and Permits. Except as would not have a Material Adverse Change, (i) the Company and its Subsidiaries possess all valid and current certificates, authorizations, approvals, licenses, permits, consents, and declarations (collectively, the “Authorizations”) issued by, and have made all declarations, amendments, supplements, reports and filings with, the appropriate local, provincial or state, national or federal or foreign regulatory agencies or bodies having jurisdiction over the Company and each of its Subsidiaries and their respective assets, rights and properties that are necessary to own, lease and operate their respective properties and to conduct their respective businesses as set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus; (ii) all such Authorizations are valid and in full force and effect and the Company and its Subsidiaries are in compliance with the terms and conditions of all such Authorizations; and (iii) neither the Company nor any of its Subsidiaries has received notice of any revocation, termination or modification of, or non-compliance with, any such Authorization or has any reason to believe that any such Authorization will not be renewed in the ordinary course.

 

(aa)          Title to Property. The Company and its Subsidiaries have good and marketable title to all personal property, free and clear of all Liens, defects and imperfections of title; and any real property and buildings held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases, except such Liens, defects and imperfections as (i) are disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or (ii) do not materially affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company and its subsidiaries.

 

(bb)          Taxes. The Company and each of its Subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date hereof or have timely requested extensions thereof and have paid all taxes required to be paid thereon, except where the failure to make such payment or filing will not have Material Adverse Change, and no tax deficiency has been determined adversely to the Company or any of its Subsidiaries (nor does the Company nor any of its Subsidiaries has any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its Subsidiaries). The charges, accruals and reserves on the books of the Company in respect of any income and other tax liability are adequate to meet any assessments for any taxes of the Company accruing through the end of the last period specified in such consolidated financial statements. Any unpaid income and other tax liability of the Company for any years not finally determined have been accrued on the Company’s consolidated financial statements in accordance with U.S. GAAP.

 

(cc)          [Reserved]

 

(dd)          [Reserved]

 

 

(ee)          Investment Company Act. The Company is not, after giving effect to the offer and sale of the Shares and the application of the proceeds therefrom as described under “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, required to register as an “investment company” (as defined in the Investment Company Act).

 

(ff)            Insurance. The Company and its Subsidiaries are insured by recognized, financially sound institutions in such amounts, with such deductibles and covering such losses and risks as is adequate for the conduct of their respective businesses and the value of their respective assets, rights and properties. All insurance policies and fidelity or surety bonds, if applicable, insuring the Company and its Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its Subsidiaries are in material compliance with the terms and conditions of such policies; neither the Company nor any of its Subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required to be made in order to continue such insurance; and neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for. There are no claims by the Company or any of its Subsidiaries under any such policy as to which any insurer is denying liability or defending under a reservation of rights clause; and neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a reasonable cost.

 

(gg)          No Stabilization or Manipulation. None of the Company, its Subsidiaries, or any of their directors, officers, Affiliates, controlling persons or any person acting on its or any of their behalf (other than the Underwriters, as to which no representation or warranty is given) has taken, directly or indirectly, any action designed to or that has constituted or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any securities of the Company.

 

(hh)          No Sale, Issuance and Distribution of Shares. Except as described in the Registration Statement, the Company has not sold, issued or distributed any shares during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or Regulation S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.

 

(ii)            Compliance with the Sarbanes-Oxley Act. The Company, its Subsidiaries, officers and directors, in their capacities as such, are in compliance with the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including but not limited to, Section 402 related to loans and all applicable rules of the Nasdaq, to the extent that such compliance is required prior to the effectiveness of the Registration Statement.

 

 

(jj)            Internal Controls. Except as disclosed in the Registration Statement, Pricing Disclosure Package and the Final Prospectus. the Company and its Subsidiaries maintain a system of internal controls, including but not limited to, disclosure controls and procedures, “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act), an internal audit function and legal and regulatory compliance controls (collectively, the “Internal Controls”) that are designed to promote compliance with all the applicable laws and regulations, including without limitation the Securities Act, the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of the Commission and the rules of the Nasdaq and to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, the Company's Internal Controls are effective and the Company is not aware of any deficiency or material weaknesses in its Internal Controls. The Internal Controls upon the effectiveness of the Registration Statement will be overseen by the audit committee of the board of Directors of the Company (the “Audit Committee”) in accordance with the rules of the Nasdaq. Since the date of the most recent balance sheet included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, (x) the Company's auditors and the Audit Committee of the Company have not been advised of (A) any significant deficiencies or material weaknesses in the design or operation of the Internal Controls of the Company and its Subsidiaries; or (B) any fraud, whether or not material, that involves management or other employees who have a role in the Internal Controls of the Company or its Subsidiaries; and (y) there have been no significant changes in the Internal Controls of the Company or its Subsidiaries or in other factors that could adversely affect such Internal Controls. Each of the deficiency, material weakness and other adverse events of the Internal Controls as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus has been duly and completely corrected and rectified. Each of the Company’s independent directors meets the criterial for “independence” under the Sarbanes-Oxley Act, the rules and regulations of the Commission and the rules of the Nasdaq.

 

(kk)            Disclosure Controls and Procedures. Except as disclosed in the Registration Statement, Pricing Disclosure Package and the Final Prospectus, the Company and its Subsidiaries have established and maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to comply with the requirements of the Exchange Act and that have been designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure.

 

(ll)            [Reserved]

 

(mm)        Related Party Transactions. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, no material relationship or transaction, direct or indirect, exists between or among the Company or any of its Subsidiaries, on the one hand, and their respective directors, officers, shareholders, sponsors, other Affiliates, customers or suppliers, or affiliates or family members of the foregoing persons, on the other hand.

 

 

(nn)          Compliance with Anti-Corruption Laws. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, employee, Affiliate or other person associated with or acting on behalf of the Company or any of its Subsidiaries has (i) used any funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made, or taken any action in furtherance of, an offer, payment, promise to pay or authorization or approval of any direct or indirect unlawful payment, giving of money, property, gifts, benefit or anything else of value to any foreign or domestic government or regulatory official (including any officer or employee of a government or a government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office); (iii) made, offered, agreed, requested or take an act in furtherance of any unlawful payment, including without limitation, any bribe, rebate, payoff, influence payment, kickback or other unlawful payment; or (iv) taken any action directly that would result in a violation by such person of any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption laws, statute or regulation. The Company and its Subsidiaries have conducted their businesses in compliance with applicable anti-corruption laws, and have instituted and maintained and will continue to maintain and enforce policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws as well as the representations and warranties contained herein.

 

(oo)          Compliance with Anti-Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and any other applicable anti-money laundering statutes of all jurisdictions where the Company or any of its Subsidiaries conduct business or their respective properties, rights and assets are subject to, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity (collectively, the “Anti-Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or threatened.

 

 

(pp)          Compliance with OFAC. Neither the Company nor any of its Subsidiaries, to the Company’s knowledge, nor any director, officer, employee, Affiliate or representative of the Company or any of its Subsidiaries, is or undertakes any business with an individual or entity (an “OFAC Person”) or is owned or controlled by an OFAC Person, (i) that is the subject or target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, Her Majesty's Treasury, or other relevant sanctions authority (collectively, “Sanctions”), and (ii) located, organized or resident in a country, region or territory that is, or whose government is, the subject or the target of Sanctions, including, without limitation, so-called Donetsk People’s Republic, or so-called Luhansk People’s Republic or any other Covered Region of Ukraine identified pursuant to Executive Order 14065, Crimea, Cuba, Iran, North Korea, Sudan and Syria (each, a “Sanctioned Country”); and the Company and its Subsidiaries and, to the Company’s knowledge, their respective directors and officers, employees, agents, Affiliates or representatives will not directly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other OFAC Person (i) to fund or facilitate any activities of or business with any OFAC Person that, at the time of such funding or facilitation, is the subject or the target of Sanctions, (ii) to fund or facilitate any activities or business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any OFAC Person (including any OFAC Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. Since their respective inception, the Company and its Subsidiaries have not engaged in and are not now engaged in any dealings or transactions with any OFAC Person that at the time of the dealing or transaction is or was, or whose government is or was, the subject or the target of Sanctions or with any Sanctioned Country.

 

(qq)          Environmental Laws. (A) Except as would not, singly or in the aggregate have a Material Adverse Change, the Company and its Subsidiaries (i) are in compliance with any and all applicable national, provincial, local and foreign laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (the “Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in material compliance with all terms and conditions of any such permit, license or approval. (B) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties), except where the failure of any of the foregoing will not have a Material Adverse Change.

 

(rr)           Cybersecurity; Data Protection. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or as would not, singly or in the aggregate have a Material Adverse Change, (i) to the knowledge of the Company, the Company’s and its Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform as required in connection with the operation of the business of the Company and its Subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants; (ii) the Company and its Subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”)) used in connection with their businesses, and to the Company’s knowledge, there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same; and (iii) the Company and its Subsidiaries are presently in compliance with all applicable binding internal policies and contractual obligations, laws or statutes and all judgments, orders, rules and regulations of any Governmental Entity, relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification.

 

 

(ss)         [Reserved]

 

(tt)           Registration Statement Exhibits. There are no legal or governmental proceedings or contracts or other documents of a character required to be described in the Registration Statement, the Pricing Disclosure Package or the Final Prospectus or, in the case of documents, to be filed as exhibits to the Registration Statement, the Pricing Disclosure Package or the Final Prospectus, that are not described and filed as required.

 

(uu)          No Unapproved Marketing Documents. The Company has not distributed and, prior to the later to occur of any delivery date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than the Preliminary Prospectus filed as part of the Registration Statement as originally confidentially submitted or as part of any amendment thereto, the Pricing Disclosure Package and the Final Prospectus and any Issuer Free Writing Prospectus to which the Representatives have consented.

 

(vv)          No Registration Rights. Except as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, there are no contracts, agreements or understandings between the Company or any of its Subsidiaries, on the one hand, and any person, on the other hand, granting such person any rights to require the Company or any of its Subsidiaries to file a registration statement under the Securities Act with respect to any securities of the Company or any of its Subsidiaries owned or to be owned by such person or to require the Company or any of its Subsidiaries to include such securities in the securities registered pursuant to the Registration Statement or in any securities being or to be registered pursuant to any registration statement files or to be filed by the Company or any of its subsidiaries under the Securities Act, and any person to whom the Company has granted registration rights has agreed not to exercise such rights until after the expiration of the Lock-Up Period referred to in Section 3(k) hereof. Each of the individuals and entities listed on Schedule III has furnished to the Representatives on or prior to the date hereof a letter or letters relating to sales and certain other dispositions of the Shares or certain other securities, in the form of Exhibit A hereto (the “Lock-Up Agreement”).

 

 

(ww)        Disclosure; Accurate Summaries. The statements set forth in each of the Registration Statement, the Pricing Disclosure Package and the Final Prospectus under the captions “Risk Factors,” “Our Organizational Structure,” “Related Party Transactions,” “Shares Eligible for Future Sale,” “Description of Capital Stock,” and “Underwriting” , insofar as they purport to summarize legal matters, agreements, documents or proceedings referred to therein, are accurate, complete and fair summaries of such laws, agreements, documents or proceedings. The share capital (including the Shares) conforms to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus. The statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the caption “Material U.S. Federal Income and Estate Tax Consequences for Non-U.S. Holders of Class A Common Stock,” insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, fairly and accurately summarize the matters referred to therein in all material respects.

 

(xx)          Merger or Consolidation. Neither the Company nor any of its Subsidiaries is a party to any memorandum of understanding, letter of intent, definitive agreement or any similar agreements with respect to a material merger or consolidation or an acquisition or disposition of assets, technologies, business units or businesses which is required to be described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus and which is not so described.

 

(yy)         Termination of Contracts. Neither the Company nor any of its Subsidiaries has sent or received any communication regarding termination of, or intent not to renew, any material contract or agreement referred to or described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus or filed as an exhibit to the Registration Statement, and no such termination or non-renewal has been threatened by the Company or any of its Subsidiaries or by any other party to any such contract or agreement.

 

(zz)          [Reserved]

 

(aaa)        Payments of Dividends. Except as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, none of the Company nor any of its Subsidiaries is prohibited, directly or indirectly, from paying any dividends or making any other distribution on their respective share capital or similar ownership interest, from making or repaying any loans or advances to the Company or any of its Subsidiaries, or from transferring any of their respective properties or assets to the Company or any Subsidiaries.

 

(bbb)       No Broker's Fees. Neither the Company nor any of its Subsidiaries is a party to, or subject to, any contract, agreement or understanding (other than this Agreement) with any person that would give rise to a valid claim against the Company or any of its Subsidiaries or any Underwriter for a brokerage commission, finder's fee or like payment in connection with the offer and sale of the Shares; there are no any other arrangements, agreements, understandings, payments or issuance with respect to the Company and its Subsidiaries or any of their respective officers, directors, shareholders, partners, employees, affiliates, agents or representatives that may affect the Underwriters’ compensation as determined by the Financial Industry Regulatory Authority (“FINRA”).The Company further confirms that it has not made any direct or indirect payments (in cash, securities or otherwise) that are unreasonably higher than the prevailing market rate to: (x) any person, as a finder’s fee, consulting fee, investor relations’ fee, advisory fees or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (y) any FINRA member; or (z) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the 180-day period immediately preceding the original filing date of the Registration Statement, other than the payment to the Representatives as provided herein in connection with the Offering.

 

 

(ccc)        No Broker-Dealer Affiliation. There are no affiliations or associations between (i) any member of FINRA and (ii) the Company or any of its Subsidiaries or any of their respective officers, directors or 10% or greater security holders or any beneficial owner of the Company’s unregistered equity securities that were acquired at any time on or after the 180 day immediately preceding the date that the Registration Statement was initially filed with the Commission.

 

(ddd)        [Reserved]

 

(eee)        [Reserved]

 

(fff)          Representation of Officers. Any certificate signed by any officer of the Company and delivered to the Underwriters or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to the Underwriters as to the matters set forth therein.

 

2.            Purchase; Payment.

 

(a)            Agreements to Sell and Purchase. On the basis of the representations, warranties and covenants herein and subject to the conditions herein,

 

(i)             The Company agrees to issue and sell the Firm Shares to the several Underwriters; and

 

(ii)            The Underwriters agree, severally and not jointly, to purchase from the Company the number of Firm Shares set forth opposite such Underwriter's name in Schedule I hereto, subject to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional Shares.

 

(iii)            The purchase price per Firm Share to be paid by the several Underwriters to the Company shall be US$[•] per share (the “Purchase Price”).

 

(iv)            Payment for the Firm Shares (the “Firm Shares Payment”) shall be made, against delivery of the Firm Shares to be purchased, by wire transfer in immediately available funds to the account(s) specified by the Company to the Representatives at least two (2) business days in advance of such payment at [•] a.m., New York City Time, on [•], 2022, or at such other place on the same or such other date and time, as shall be designated in writing by the Representatives (the “Closing Date”).

 

 

(b)            Over-Allotment Option. On the basis of the representations, warranties and covenants herein and subject to the conditions herein,

 

(i)             the Company hereby agrees to issue and sell to the Underwriters the Option Shares, and the Underwriters shall have the option to purchase, severally and not jointly, in whole or in part, the Option Shares from the Company (the “Over-Allotment Option”), in each case, at a price per share equal to the Purchase Price less an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Shares but not payable on the Option Shares (the “Over-Allotment Option Purchase Price”);

 

(ii)            the parties agree that the Underwriters may only exercise the Over-Allotment Option for the purpose of covering over-allotments made in connection with the offering of the Firm Shares.

 

(iii)           The Representatives may exercise the Over-Allotment Option on behalf of the Underwriters at any time in whole, or from time to time in part, on or before the forty-fifth (45^th) day after effective date of the Registration Statement, by giving written notice to the Company (the “Over-Allotment Exercise Notice”). Each exercise date must be at least one (1) business day after the written notice is given and may not be earlier than the Closing Date nor later than ten (10) business days after the date of such notice. On each day, if any, that the Option Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of the Option Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of the Option Shares to be purchased on such Additional Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of the Firm Shares. The Representatives may cancel any exercise of the Over-Allotment Option at any time prior to the Closing Date or the applicable Additional Closing Date, as the case may be, by giving written notice of such cancellation to the Company.

 

(iv)           The Over-Allotment Exercise Notice shall set forth:

 

(A)           the aggregate number of Option Shares as to which the Over-Allotment Option is being exercised;

 

(B)            the Over-Allotment Option Purchase Price;

 

(C)            the names and denominations in which the Option Shares are to be registered; and

 

(D)            the applicable Additional Closing Date.

 

(v)            Payment for the Option Shares (the “Option Shares Payment”) shall be made, against delivery of the Option Shares to be purchased, by wire transfer in immediately available funds to the account(s) specified by the Company to the Representatives at least two (2) business day in advance of such payment at [•], New York City Time, on the date specified in the corresponding Over-Allotment Exercise Notice, or on the same or such other date and time, as shall be designated in writing by the Representatives (an “Additional Closing Date”).

 

 

(c)            Warrant Shares. The Company hereby agrees to issue to the Representatives (and/or their designees) on the effective date of the Registration Statement, warrants to purchase such number of shares of Class A Common Stock of the Company up to four percent (4%) of the Firm Shares (the “Underwriters’ Warrants”). The Underwriters’ Warrants, in the form attached hereto as Exhibit G, shall be exercisable, in whole or in part, commencing on the effective date of the Registration Statement and expiring on the three-year anniversary thereof at an initial exercise price per share of US$[•], which is equal to one hundred and twenty five percent (125%) of the initial public offering price. The Underwriters’ Warrants shall include a “cashless” exercise feature, shall be non-callable and non-cancellable with immediate demand and shall include a provision for “piggy-back” registration rights to the satisfaction of the Representatives at the Company’s expense until expiration or until the shares underlying the warrant are eligible for resale pursuant to an exemption from registration. The Warrants shall also have customary anti-dilution provisions, including without limitation, for stock dividends, splits, mergers, consolidation and shall provide for automatic cashless exercise immediately prior to expiration.

 

(d)            Public Offering. The Company understands that the Underwriters intend to make a public offering of their respective portion of the Shares as soon after the effectiveness of the Registration Statement and this Agreement as in the judgment of the Representatives is advisable, and initially to offer the Shares on the terms set forth in the Final Prospectus. The Company acknowledges and agrees that the Underwriters may offer and sell Shares to or through any Affiliate of an Underwriter. The Company is further advised by the Representatives that the Shares are to be offered to the public initially at US$[•] per Share (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of US$[•] per Share under the Public Offering Price.

 

(e)            The Shares to be delivered to each Underwriter shall be delivered in book entry form, and in such denominations and registered in such names as the Representatives may request in writing not later than one (1) business day prior to the Closing Date or Additional Closing Date, as the case may be. Such Shares shall be delivered by or on behalf of the Company to the Representatives through the facilities of The Depository Trust Company (“DTC”), unless the Representatives shall otherwise instruct, for the account of such Underwriter, against payment by or on behalf of such Underwriter of the Purchase Price therefor. The Purchase Price payable by the Underwriters shall be reduced by (i) any transfer taxes or stamp duties paid by, or on behalf of, the Underwriters in connection with the transfer of the Shares to the Underwriters duly paid and (ii) any withholding required by law. It is being understood that under current law no such withholding is required.

 

 

3.            Covenants of the Company. The Company, in addition to its other agreements and obligations hereunder, hereby covenants and agrees with each Underwriter as follows:

 

(a)            Filings with the Commission. The Company will:

 

(i)             prepare and file the Final Prospectus (in a form approved by the Representatives and containing the Rule 430A Information) with the Commission in accordance with and within the time periods specified by Rules 424(b) and 430A under the Securities Act;

 

(ii)            file any Issuer Free Writing Prospectus with the Commission to the extent required by Rule 433 under the Securities Act; and

 

(iii)           file with the Commission such reports as may be required by Rule 463 under the Securities Act.

 

(b)            Notice to the Representatives. The Company will advise the Representatives promptly, and confirm such advice in writing:

 

(i)             when the Registration Statement has become effective;

 

(ii)            when the Final Prospectus has been filed with the Commission;

 

(iii)           when any amendment to the Registration Statement has been filed or becomes effective;

 

(iv)           when any Rule 462(b) Registration Statement has been filed with the Commission;

 

(v)            when any supplement to the Final Prospectus, any Issuer Free Writing Prospectus, or any amendment to the Final Prospectus has been filed with the Commission or distributed;

 

(vi)           of (x) any request by the Commission for any amendment or supplement to the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, or any Issuer Free Writing Prospectus, (y) the receipt of any comments from the Commission relating to the Registration Statement or (z) any other request by the Commission for any additional information;

 

(vii)          of (x) the issuance by any Governmental Entity (including the Commission) of any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus or (y) the initiation or threatening of any proceeding for that purpose or (z) the notice of proceedings pursuant to Section 8A of the Securities Act against the Company or related to this offering;

 

 

(viii)         of the occurrence of any event or development within the Prospectus Delivery Period as a result of which, the Final Prospectus, the Pricing Disclosure Package, any Issuer Free Writing Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Final Prospectus, the Pricing Disclosure Package, any such Issuer Free Writing Prospectus is delivered to a purchaser, not misleading; and

 

(ix)            of the receipt by the Company of any notice with respect to any suspension of the qualification of the Shares for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

 

(c)            Orders and Notices. The Company will use its commercially reasonable efforts to prevent the issuance of any order or notice described in Sections 3(b)(vii) or 3(b)(ix); and, if any such order or notice is issued, will use its best efforts to obtain the lifting or removal of such order or notice as soon as possible.

 

(d)            Ongoing Compliance.

 

(i)            If during the Prospectus Delivery Period:

 

(A)            any event or development shall occur or condition shall exist as a result of which it is necessary to amend or supplement the Final Prospectus so as not to include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Final Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to Section 3(e) hereof, file with the Commission and furnish, at its own expense, to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Final Prospectus so that the statements in the Final Prospectus as so amended or supplemented will not, in the light of the circumstances existing when the Final Prospectus is delivered (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) to a purchaser, be misleading; or

 

(B)            if in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Final Prospectus to comply with applicable law, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to Section 3(e) hereof, file with the Commission and furnish, at its own expense, to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Final Prospectus so that the Final Prospectus as amended or supplemented will comply with applicable law; and

 

 

(ii)            if at any time prior to the Closing Date or any Additional Closing Date, as the case may be:

 

(A)           any event or development shall occur or condition shall exist as a result of which it is necessary to amend or supplement the Pricing Disclosure Package so as to not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a prospective purchaser, not misleading, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to Section 3(e) hereof, file with the Commission and furnish, at its own expense, to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Pricing Disclosure Package so that the statements in the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a prospective purchaser, be misleading; or

 

(B)            if any event shall occur or condition shall exist as a result of which the Pricing Disclosure Package conflicts with the information contained in the Registration Statement then on file, or if in the opinion of counsel for the Underwriter, it is necessary to amend or supplement the Pricing Disclosure Package to comply with applicable law, and such conflict or discrepancy is not updated and corrected in the Final Prospectus, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to Section 3(e) hereof, file with the Commission and furnish, at its own expense, to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Pricing Disclosure Package so that the Pricing Disclosure Package as amended or supplemented will no longer conflict with the Registration Statement, or will comply with applicable law.

 

(e)            Amendments, Supplements and Issuer Free Writing Prospectuses. Before (i) using, authorizing, approving, referring to, distributing or filing any Issuer Free Writing Prospectus, (ii) filing (x) any Rule 462(b) Registration Statement or (y) any amendment or supplement to the Registration Statement, the Pricing Disclosure Package or the Final Prospectus, or (iii) distributing any amendment or supplement to the Registration Statement, the Pricing Disclosure Package or the Final Prospectus, the Company will furnish to the Representatives and counsel for the Underwriters a copy of the proposed Issuer Free Writing Prospectus, Rule 462(b) Registration Statement or other amendment or supplement thereto for review and will not use, authorize, approve, refer to, distribute or file any such Issuer Free Writing Prospectus or Rule 462(b) Registration Statement, or file or distribute any such proposed amendment or supplement thereto (A) to which the Representatives reasonably objects in a timely manner and (B) which is not in compliance with the Securities Act. The Company will, pursuant to reasonable procedures developed in good faith, retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission in accordance with Rule 433 under the Securities Act. The Company will file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any such supplements or amendments or prospectus as approved by the Representatives required to be filed pursuant to such Rule; provided that, the Company will not take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a Free Writing Prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.

 

 

(f)             Delivery of Copies. The Company will deliver, without charge, (i) to the Representatives, three signed copies of the Registration Statement as originally filed and each supplement and amendment thereto, in each case, including all exhibits and consents filed therewith, prior to [•] New York City time on the business day next succeeding the date of this Agreement; and (ii) to each Underwriter (A) a conformed copy of the Registration Statement as originally filed and each supplement and amendment thereto (without exhibits and consents) and (B) during the Prospectus Delivery Period, as many copies of the Pricing Disclosure Package and the Final Prospectus (including all amendments and supplements thereto or to the Registration Statement and each Issuer Free Writing Prospectus) as the Representatives may reasonably request; provided that, the delivery requirement shall not be applicable to any documents filed on EDGAR.

 

(g)            Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Shares within the meaning of the Securities Act and (ii) completion of the Lock-Up Period (as defined below).

 

(h)            Escrow Agreement. Concurrently with the execution and delivery of this Agreement, the Company will set up an escrow account with a third-party escrow agent approved by the Representatives in the United States and will fund such account with US$1,000,000 from this offering that may be utilized by the Underwriters to fund any indemnification claims of the Underwriters or other Indemnified Persons pursuant to Section 7 arising during the twelve (12) month period following the closing of the offering. The escrow account will be interest bearing, and the Company may, with prior written notice to the Representatives, invest the assets in low risk investments such as bonds, mutual funds and money market funds. All funds that are not subject to an indemnification claim will be returned to the Company after the applicable period expires. The Company will pay the reasonable fees and expenses of the escrow agent.

 

(i)             Earning Statement. The Company will make generally available to its security holders and the Representatives as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, but not limited to, Rule 158 under the Securities Act) covering a period of at least 12 months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158 under the Securities Act) of the Registration Statement; provided that the Company will be deemed to have furnished such statement to the Representatives to the extent they are filed on EDGAR.

 

 

(j)             Use of Proceeds. The Company shall apply the net proceeds from the sale of the Shares in the manner described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, unless otherwise permitted by applicable laws and regulations, and file such reports with the Commission with respect to the sale of the Shares and the application of the proceeds therefrom as may be required by Rule 463 under the Securities Act.

 

(k)            Clear Market.

 

(i)             For a period of one hundred and eighty (180) days after the effective date of the Registration Statement (the “Lock-Up Period”), the Company will not, without the prior written consent of the Representatives, (x) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, or (y) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any shares of Common Stock, whether any such transaction described in clause (x) or (y) above is to be settled by delivery of shares or such other securities, in cash or otherwise, or (c) file with the Commission any registration statement under the Securities Act relating to the offering of any shares, or any securities convertible into or exercisable or exchangeable for shares of Common Stock; provided that the Company may file one or more registration statements on Form S-8 with respect to any shares of Class A Common Stock issued or issuable pursuant to any stock option, or other stock plan or arrangement described in the Registration Statement, or (4) publicly disclose the intention to do any of the foregoing.

 

(ii)            The restrictions contained in Section 3(k)(i) hereof shall not apply to the offer and sale of the Shares hereunder, and the restrictions contained in Section 3(k)(i)(x) hereof shall not apply to shares of Common Stock issued pursuant to a Company equity plan described in the Registration Statement or in connection with a bona fide acquisition of another business or entity.

 

(iii)            If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in any Lock-Up Agreement (as defined below) for an officer or director of the Company and provide the Company with notice of the impending release or waiver in the form of Exhibit B hereto at least three business days before the effective date of the release or waiver, then the Company agrees to announce the impending release or waiver by a press release in the form of Exhibit C hereto through a major news service at least two business days before the effective date of the release or waiver.

 

(l)             No Stabilization or Manipulation. None of the Company, its subsidiaries, other Affiliates or any person acting on behalf of any foregoing persons(other than the Underwriters, as to which no covenant is given) will take, directly or indirectly, any action designed to or that would constitute or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any securities of the Company.

 

 

(m)           Investment Company Act. The Company shall not invest, or otherwise use the proceeds received by the Company from the sale of the Shares in such a manner (i) as would require the Company to register as an “investment company” (as defined in the Investment Company Act) under the Investment Company Act.

 

(n)            Transfer Agent. The Company shall engage and maintain, at its expense, a transfer agent and registrar for its shares of Class A Common Stock and shares of Class B Common Stock.

 

(o)            Reports. During the period when the Final Prospectus is required to be delivered under the Securities Act, the Company shall file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the rules and regulations of the Commission thereunder. For the period of three years from the date of this Agreement, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, copies of all reports or other communications (financial or other) furnished to holders of the Shares, and copies of any reports, financial statements, and definitive proxy statements furnished to or filed with the Commission or any national securities exchange or automatic quotation system, and from time to time as the Representatives may reasonably request, such other information concerning the Company; provided that the Company will be deemed to have furnished such reports and financial statements to the Representatives to the extent they are filed on EDGAR.

 

(p)            The Company agrees (1) to instruct its transfer agent and registrar not to give effect to any share transfers directly or indirectly by any shareholder during the Lock-up Period, unless with the prior written consent of the Representatives on behalf of the Underwriters.

 

(q)            Listing on Nasdaq. The Shares have been approved for listing on the Nasdaq Capital Market (“Nasdaq”), subject to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, terminating the listing of the Shares on Nasdaq nor has the Company received any notification that Nasdaq is contemplating revoking or withdrawing approval for listing of the Shares.

 

4.            [Reserved]

 

5.            Consideration; Expenses.

 

(a)            In consideration of the services to be provided for hereunder, the Company shall pay to the Representatives on behalf of the Underwriters of the following compensation with respect to the Shares that they are offering:

 

(i)             a commission equal to six-and-half percent (6.5%) of the aggregate gross proceeds received by the Company from the sale of the Shares in the offering (for the avoidance of doubt, the commission referenced herein has been applied to the price per share in Section 2(a)(iii) hereof and is not in addition thereof);

 

 

(ii)            a non-accountable expense allowance to be paid to US Tiger and EF Hutton equal to half percent (0.5%) of the aggregate gross proceeds received by the Company from the sale of the Shares in the offering; and

 

(iii)           an accountable expense allowance of US$416,500 of which US$[•] has been paid and the balance of US$[ ] shall be paid to the Representatives at the Closing to cover documented expenses pursuant to Section 5(b)(xii); provided, that the Company shall pay the accountable expense allowance regardless of whether the transactions contemplated by this Agreement are consummated or this Agreement is terminated. Notwithstanding the foregoing, any advance received by the Representatives will be returned to the Company to the extent not actually incurred pursuant to Section 5(b) in compliance with FINRA Rule 5110(f)(2)(C).

 

(b)            Company Expenses. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder, including, without limitation, (i) all expenses incident to the authorization, issuance, sale, preparation, transfer and delivery of the Shares (including all printing and engraving costs), (ii) all costs and expenses, including any issue, transfer, stamp and other similar taxes in connection with the authorization, issuance, sale, preparation, transfer and delivery of the Shares to the Underwriters, (iii) all fees, disbursements and expenses of the Company's counsel (including local, overseas and special counsel), independent public or certified public accountants and other advisors, (iv) all costs and expenses incurred in connection with the preparation, printing or reproduction, and filing with the Commission of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus, including, in each case, financial statements, schedules, exhibits, consents, amendments and supplements thereto, (v) all costs and expenses incurred in connection with the shipping and distribution (including postage, air freight charges and charges for packaging) of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus, including, in each case, financial statements, schedules, exhibits, consents, amendments and supplements thereto, as may, in each case, be reasonably requested by the Underwriters or dealers for use in connection with the offer and sale of the Shares, (vi) all fees and expenses incurred in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) the Shares for offer and sale under the securities laws of the several states of the United States or other jurisdictions as the Representatives may request and the preparation, printing, producing and distribution of a Blue Sky or legal investment memorandum, including but not limited to, filing fees, fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or legal investment memorandum, (vii) all fees and expenses (including fees and expenses of counsel) of the Company in connection with approval of the Shares by DTC for “book-entry” transfer, (viii) all costs and expenses and application fees related to the registration of the shares of the Company under the Exchange Act and the listing of the shares of the Company, including the Shares, on Nasdaq, (ix) all costs and expenses incurred by the Company in connection with any Road Show presentation to potential investors, including, without limitation, expenses associated with the preparation or dissemination of any electronic Road Show, expenses associated with the production of Road Show slides and graphics, expenses associated with hosting investor meetings or luncheons, fees and expenses of any consultants engaged in connection with the Road Show presentations, and travel, meals and lodging expenses of any such consultants and the Company’s representatives, and the cost of any aircraft chartered in connection with the Road Show, (x) the costs and charges of the transfer agent and the registrar for the share of the Company, (xi) all application fees, and fees, disbursements and expenses (up to US$40,000) of counsel for the Underwriters incurred in connection with any filing with, and clearance of the offering by FINRA; (xii) all reasonable fees and expenses incurred by the Underwriters, including the fees, expenses and disbursements of counsel for the Underwriters; such fees, expenses and disbursements of counsel for the Underwriters shall be capped in an amount not to exceed $125,000; (xiii) the cost of printing certificates representing the Shares, the document production charges and expenses associated with printing this Agreement, and (xiv) all other expenses incident to the performance by the Company of its other obligations under this Agreement.

 

 

6.            Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase the Firm Shares as provided herein on the Closing Date or the Option Shares as provided herein on any Additional Closing Date, as the case may be, shall be subject to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions:

 

(a)            Registration Compliance; No Stop Order.

 

(i)             The Registration Statement and any post-effective amendment thereto shall have become effective, no stop order suspending the effectiveness of the Registration Statement, any Rule 462 Registration Statement or any post-effective amendment thereto shall be in effect, and no proceeding for such purpose or pursuant to Section 8A of the Securities Act shall be pending before or threatened by the Commission.

 

(ii)            The Company shall have filed the Final Prospectus, any post-effective amendment and each Issuer Free Writing Prospectus with the Commission in accordance with and within the time periods prescribed by Section 3(a) hereof.

 

(iii)           The Company shall have (A) disclosed to the Representatives all requests by the Commission for additional information relating to the offer and sale of the Shares and (B) complied with such requests to the satisfaction of the Representatives.

 

 

 

(b)            Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct on the date hereof and on and as of the Closing Date or any Additional Closing Date, as the case may be; and the statements of the Company and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date or any Additional Closing Date, as the case may be.

 

(c)            Accountants' Comfort Letters; CFO Certificates. On the date of this Agreement and on the Closing Date or any Additional Closing Date, as the case may be, BDO USA LLP, independent public accountants, shall have furnished to the Representatives, letters dated the respective dates of delivery thereof and addressed to the Underwriters, in form and substance satisfactory to the Representatives, containing statements and information of the type customarily included in accountants’ “comfort letters” to Underwriters with respect to the financial statements and certain financial information contained in each of the Registration Statement, the Pricing Disclosure Package and the Final Prospectus.

 

On the Closing Date or any Additional Closing Date, as the case may be, the Company shall have furnished to the Representatives a certificate of the Company's chief financial officer, dated the respective dates of their delivery and signed by the chief financial officer and addressed to the Underwriters, with respect to certain operating and financial data contained in each of the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, providing “management comfort” with respect to such information, in form and substance satisfactory to the Representatives (attached as Exhibit D hereto).

 

(d)            FINRA Clearance. On or before the Closing Date, the Underwriters shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement. FINRA shall not have raised any objection with respect to the fairness or reasonableness of the underwriting, or other arrangements of the transactions contemplated hereby.

 

(e)            No Material Adverse Change. No event or condition of a type described in Section 1(k) hereof shall have occurred or shall exist, the effect of which in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares prior to or on the Closing Date or any Additional Closing Date, as the case may be, in the manner and on the terms contemplated by this Agreement, the Pricing Disclosure Package and the Final Prospectus.

 

(f)            Opinion and Negative Assurance Letter of U.S. Counsel to the Company. Davis Polk & Wardwell LLP, U.S. counsel to the Company, shall have furnished to the Representatives its (i) written opinion, addressed to the Underwriters and dated the Closing Date or any Additional Closing Date, as the case may be, and (ii) negative assurance letter, addressed to the Underwriters and dated the Closing Date or any Additional Closing Date, as the case may be, in each case, in form and substance satisfactory to the Representatives.

 

 

(g)            [Reserved]

 

(h)            [Reserved]

 

(i)             Secretary's Certificate. At each of the Closing Date and the Additional Closing Date, if any, the Representatives shall have received a certificate of the Company signed by the Secretary or Assistant Secretary of the Company (in the form attached as Exhibit F hereto), dated the Closing Date or the Additional Closing Date, as the case may be, respectively, certifying (i) that the Amended and Restated Certificate of Incorporation of the Company is true and complete, have not been modified and are in full force and effect, (ii) that the resolutions of the Company's Board of Directors relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified, (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the SEC, (iv) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Nasdaq, and (v) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.

 

(j)             Opinion and Negative Assurance Letter of Counsel to the Underwriters. Greenberg Traurig, LLP, counsel to the Underwriters, shall have furnished to the Representatives its (i) written opinion, addressed to the Underwriters and dated the Closing Date or any Additional Closing Date, as the case may be, and (ii) negative assurance letter, addressed to the Underwriters and dated the Closing Date or any Additional Closing Date, as the case may be, and the Company shall have furnished to such counsel such documents and information as such counsel may reasonably request to enable them to pass on such matters.

 

(k)            Reorganization Transactions. The Reorganization Transactions shall have been completed as described in the Pricing Prospectus and, as of the Closing Date: (i) the transaction documents in connection with the Reorganization Transactions shall have been executed and delivered and (ii) the Amended and Restated Certificate of Incorporation shall have been filed with the Secretary of the State of Delaware and shall be in full force and effect.

 

(l)             Officer's Certificate. The Representatives shall have received on and as of the Closing Date or any Additional Closing Date, as the case may be, a certificate (as Exhibit E hereto), dated such date, signed by a duly authorized executive officer of the Company who has specific knowledge of the Company's operating and financial matters and in form and substance satisfactory to the Representatives, in each case (i) confirming that such officer has carefully reviewed the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any post-effective amendment, and each Issuer Free Writing Prospectus and, the representations set forth in Sections 1(a)(ii), 1(b), 1(c)(i), 1(e)(i), and 1(e)(ii) and 1(h) hereof are true and correct on and as of the Closing Date or any Additional Closing Date, as the case may be; (ii) to the effect set forth in clause (i) of Section 1(k) and Section 6(e); and (iii) confirming that all of the other representations and warranties of the Company contained in this Agreement are true and correct on and as of the Closing Date or any Additional Closing Date, as the case may be, and that the Company has complied with all agreements and covenants and satisfied all other conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date or any Additional Closing Date, as the case may be.

 

 

(m)            No Legal Impediment to Issuance and Sale. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign Governmental Entity that would, as of the Closing Date or any Additional Closing Date, as the case may be, prevent the issuance, sale or delivery of the Shares by the Company; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date or any Additional Closing Date, as the case may be, prevent the issuance, sale or delivery of the Shares.

 

(n)            Good Standing. The Representatives shall have received on and as of the Closing Date and any Additional Closing Date, as the case may be, satisfactory evidence of the good standing (or the applicable equivalent thereof in the State of Delaware) of the Company and each of the Company's Subsidiaries in their respective jurisdictions of organization and their good standing in such other jurisdictions as the Representatives may reasonably request, in each case, in writing from the appropriate governmental authorities of such jurisdictions or, for any such jurisdiction in which evidence of good standing may not be obtained from appropriate governmental authorities, in the form of an opinion of counsel licensed in the applicable jurisdiction.

 

(o)            Lock-Up Agreements. The Lock-Up Agreements, in the form of Exhibit A hereto, executed by the individuals and entities listed on Schedule III, which consist of all directors, executive officers and all stockholders of the Company as of the date hereof, relating to sales and certain other dispositions of the Shares or certain other securities, delivered to the Representatives on or before the date hereof, shall be in full force and effect on the Closing Date or any Additional Closing Date, as the case may be.

 

(p)            Exchange Listing. On the Closing Date or any Additional Closing Date, as the case may be, the Shares shall have been approved for listing on Nasdaq, subject to only official notice of issuance.

 

(q)            If the Company elects to rely upon Rule 462(b) under the Securities Act, the Company shall have filed a Rule 462 Registration Statement with the Commission in compliance with Rule 462(b) promptly after [•], New York City time, on the date of this Agreement, and the Company shall have at the time of filing either paid to the Commission the filing fee for the Rule 462 Registration Statement or given irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Securities Act.

 

(r)            Additional Documents. On or prior to the Closing Date or any Additional Closing Date, as the case may be, the Representatives shall have received such information, opinions, certificates and other additional documents from the Company as they may reasonably require for the purpose of enabling them to pass upon the accuracy and completeness of any statement in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, the issuance and sale of the Shares as contemplated herein or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the covenants, closing conditions or other obligations, contained in this Agreement.

 

 

All opinions, letters, certificates and other documents delivered pursuant to this Agreement will be deemed to be in compliance with the provisions hereof only if they are satisfactory in form and substance to counsel for the Underwriters.

 

If any condition specified in this Section 6 is not satisfied when and as required to be satisfied, this Agreement and all obligations of the Underwriters hereunder may be terminated by the Representatives by notice to the Company at any time on or prior to the Closing Date or any Additional Closing Date, as the case may be, which termination shall be without liability on the part of any party to any other party, except that the Company shall continue to be liable for the payment of expenses under Section 5 and Section 10 hereof and except that the provisions of Section 7 and Section 8 hereof shall at all times be effective and shall survive any such termination.

 

7.            Indemnification.

 

(a)            Indemnification. The Company agrees to indemnify and hold harmless each Underwriter, its Affiliates, each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each director, officer, employee and agent of any of the foregoing (each an “Underwriter Indemnified Party,” collectively the “Underwriter Indemnified Parties”), from and against any and all losses, claims, damages and liabilities (including, without limitation, any and all legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), the Pricing Disclosure Package or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any Road Show, or the Final Prospectus or any amendment or supplement thereto, or (ii) any omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and reimburse each such Underwriter Indemnified Party for any legal or other out-of-pocket expenses incurred by such person in connection with any suit, action or proceeding or any claim asserted, whether or not such foregoing person is a party to any action or proceeding, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon, and in conformity with, any Underwriter information. The indemnity agreement set forth in this Section 7(a) shall be in addition to any liabilities that the Company may otherwise have.

 

 

(b)            Indemnification of the Company by the Underwriters. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, each officer who has signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any and all legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, to the same extent as the indemnity set forth in Section 7(a) hereof; provided, however, that each Underwriter shall be liable only to the extent that any untrue statement or omission or alleged untrue statement or omission was made in the Registration Statement (or any amendment or supplement thereto), any Pricing Disclosure Package (including any Pricing Disclosure Package that has subsequently been amended), the Final Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Road Show in reliance upon, and in conformity with, the Underwriter information relating to such Underwriter; it being understood and agreed that the only information furnished by the Underwriters to the Company in connection with the offering are their respective names. The indemnity agreement set forth in this Section 7(b) shall be in addition to any liabilities that each Underwriter may otherwise have.

 

(c)            Notifications and Other Indemnification Procedures. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to this Section 7, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 7 except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 7. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall notify the Indemnifying Person thereof, the Indemnifying Person shall retain counsel satisfactory to the Indemnified Person (which counsel shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person in such proceeding and shall pay all the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Indemnifying Person has failed within a reasonable time to assume the defense or retain counsel satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them; or (v) the Indemnified Person has incurred such fees and expenses of the counsel retained by it in connection with any regulatory investigation or inquiry. Any firm for (i) any Underwriter Indemnified Party shall be designated in writing by the Representatives; and (ii) the Company, its directors, its officers who have signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall be designated in writing by the Company. For the avoidance of doubt, the Indemnifying Person shall be liable for all the fees and expenses of one firm (in addition to local counsel, if any) representing all Indemnified Persons designated as provided in the preceding sentence, except as prohibited by applicable laws.

 

 

(d)            Settlements. The Indemnifying Person under this Section 7 shall not be liable for any settlement of any proceeding effected without its written consent, which consent may not be unreasonably withheld, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify the Indemnified Person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for any fees and expenses of counsel as contemplated by this Section 7, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request, (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement and (iii) such Indemnified Person shall have given the Indemnifying Person 30 days’ prior notice of its intention to settle. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, which consent may not be unreasonably withheld, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any Indemnified Person is or could have been a party and indemnity was or could have been sought hereunder by such Indemnified Person, unless such settlement, compromise or consent (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from and against all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include any statements as to or any admission of fault, culpability or failure to act by or on behalf of any Indemnified Person.

 

8.            Contribution. To the extent the indemnification provided for in Section 7 is unavailable to or insufficient to hold harmless an Indemnified Person in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each Indemnifying Person, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the aggregate amount paid or payable by such Indemnified Person, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person, on the one hand, and the Indemnified Person, on the other hand, from the offering of the Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Person, on the one hand, and the Indemnified Person, on the other hand, in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Shares pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discounts and commissions received by the Underwriters, on the other hand, in each case as set forth in the table on the cover of the Final Prospectus bear to the aggregate initial offering price of the Shares. The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

 

The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 7 hereof, any and all legal or other fees or expenses incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 7 hereof with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 8; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8 hereof for purposes of indemnification.

 

The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8.

 

Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter in connection with the Shares distributed by it exceeds the amount of any damages that such Underwriter has otherwise paid or been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ respective obligations to contribute pursuant to this Section 8 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule I hereto.

 

For purposes of this Section 8, each Affiliate, director, officer, employee and agent of an Underwriter and each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each director, and each officer of the Company who has signed the Registration Statement, and each person, if any, who controls the Company with the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company.

 

The remedies provided for in Section 7 and Section 8 hereof are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

 

 

The indemnity and contribution provisions contained in this Section 8 and Section 3(q) and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of (a) any Underwriter, its directors, officers, employees, any person controlling any Underwriter or any affiliate of any Underwriter, or (b) the Company, its officers or directors or any person controlling the Company, and (iii) acceptance of and payment for any of the Shares.

 

9.            Termination. Prior to the delivery of and payment for the Shares on the Closing Date or any Additional Closing Date, as the case may be, this Agreement may be terminated by the Underwriters by notice given to the Company if after the execution and delivery of this Agreement: (i) trading or quotation of any securities issued by the Company shall have been suspended or materially limited on any securities exchange, quotation system or in any over-the-counter market; (ii) trading generally on any of the New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Select Market, or other relevant exchanges or the over-the-counter market shall have been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other government authority; (iii) a general banking moratorium on commercial banking activities shall have been declared by federal or New York state,; (iv) there shall have occurred a material disruption in commercial banking or securities settlement, payment or clearance services in the United States; (v) there shall have occurred any outbreak or escalation of hostilities, or any change in the financial markets, currency exchange rates, or controls or any calamity or crisis or any change or development involving a prospective change in general economic, financial or political conditions that, as in the reasonable judgment of the Representatives is material and adverse and which, singly or together with any other event specified in this clause (v) makes it impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the Closing Date or any Additional Closing Date, as the case may be, in the manner and on the terms described in the Pricing Disclosure Package or Final Prospectus to enforce contracts for the sale of the Shares; (vi) the Company or any of its Subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the reasonable judgment of the Representatives may interfere materially with the conduct of the business and operations of the Company and its Subsidiaries, considered as one entity, regardless of whether or not such loss shall have been insured; (vii) there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package or the Final Prospectus, any Material Adverse Change of the Company, the Subsidiaries considered as one enterprise, whether or not in the ordinary course of business.

 

Any termination pursuant to this Section 9 shall be without liability on the part of: (x) the Company to the Underwriters, except that the Company shall continue to be liable for the payment of expenses under Section 5 hereof; (y) any Underwriter to the Company; or (z) any party hereto to any other party except that the provisions of Section 7 and Section 8 hereof shall at all times be effective and shall survive any such termination.

 

 

10.            Reimbursement of the Underwriters’ Expenses. If (a) the Company fails to deliver the Shares to the Underwriters for any reason at the Closing Date or any Additional Closing Date, as the case may be, in accordance with this Agreement or (b) the Underwriters decline to purchase the Shares for any reason permitted under this Agreement, then the Company agrees to reimburse the Underwriters for all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel to the Underwriters) incurred by the Underwriters in connection with this Agreement and the applicable offering contemplated hereby in accordance with Section 5 hereof.

 

11.            Representations and Indemnities to Survive Delivery. The respective indemnities, rights of contribution, agreements, representations, warranties, covenants and other statements of the Company and the several Underwriters set forth in or made pursuant to this Agreement or made by or on behalf of the Company or the Underwriters pursuant to this Agreement or any certificate delivered pursuant hereto shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, the Company or any of their respective officers or directors or any controlling person, as the case may be, and shall survive delivery of and payment for the Shares sold hereunder and any termination of this Agreement.

 

12.            Notices. All notices, requests, consents, claims, demands, waivers and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) when delivered by hand (with written confirmation of receipt), (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (iii) on the date sent by facsimile (with confirmation of transmission) or email of a PDF document if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient, or (iv) on the third day after the date mailed, by certified or registered mail (in each case, return receipt requested, postage pre-paid). Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12):

 

If to the Underwriters:	US Tiger Securities, Inc. 437 Madison Ave., 27th Floor New York, NY 10022 Email: Tony.Tian@ustigersecurities.com Attention: Tony Tian   EF Hutton, division of Benchmark Investments, LLC 590 Madison Avenue, 39th Floor New York, NY 10022 Email: dboral@efhuttongroup.com Attention: David W. Boral
with a copy to:	Greenberg Traurig, LLP 1750 Tysons Blvd., Suite 1000 McLean, Virginia Email: simonj@gtlaw.com Attention: Jason T. Simon, Esq.

 

 

If to the Company:	Snail, Inc. 12049 Jefferson Boulevard Culver City, CA 90230 Email: jimt@snailgamesusa.com Attention: Jim S. Tsai, CEO
with a copy to:	Davis Polk & Wardwell LLP 450 Lexington Avenue, New York, NY 10017 Email: byron.rooney@davispolk.com or john.runne@davispolk.com Attention: Byron B. Rooney, Esq. or John H. Runne, Esq.

 

Any party hereto may change the address or facsimile number for receipt of communications by giving written notice to the others in accordance with this Section 12.

 

13.            Parties at Interest; Successors.

 

(a)            The Agreement set forth has been and is made solely for the benefit of the Underwriters, the Company and to the extent provided in Section 7 and Section 8 hereof the controlling persons, partners, affiliates, directors, officers and employees referred to in such Sections and their respective successors, assignees, heirs, personal representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any rights under or by virtue of this Agreement.

 

(b)            This Agreement shall be binding upon the Underwriters, the Company and their successors and assignees and any successor or assignee of any substantial portion of the Company’s and any of the Underwriters’ respective business and/or assets. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the directors, officers, employees and affiliates of the Underwriters and each person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended, or shall be construed, to give any other person or entity any legal or equitable right, benefit, remedy or claim under, or in respect of or by virtue of, this Agreement or any provision contained herein. The term “successors,” as used herein, shall not include any purchaser of the Shares from any Underwriter merely by reason of such purchase.

 

14.            Authority of the Representatives. Any action by the Underwriters hereunder may be taken by the Representatives on behalf of the Underwriters, and any such action taken by the Representatives shall be binding upon the Underwriters.

 

 

 

15.            Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, subsection, paragraph or provision hereof. If any Section, subsection, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

16.            Governing Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement, whether sounding in contract, tort or statute, shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in such state (including its statute of limitations), without giving effect to the conflict of laws provisions thereof to the extent such principles or rules would require or permit the application of the laws of any jurisdiction other than those of the State of New York.

 

17.            Consent to Jurisdiction. No legal suit, action or proceeding arising out of or relating to this Agreement, the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, the offering of the Shares or the transactions contemplated hereby (each, a “Related Proceeding”) may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts (collectively, the “Specified Courts”) shall have jurisdiction over the adjudication of any Related Proceeding, and the parties to this Agreement hereby irrevocably consent to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any Specified Court (a “Related Judgment”), as to which such jurisdiction is non-exclusive) of the Specified Courts and personal service of process with respect thereto. The parties to this Agreement hereby irrevocably and unconditionally waive any objection to the laying of venue of any Related Proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any Specified Court that any Related Proceeding brought in any Specified Court has been brought in an inconvenient forum. The Company irrevocably appoints Puglisi & Associates as its agent to receive service of process or other legal summons for purposes of any Related Proceeding that may be instituted in any Specified Court in the City and County of New York, and agrees that service of process in any manner permitted by applicable law upon such agent shall be deemed in every respect effective service of process in any manner permitted by applicable law upon the Company in any Related Proceeding. The Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of seven years from the date of this Agreement.

 

18.            [Reserved]

 

19.            [Reserved]

 

20.            Waiver of Jury Trial. The parties to this Agreement hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any Related Proceeding.

 

 

21.            No Fiduciary Relationship. The Company acknowledges and agrees that: (i) the purchase and sale of the Shares pursuant to this Agreement, including the determination of the offering price of the Shares and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand; the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its Affiliates, shareholders, members, partners, creditors or employees or any other party; (iii) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement; (iv) the several Underwriters and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, and the several Underwriters have no obligation to disclose any of such interests or transactions to the Company by virtue of any agency, fiduciary or advisory relationship; and (v) the Underwriters have not provided any legal, accounting, regulatory or tax advice in any jurisdiction with respect to the offering contemplated hereby and the transactions contemplated under this Agreement, and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate. The Company waives and releases, to the fullest extent permitted by applicable law, any claims it may have against the Underwriters arising from breach of fiduciary duty or an alleged breach of fiduciary duty, and agrees that none of the Underwriters shall have any liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company in connection with the offering of the Shares or any matters leading up to the offering of the Shares.

 

22.            Compliance with the USA Patriot Act. In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of its clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

 

23.            Effectiveness; Defaulting Underwriters.

 

 (a)            This Agreement shall become effective upon the execution and delivery hereof by the parties hereto;

 

 

 (b)            If, on the Closing Date or any Additional Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth (10%) of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that, in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 23 by an amount in excess of one-ninth (1/9) of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth (10%) of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Firm Shares are not made within thirty six (36) hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case, either the Representatives or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Pricing Disclosure Package, in the Final Prospectus or in any other documents or arrangements may be effected. If, on an Additional Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Option Shares and the aggregate number of Option Shares with respect to which such default occurs is more than one-tenth (10%) of the aggregate number of Option Shares to be purchased on such Additional Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Option Shares to be sold on such Additional Closing Date or (ii) purchase not less than the number of Option Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

 

 (c)            If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for reasonable and documented out-of-pocket expenses (including the fees and disbursements of their counsel) incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.

 

24.            Entire Agreement. This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offer, sale and purchase of the Shares, represents the entire agreement among the Company and the Underwriters with respect to the preparation of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, each Preliminary Prospectus, each Issuer Free Writing Prospectus and each road show, the purchase and sale of the Shares and the offering of the Shares, and the conduct of the offering contemplated hereby.

 

 

25.            Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by all the parties hereto. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after the waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise of any other right, remedy power or privilege.

 

26.            Section Headings. The headings of the Sections herein are included for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

27.            Counterparts. This Agreement may be executed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be deemed an original and all of which together shall constitute one and the same agreement.

 

[signature page follows]

 

 

If the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided below.

 

	Very truly yours,
	Snail, Inc.
	By:
	Name:
	Title:

 

[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]

 

 

Confirmed and accepted as of the date first above written:
US Tiger Securities, Inc.
Acting on behalf of itself and as a Representative of the several Underwriters
By:
Name:
Title:

 

[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]

 

 

 

Confirmed and accepted as of the date first above written:

EF Hutton, division of Benchmark Investments, LLC

Acting on behalf of itself and as a Representative of the several Underwriters

By:
Name:
Title:

 

[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]

 

 

SCHEDULE I

 

Underwriters

 

Underwriter		Number of Firm Shares to Be Purchased		Number of Option Shares to Be Purchased if the Maximum Over-Allotment Option Is Exercised
US Tiger Securities, Inc.		[NUMBER]		[NUMBER]
EF Hutton, division of Benchmark Investments, LLC		[NUMBER]		[NUMBER]
Total:		[NUMBER]		[NUMBER]

 

 

Schedule II

 

Pricing Disclosure Package

 

 

Schedule III

 

List of Lock-Up Parties

 

Hai Shi
Jim S. Tsai
Heidy Chow
Peter Kang
Ying Zhou
Sandra Pundmann
Neil Foster
Olive Wood Global Development Limited
Amethyst Fortune Development Limited
Hua Yuan International Limited
Qianrong Capital Limited
Ancient Jade (East) Holdings Limited
Ferth Development limited

 

 

 

Exhibit A

 

Form of Lock-Up Agreement

 

US Tiger Securities, Inc. (“US Tiger”)

437 Madison Ave., 27th Floor

New York, NY 10022

 

EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”)

590 Madison Avenue, 39th Floor

New York, NY 10022

 

As Representatives of the several underwriters

 

Ladies and Gentlemen:

 

The undersigned understands that US Tiger Securities, Inc. and EF Hutton, division of Benchmark Investments, LLC (each the “Representative,” collectively the “Representatives”)  propose to enter into an underwriting agreement dated [•], 2022 (the “Underwriting Agreement”) with Snail, Inc., a Delaware corporation (the “Company”), providing for the initial public offering by the several underwriters (the “Underwriters”) in the United States (the “Initial Public Offering”) of a certain number of shares of Class A Common Stock, par value $0.0001 per share, of the Company (the “Securities”). For purposes of this letter agreement, “Shares” shall mean the Company’s shares of Class A Common Stock and shares of Class B Common Stock.

 

To induce the Underwriters to continue their efforts in connection with the Initial Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representatives on behalf of the Underwriters, during the period commencing on the date hereof and ending one hundred and eighty (180) days after the effective date of the Registration Statement (the “Lock-Up Period”), the undersigned will not (1) offer, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for or represent the right to receive Shares, whether now beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or hereafter acquired by the undersigned (collectively, the “Lock-Up Securities”); (2) enter into a transaction which would have the same effect, or any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) above or this clause (2) is to be settled by delivery of Shares or such other securities, in cash or otherwise; (3) make any written demand for or exercise any right with respect to the registration of any Shares or any security convertible into or exercisable or exchangeable for Shares; or (4) publicly disclose the intention to do any of the foregoing.

 

 

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Underwriters in connection with, as the case may be, (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Initial Public Offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of the Lock-up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy upon the death of the directors, officers or greater than 5% securityholders or to an immediate family member or trust for the benefit of the undersigned and/or one or more family members (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution or other not-for-profit organization; (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any such corporation, partnership, limited liability company or other business entity, or any shareholder, partner or member of, or owner of similar equity interests in, the same, as the case may be; (e) a sale or surrender to the Company of any share options or Shares of the Company underlying share options in order to pay the exercise price or taxes associated with the exercise of share options pursuant to the Company’s equity incentive plans which are outstanding as of the date of the Registration Statement, provided that such lock-up restrictions shall apply to any of the undersigned’s Shares issued upon such exercise; or (f) transfers or distributions pursuant to any bona fide third-party tender offer, merger, acquisition, consolidation or other similar transaction made to all holders of the Company’s Shares involving a Change of Control of the Company, provided that in the event that such tender offer, merger, acquisition, consolidation or other such transaction is not completed, the Lock-Up Securities held by the undersigned shall remain subject to the provisions of this lock-up agreement; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Underwriters a lock-up agreement in the form of this lock-up agreement and (iii) no filing under Section 16(a) of the Exchange Act of shall be voluntarily made (collectively, “Permitted Transfers”). For purposes of this paragraph, the term “Change of Control” shall mean any transaction or series of related transactions pursuant to which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Shares of the Company on a fully diluted basis. In addition, the undersigned agrees that, without the prior written consent of the Representatives on behalf of the Underwriters, the undersigned will not, during the Lock-up Period, make any demand for or exercise any right with respect to, the registration of any Shares or any securities convertible into or exercisable or exchangeable for the Shares. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.

 

The undersigned agrees that at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Underwriters will notify the Company of the impending release or waiver. Any release or waiver granted by the Underwriters hereunder to the Company or any of its officers or directors shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration or in connection with any other Permitted Transfer and (b) the transferee has agreed in writing to be bound by a lock-up agreement in the form of this lock-up agreement and for the duration such terms of this agreement remain in effect at the time of the transfer.

 

 

No provision in this agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Shares, as applicable; provided that the undersigned does not transfer the Shares acquired on such exercise, exchange or conversion during the Lock-Up Period, unless in connection with a Permitted Transfer or in a transfer otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period). Nothing in this Agreement shall be construed to prohibit or restrict the Company from filing a registration statement on Form S-8 covering shares of Class A Common Stock issuable pursuant to an equity incentive plan.

 

The undersigned understands that the Company and the Underwriters are relying upon this lock-up agreement in proceeding toward consummation of the Initial Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal Underwriters, successors and assigns.

 

The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, then this lock-up agreement shall be void and of no further force or effect.

 

Whether or not the Initial Public Offering actually occurs depends on a number of factors, including market conditions. The Initial Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 

This lock-up agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. The undersigned hereby submits to the exclusive jurisdiction of any court of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York over any suit, action or proceeding arising out of or relating to this agreement (each, a “Related Proceeding”). The undersigned irrevocably waives, to the fullest extent permitted by law, any objection which he or she or it may now or hereafter have to the laying of venue of any Related Proceeding brought in such a court and any claim that any such Related Proceeding brought in such a court has been brought in an inconvenient forum. Delivery of a signed copy of this lock-up agreement by facsimile or e-mail/.pdf transmission shall be effective as the delivery of the original hereof.

 

Terms used herein but not defined shall have the same meaning assigned to them as in the Underwriting Agreement.

 

[SIGNATURE PAGE TO FOLLOW]

 

 

Very truly yours,
(Signature)
Address:

 

 

Exhibit B

 

Form of Lock-Up Waiver

 

Snail, Inc.

 

[Name and Address of

The Company or Officer or Director

Requesting Waiver]

 

Dear [Name]:

 

This letter is being delivered to you in connection with the offering by Snail, Inc. (the “Company”) of [•] shares of Class A Common Stock of the Company, par value US$0.0001 per share, and the lock-up agreement dated [date], 2022 (the “Lock-Up Agreement”), executed by you in connection with such offering, and your request for a [waiver]/[release] dated [date], with respect to [number] shares of Class A Common Stock/ [number] shares of Class B Common Stock (the “Shares”).

 

The undersigned hereby agrees to [waive]/[release] the transfer restrictions set forth in the Lock-up Agreement, but only with respect to the Shares, effective [date]; provided, however, that such [waiver]/[release] is conditioned on the Company announcing the impending [waiver]/[release] by press release through a major news service at least two business days before effectiveness of such [waiver]/[release]. This letter will serve as notice to the Company of the impending [waiver]/[release].

 

Except as expressly [waived]/[released] hereby, the Lock-up Agreement shall remain in full force and effect.

 

 

	Yours very truly,
	US Tiger Securities, Inc.
	By:
	Name:
	Title:
	Yours very truly,
	EF Hutton, division of Benchmark Investments, LLC
	By:
	Name:
	Title:

 

 

Exhibit C

 

Form of Lock-Up Waiver Press Release

 

Snail, Inc.

 

[●]

 

Snail, Inc. (the “Company”) announced today that US Tigers Securities, Inc. and EF Hutton, division of Benchmark Investments, LLC, the joint book-running managers in the Company’s recent public sale of [•] shares of Class A Common Stock, are [waiving]/[releasing] a lock-up restriction with respect to [number] shares of Class A Common Stock/[number] shares of Class B Common Stock held by the [Company/certain officers/directors of the Company] (the “Shares”). The [waiver]/[release] will take effect on [date], and the Shares may be sold on or after such date.

 

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

 

Exhibit D

 

Certificate of the Company’s Chief Financial Officer

 

 

Exhibit E

 

Certificate of an Executive Officer of the Company

 

 

EXHIBIT F

 

Certificate of the Company’s Secretary

 

 

Exhibit G

 

Form of Underwriters’ Warrant

 

Exhibit 4.2

 

Form of Underwriter’s Warrant

 

THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES BY HIS, HER OR ITS ACCEPTANCE HEREOF, THAT SUCH HOLDER WILL NOT FOR A PERIOD OF one hundred and eighty (180) DAYS FOLLOWING THE date of commencement of sales of the offering PURSUANT TO THE REGISTRATION STATEMENT NO.: 333-267483 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION: (A) exercise, SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT TO ANYONE OTHER THAN (i) an underwriter or a selected dealer in connection with the offering, or (ii) bona fide OFFICERS OR PARTNERS OF any such underwriter or selected dealer, EACH OF WHOM SHALL HAVE AGREED TO THE RESTRICTIONS CONTAINED HEREIN, IN ACCORDANCE WITH FINRA (as defined below) CONDUCT RULE 5110(E)(1), or (B) CAUSE THIS PURCHASE WARRANT OR THE SECURITIES ISSUABLE HEREUNDER TO BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF THIS PURCHASE WARRANT OR THE SECURITIES HEREUNDER, EXCEPT AS PROVIDED FOR IN FINRA RULE 5110(E)(2).

 

VOID AFTER 5:00 P.M., EASTERN TIME, [•], 2025¹.

 

WARRANT

 

For the Purchase of [•]² Shares of Class A Common Stock

 

of

 

Snail, Inc.

 

1.        Warrant. THIS WARRANT (this “Warrant”) certifies that, pursuant to that certain underwriting agreement by and among Snail, Inc., a Delaware corporation (the “Company”), and US Tiger Securities, Inc. (“US Tiger”) and EF Hutton, a division of Benchmark Investments, LLC (“Hutton,” together with US Tiger, the “Representatives” and each, a “Representative”), dated [•], 2022 (the “Underwriting Agreement”), [name of holder] (in such capacity with its permitted successors or assignees, the “Holder”), as registered owner of this Warrant, is entitled, subject to Section 3 hereof, at any time or from time to time from [•], 2022 (the “Exercise Date”), and at or before 5:00 p.m., Eastern time, [•], 2025 (the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [•] shares (the “Shares”) of Class A common stock, par value $0.0001 per share, of the Company, subject to adjustment as provided in Section 5 hereof. If the Expiration Date is a day on which banking institutions are authorized by law or executive order to close, then this Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period commencing on the date hereof and ending on the Expiration Date, the Company agrees not to take any action that would terminate this Warrant. This Warrant is initially exercisable at $[•] per Share (125% of the initial public offering price of the Shares sold in the Offering); provided, however, that upon the occurrence of any of the events specified in Section 5 hereof, the rights granted by this Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the exercise price in effect at the date the Exercise Price is determined, after giving effect to any adjustment pursuant to Section 5. Any term not defined herein shall have the meaning ascribed thereto in the Underwriting Agreement.  

 

2.         Exercise.

 

2.1       Exercise Form. In order to exercise this Warrant, the exercise form attached hereto as Exhibit I (the “Exercise Form”) must be duly executed and completed and delivered to the Company, together with this Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check, subject to Section 2.2 below. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire. 

 

¹ Third anniversary of the effective date of the S-1.

² 4% of the number of shares being sold in the base offering.

 

 

2.2        Cashless Exercise. In lieu of exercising this Warrant by payment of cash or check payable pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Warrant (or the portion thereof being exercised), by surrender of this Warrant to the Company, together with the Exercise Form, in which event the Company shall issue to Holder, Shares in accordance with the following formula:

 

	X   =	Y (A – B)
		A

 

  Where,                  X   =      The number of Shares to be issued to Holder;

 

Y   =       The number of Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise;

 

A   =      The fair market value of one Share; and

 

B   =       The Exercise Price of this Warrant in effect on the date of exercise.

 

For purposes of this Section 2.2, the fair market value of one Share is defined as follows:

 

(i)           if the Company’s Shares are traded on a securities exchange, the value shall be deemed to be the last sale price on such exchange on the trading day immediately prior to the day on which the Exercise Form is submitted in connection with the exercise of this Warrant;

 

(ii)           if the Company’s Shares are quoted over-the-counter, the value shall be deemed to be the last sale price on the trading day immediately prior to the day on which the Exercise Form is submitted in connection with the exercise of the Warrant; provided, that if there is no reported sale on such date the average of the closing bid and asked prices, in each case as reported by OTC Markets Group or its successor; or

 

(iii)          if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.

 

2.3       Legend. Each certificate for the securities purchased under this Warrant shall bear a legend as follows unless such securities have been sold pursuant to a registration statement under the Securities Act of 1933, as amended (the “Act”):

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law which, in the opinion of counsel to the Holder, reasonably satisfactory to the Company, is available.”

 

3.       Transfer.

 

3.1       General Restrictions. The registered Holder of this Warrant agrees by his, her or its acceptance hereof, that such Holder will not for a period of one hundred and eighty (180) days following the date of commencement of sales of the offering (the “Commencement Date”): (a) exercise, sell, transfer, assign, pledge or hypothecate this Warrant to anyone other than: (i) an Underwriter or a selected dealer participating in the Offering contemplated by the Underwriting Agreement, or (ii) bona fide officers or partners of any such Underwriter or selected dealer, each of whom shall have agreed to the restrictions contained herein, in accordance with FINRA Rule 5110(e)(1), and (b) cause this Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(e)(2). On and after the expiration of the one hundred and eighty (180) days following the Commencement Date (such period, the “Lock-Up Period”), transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto as Exhibit B duly executed and completed, together with this Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Warrant on the books of the Company and shall execute and deliver a new Warrant or Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

 

 

3.2       Restrictions Imposed by the Act. The securities evidenced by this Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder reasonably satisfactory to the Company that the securities may be transferred pursuant to an exemption from registration under the Act and applicable state securities laws, or (ii) a registration statement relating to the offer and sale of such securities that includes a current prospectus has been filed and declared effective by the Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.

 

4.         New Warrants to be Issued.

 

4.1       Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Warrant for cancellation, together with the duly executed exercise or assignment form (as attached hereto) and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereof, the Company shall cause to be delivered to the Holder without charge a new Warrant of like tenor to this Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Warrant has not been exercised or assigned.

 

4.2       Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

 

5.        Adjustments.

 

5.1       Adjustments to Exercise Price and Number of Shares. The Exercise Price and the number of Shares underlying this Warrant shall be subject to adjustment from time to time as hereinafter set forth:

 

5.1.1       Dividends paid in Shares; Split Ups. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding shares, and the Exercise Price shall be proportionately decreased.

 

5.1.2       Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding shares is decreased by a consolidation, combination, reverse stock split or reclassification of shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares, and the Exercise Price shall be proportionately increased.

 

5.1.3       Replacement of Shares upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares other than a change covered by Section 5.1.1 or Section 5.1.2 hereof or that solely affects the par value of such shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Warrant shall have the right thereafter (until the expiration of the right of exercise of this Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 5.1.1 or Section 5.1.2, then such adjustment shall be made pursuant to Section 5.1.1, Section 5.1.2 and this Section 5.1.3. The provisions of this Section 5.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

 

 

5.1.4       Changes in Form of Warrant. This form of Warrant need not be changed because of any change pursuant to this Section 5.1, and Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the date hereof or the computation thereof.

 

5.2       Substitute Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder an amendment to this Warrant that provides that the Holder of this Warrant, to the extent outstanding, shall have the right thereafter (until the stated expiration of this Warrant) to receive, upon exercise of such Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a Holder of the number of Shares of the Company or other securities of the successor to the Company, as the case may be, for which such Warrant might have been exercised immediately prior to the effective time of such consolidation, share reconstruction or amalgamation, sale or transfer. Such amendment to this Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 5. The above provision of this Section 5 shall similarly apply to successive consolidations or share reconstructions or amalgamations. 

 

5.3       Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Warrant. As to any fraction of a Share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the fair market value as of the date of exercise pursuant to Section 2.1 or Section 2.2, as applicable, or round up to the next whole Share. 

 

6.       Registration Rights. The Company has filed the Registration Statement on Form S-1 (File No. 333-267483) with the Commission, which has been declared effective, and registers the underlying Shares of the Warrant(s) granted to the Holder(s) in connection with the Offering, under the terms of the Underwriting Agreement.

 

6.1       Demand Registration.

 

6.1.1       Grant of Right. Unless all of the Registrable Securities (defined as below) are included in an effective registration statement with a current prospectus, the Company, upon written demand (“Demand Notice”) of the Holder(s) of at least 51% of the Warrants issued and outstanding as the date hereof and/or the related underlying Shares (“Majority Holder(s)”), agrees to register on up to two occasions, all or any portion of the outstanding Registrable Securities (as defined below) as requested by the Majority Holder(s) in the Demand Notice (each such registration, a “Demand Registration”). On each such occasion, the Company will file a new registration statement or a post-effective amendment to the Registration Statement covering the Registrable Securities within sixty (60) days after receipt of the Demand Notice and use its best efforts to have such registration statement or post-effective amendment declared effective as soon as possible thereafter. The demand for registration may be made at any time after the Commencement Date, but no later than five (5) years therefrom. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Underwriter’s Warrants and/or the Registrable Securities within ten (10) days from the date of the receipt of any such Demand Notice, who shall have five (5) days from the receipt of such Notice in which to notify the Company of their desire to have their Registrable Securities included in the registration statement.

 

 

6.1.2       Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities upon the first Demand Notice, including the reasonable expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities, but the Holders shall pay any and all underwriting or brokerage commissions and other selling expenses, if any. The Holders shall bear all fees and expenses attendant to registering the Registrable Securities upon the second Demand Notice, if any. The Company agrees to use its best efforts to cause any filings required herein to become effective as promptly as possible and to qualify or register the Registrable Securities in such States as are reasonably requested by the Majority Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause (i) the Company to be obligated to qualify to do business in such State or execute a general consent to service of process, or (ii) the principal shareholders of the Company to be obligated to escrow their shares of the Company. The Company shall cause any registration statement or post-effective amendment filed pursuant to the demand rights granted under Section 6.1.1 to remain effective for a period of twelve (12) consecutive months from the effective date of such registration statement or post-effective amendment or until the Holders have completed the distribution of the Registrable Securities included in such registration statement, whichever occurs first. 

 

6.2       “Piggy-Back” Registration. 

 

6.2.1       Grant of Right. Unless all of the Registrable Securities are included in an effective registration statement with a current prospectus, the Holders of the Underwriter’s Warrants shall have the right for a period of not more than three (3) years from the expiration of the Lock-Up Period, to include the remaining Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or S-4 or any successor or equivalent form); provided, however, that if, in the opinion of the Company’s managing underwriters or underwriters, if any, for such offering, the inclusion of the Registrable Securities, when added to the securities being registered by the Company or the selling shareholder(s), will exceed the maximum amount of the Company’s securities which can be marketed (i) at a price reasonably related to their then current market value, and (ii) without materially and adversely affecting the entire offering, then the Company will still be required to include the Registrable Securities, but may require the Holders to agree, in writing, to delay the sale of all or any portion of the Registrable Securities for a such period, not to exceed one hundred eighty (180) days from the effective date of the offering as the managing underwriters or underwriters may require, provided, further, that if the sale of any Registrable Securities is so delayed, then the number of securities to be sold by each Holder of the Registrable Securities in such public offering shall be made pro rata among them, in proportion to the total amount of securities of the Company owned by said Holders seeking to include Registrable Securities; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such registration statement or are not entitled to pro rata inclusion with the Registrable Securities.

 

 

6.2.2       Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, including the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities, but the Holders shall pay any and all underwriting or brokerage commissions and other selling expenses, if any. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than ten (10) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each applicable registration statement filed (during the period in which the Underwriter’s Warrant is exercisable) by the Company until such time as all of the Registrable Securities have been registered and sold. The Holders of the Registrable Securities shall exercise the “piggy back” rights provided for herein by giving written notice, within seven (7) business days of the receipt of the Company’s notice of its intention to file a registration statement. The Company shall use its best efforts to cause any registration statement filed pursuant to the above “piggyback” rights that does not relate to a firm commitment underwritten offering to remain effective for at least nine (9) consecutive months from the effective date of such registration statement or until the Holders have completed the distribution of the Registrable Securities in the registration statement, whichever occurs first. Except as otherwise provided in this Warrant, there shall be no limit on the number of times the Holders may request registration under this Section 6.2.2.

 

6.3       General Terms.

 

6.3.1       Registrable Securities. For purposes of this Section 6, the term “Registrable Securities” shall mean the Shares underlying the Warrants, provided, however, that such securities shall cease to be Registrable Securities when: (i) the date that such securities shall have been sold, transferred, disposed of or exchanged in accordance with an effective registration statement; (ii) such securities may otherwise be transferred, new certificates or book entries credits for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Act; or (iii) such securities shall have ceased to be outstanding.

 

6.3.2       Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 7(a) of the Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assignees, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holder(s), or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 7(b) of the Underwriting Agreement.

 

6.3.3       Exercise of Warrants. Unless a registration statement with a current prospectus relating to the issuance of the Shares issuable upon the exercise of this Warrant has been filed and declared effective, the Warrants shall only be exercisable on a “cashless basis” pursuant to subsection 2.2. Nothing contained in this Warrant shall be construed as requiring the Holder(s) to exercise their Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

 

6.3.4       Documents Delivered to Holders. The Company shall deliver as promptly as possible to each Holder participating in the offering and to the managing underwriter(s), if any, upon request of the Holder, the following correspondence and memoranda relating to the offering: copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement. The Company shall permit each Holder and the underwriter(s), if any, to do such investigation upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request in connection with the underwritten offering.

 

 

6.3.5       Documents to be Delivered by Holder(s). It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Section 6 that each Holder participating in the Offering shall furnish to the Company in a timely manner such information regarding such Holder, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request In furtherance of the foregoing, each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.

 

6.3.6       Damages. Should the registration or the effectiveness thereof required by Section 6.1 and Section 6.2 hereof be delayed by the Company or the Company otherwise fail to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security. 

 

7.       Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of this Warrant, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of this Warrant and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as this Warrant shall be outstanding, the Company shall use its best efforts to cause all Shares issuable upon exercise of this Warrant to be listed (subject to official notice of issuance) on a national securities exchange (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the offering may then be listed and/or quoted.

 

8.       Certain Notice Requirements.

 

8.1       Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books (the “Notice Date”) for the determination of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is given to the shareholders.

 

8.2       Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.

 

8.3       Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 5 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.

 

  

8.4       Transmittal of Notices. All notices, requests, consents and other communications under this Warrant shall be in writing and shall be deemed to have been duly made (1) when hand delivered, (2) when mailed by express mail or private courier service, (3) if sent by electronic mail, on the day the notice was sent if during regular business hours and, if sent outside of regular business hours, on the following business day, or (4) when the event requiring notice is disclosed in all material respects and filed in a Current Report on Form 8-K prior to the Notice Date: (i) if to the registered Holder of the Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:

 

If to the Holder:

 

US Tiger Securities, Inc.

437 Madison Ave., 27th Floor

New York, NY 10022

Attention: Tony Tian

Email: Tony.Tian@ustigersecurities.com

 

EF Hutton, division of Benchmark Investments, LLC

590 Madison Avenue, 39th Floor

New York, NY 10022

Attention: David W. Boral

Email: dboral@efhuttongroup.com

 

with a copy (which shall not constitute notice) to:

 

Greenberg Traurig, LLP

1750 Tysons Blvd, Suite 1000

McLean, VA 22102

Attention: Jason Simon, Esq.

Email: Jason.Simon@gtlaw.com

  

If sent to the Company, shall be mailed, delivered, or emailed, to the Company:

 

Snail, Inc.

12049 Jefferson Boulevard

Culver City, CA 90230

Attention: Jim S. Tsai, CEO

Email: jimt@snailgamesusa.com

 

with a copy (which shall not constitute notice) to the Company’s Counsel at:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Attention: Byron B. Rooney, Esq. or John H. Runne, Esq.

Email: Byron.rooney@davispolk.com or john.runne@davispolk.com

 

9.       Miscellaneous.

 

9.1       Amendments. The Company and the Representatives may from time to time supplement or amend this Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Representatives may deem necessary or desirable and that the Company and the Representatives deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.

 

9.2       Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Warrant.

 

9.3       Entire Agreement. This Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Warrant to the extent provided in this Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

9.4       Binding Effect. This Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees and respective successors and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Warrant or any provisions herein contained.

 

  

9.5       Governing Law; Submission to Jurisdiction. This Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Warrant shall be brought and enforced in the Borough of Manhattan in The City of New York (each, a “New York Court”), and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the Holder and the Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company or the Holder may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at their respective addresses set forth in Section 8.4 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company or the Holder in any action, proceeding or claim.

 

9.6       Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

 

9.7       Exchange Agreement. As a condition of the Holder’s receipt and acceptance of this Warrant, Holder agrees that, at any time prior to the complete exercise of this Warrant by Holder, if the Company and the Representatives (to the extent that they and their affiliates (as defined by the United States securities laws) are Holders of Warrants) enter into an agreement (“Exchange Agreement”) pursuant to which they agree that all outstanding Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.

 

9.8       Restrictions. The Holder acknowledges that the Shares acquired upon the exercise of this Warrant, if not registered, and if the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

9.9       Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant.

 

 [ Remainder of Page Intentionally Left Blank ]

 

  

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2022.

 

SNAIL, Inc.
By:
	Name: Title:

 

[SIGNATURE PAGE TO WARRANT]

 

 

EXHIBIT I

EXERCISE FORM

 

Form to be used to exercise Warrant:

 

Date: __________, 20_____

 

The undersigned hereby elects irrevocably to exercise the Warrant for ______ shares (the “Shares”) of Class A common stock of Snail, Inc., a Delaware corporation (the “Company”), and hereby makes payment of $____ (at the price of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Warrant is exercised in accordance with the instructions given below and, if applicable, a new Warrant representing the number of Shares for which this Warrant has not been exercised.

 

or

 

The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares under the Warrant for ______ Shares, as determined in accordance with the following formula:

 

		X    =	Y(A-B)
			A
	Where,

X   =      The number of Shares to be issued to Holder;

 

Y   =      The number of Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise;

 

A   =      The fair market value of one Share (as determined pursuant to Section 2.2 of the Warrant); and

 

B   =       The Exercise Price of this Warrant in effect on the date of exercise

 

The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.

 

Please issue the Shares as to which this Warrant is exercised in accordance with the instructions given below and, if applicable, a new Warrant representing the number of Shares for which this Warrant has not been exercised.

 

Signature:

 

Signature Guaranteed:

 

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

 

Name:

(Print in Block Letters)

 

Address:

 

NOTICE: The signature to this form must correspond with the name as written upon the face of the Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

  

  

EXHIBIT II

ASSIGNMENT FORM

 

Form to be used to assign Warrant:

 

(To be executed by the registered Holder to effect a transfer of the within Warrant):

 

FOR VALUE RECEIVED,                                                                       does hereby sell, assign and transfer unto the right to purchase shares of Class A common stock of Snail, Inc., a Delaware corporation (the “Company”), evidenced by the Warrant and does hereby authorize the Company to transfer such right on the books of the Company to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

Dated:  ____________, 20__

  

 

Holder’s Signature: _____________________________

 

Holder’s Address:   _____________________________

 

_____________________________

 

Signature Guaranteed: ___________________________________________

 

NOTICE: The signature to this form must correspond with the name as written upon the face of the within Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

  

 

 

EXHIBITS 5.1 AND 23.2

 

Davis Polk & Wardwell llp 450 Lexington Avenue New York, NY 10017 davispolk.com

 

OPINION OF DAVIS POLK & WARDWELL LLP

 

October 17, 2022

 

Snail, Inc.
12049 Jefferson Boulevard
Culver City, CA 90230  

 

Ladies and Gentlemen:

 

Snail, Inc., a Delaware corporation (the “Company”), has filed with the Securities and Exchange Commission a Registration Statement on Form S-1 (the “Registration Statement”) and the related prospectus (the “Prospectus”) for the purpose of registering under the Securities Act of 1933, as amended (the “Securities Act”), the issuance of up to (i) 5,750,000 shares of Class A common stock, par value $0.0001 per share (the “Shares”), including 750,000 shares of Class A common stock subject to the Underwriters’ over-allotment option (ii) warrants to purchase 200,000 shares of Class A common stock (the “Warrants”) issuable upon the exercise of the Warrants and (iii) 200,000 shares of Class A common stock issuable upon the exercise of the Warrants (the “Warrant Shares”), each as described in the Registration Statement.

 

We, as your counsel, have examined originals or copies of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion.

 

In rendering the opinion expressed herein, we have, without independent inquiry or investigation, assumed that (i) all documents submitted to us as originals are authentic and complete, (ii) all documents submitted to us as copies conform to authentic, complete originals, (iii) all signatures on all documents that we reviewed are genuine, (iv) all natural persons executing documents had and have the legal capacity to do so, (v) all statements in certificates of public officials and officers of the Company that we reviewed were and are accurate and (vi) all representations made by the Company as to matters of fact in the documents that we reviewed were and are accurate.

 

Based upon the foregoing, and subject to the additional assumptions and qualifications set forth below, we advise you that, in our opinion:

 

	1.	When the price at which the Shares to be sold has been approved by or on behalf of the Board of Directors of the Company and when the Shares have been issued and delivered against payment therefor in accordance with the terms of the underwriting agreement referred to in the Prospectus, the Shares will be validly issued, fully paid and non-assessable.
	2.	When the Warrants are issued and delivered in accordance with the terms of the underwriting agreement referred to in the Prospectus, the Warrants will be valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability; provided that we express no opinion as to the validity, legally binding effect or enforceability of any provision in the Warrants that requires or relates to adjustments to the exercise price at a price or in an amount that a court would determine in the circumstances under applicable law to be commercially unreasonable or a penalty or forfeiture.

 

 

Snail, Inc.

 

3.

When the Warrants are issued and delivered in accordance with the terms of the underwriting agreement referred to in the Prospectus, the Warrant Shares, when issued and paid for upon exercise of the Warrants in accordance with their terms, will be validly issued, fully paid and non-assessable.

 

In connection with the opinions expressed above, we have assumed (i) the filing of the Amended and Restated Certificate of Incorporation (in the form filed as Exhibit 3.1 to the Registration Statement) with the Secretary for the State of Delaware and the effectiveness thereof under Delaware Law and (ii) the adoption of the Amended and Restated Bylaws of the Company (in the form filed as Exhibit 3.2 to the Registration Statement), each at or prior to the time of delivery of the Shares and the Warrants.

 

We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware.

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and further consent to the reference to our name under the caption “Legal Matters” in the Prospectus. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.

 

Very truly yours,

 

/s/ Davis Polk & Wardwell LLP

 

 

Exhibit 10.5

 

EXCLUSIVE SOFTWARE LICENSE AGREEMENT

 

THIS EXCLUSIVE SOFTWARE LICENSE AGREEMENT (this “Agreement”) is effective as of April 27, 2022 (the “Effective Date”), by and between SDE Inc., corporation organized under the laws of California and having its principal place of business at 200 E. Sandpointe Avenue, Suite 600, Santa Ana, CA 92707 (“Licensor”), and Snail Games USA Inc., a corporation organized under the laws of California and having its principal place of business at 12049 Jefferson Blvd., Culver City, CA 90230 (“Licensee”). Each of Licensor and Licensee may be individually referred to herein as a “Party” and collectively as the “Parties”.

 

W I T N E S S E T H:

 

WHEREAS, Licensor, through one or more of its Subsidiaries, is currently developing the Game (as defined herein), and expects the development to be completed within calendar year 2022;

 

WHEREAS, Licensee has the requisite expertise and resources to publish, distribute and sell the products similar to the Game throughout the world;

 

WHEREAS, Licensee desires to obtain from Licensor, and Licensor is willing to grant to Licensee, an exclusive license to publish, distribute or sell the Game in the Territory (as defined herein), on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Licensee has agreed to pay certain Advance Payments (as defined herein) to Licensor in connection with the rights being granted to Licensee hereunder.

 

NOW, THEREFORE, in consideration of the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

Article 1
Definitions

 

Section 1.01.         Definitions. (a) The following terms, as used herein, have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person, whether now or in the future. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

 

“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

 

 

“Business Day” means a day on which commercial banks are open for business in Los Angeles, California, U.S.

 

“Bug” means any defect of design or bug in the Game which prevents it from performing in accordance with the specifications and expectations of a reasonable End User, or a malfunction in the software of the Game that degrades the experience of the End User, including such defects or bugs. As used herein, “Emergency Bugs” refers to Bugs which have a severe impact on the balanced experience of the Game for End Users (such as farming), and “General Bugs” refers to all other Bugs.

 

“Closed Beta” means a version of the Game released to a selected group of individuals, for free, the release of which is intended to (i) test the stability and compatibility of Client Software and Server Software and (ii) help further develop the Game.

 

“Commercial Release Date” means the date, no earlier than the Early Access Date, upon which the Game is released on a commercial basis for End Users to download and play, as such date is determined by Licensee in its sole and absolute discretion.

 

“Derivative ARK Game” means any game (other than the Game) subsequently developed by Licensor, which is based upon or relating to the “ARK2” creative universe.

 

“DLC” means optional downloadable additional content (such as a game add-on or in-game items) which may be offered to an End User for a fee.

 

“Early Access Date” means the date End Users are allowed to download and play beta version of the Game, as such date is determined by Licensee in its sole discretion.

 

“End User” means an individual or entity who enters into an end user agreement with respect to the Game that permits such individual or entity to rightfully play the Game.

 

“Error” means any software error, such as logic errors, in the Game that may result in incorrect on unexpected behavior, and includes any Bug.

 

“Force Majeure Event” means an event beyond a Party’s reasonable control that affects such Party’s ability to fulfill or perform any term of this Agreement including (i) strikes, lockouts or other labor difficulties; (ii) fires, floods, acts of God, extremes of weather, earthquakes, tornadoes, or similar occurrences; (iii) riot, insurrection or other hostilities; (iv) embargo; (v) fuel or energy shortages; (vi) delays by unaffiliated suppliers or carriers; (vii) inability to obtain necessary labor, materials or utilities; or (viii) any epidemic, pandemic or disease outbreak (including COVID-19) or worsening thereof.

 

 

“Game” means any and all versions of the software product “ARK2”, in any and all languages, including (i) downloadable software that is required to be installed on a suitable computer for an End User to play such software product (“Client Software”), (ii) software installed by Licensor on a server designated by Licensee to process code and data in order to enable an End User to play such software product (“Server Software”), (iii) text files in all languages contained in the such software product (“Text File”), (iv) DLC related to such software product, (v) any additional or derivative content created for such software product by Licensor and (vi) any content created by End Users for such software product, to the extent Licensor or Licensee has rights to such content under their agreements with such End Users.

 

“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

 

“Intellectual Property Rights” means any and all intellectual property rights or similar proprietary rights throughout the world, including any and all (i) trademarks, service marks, certification marks, logos, trade names, trade dress, domain names and other indications of origin, including all registrations and applications for registration of, and all goodwill associated with, any of the foregoing (“Trademarks”); (ii) copyrights and registrations and applications for registration thereof; (iii) trade secrets, know-how and other confidential or proprietary information (including processes, techniques and research and development information); (v) database rights, publicity rights and privacy rights and (v) rights to assert, claim or sue and collect damages, losses and expenses for the past, present or future infringement, misappropriation or other violation of any of the foregoing.

 

“Open Beta” means a version of the Game released to the public, for free, the release of which is intended to (i) test the stability and compatibility of Client Software and Server Software and (ii) help further develop the Game.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

 

“Peripheral Products” means any and all non-software products intended for promotional purposes, including toys, clothes, gifts, ornaments, books, cartoons, movies and souvenirs, but expressly excluding stamps.

 

“Platform” means any online software platform that distributes video games and content to End Users including Steam, Epic Games, Xbox and PlayStation.

 

“Subsidiary” means, with respect to any Person, any other Person of which a majority of the outstanding shares or the other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the first Person.

 

“Territory” means worldwide.

 

 

“Total Revenue” means any and all revenue earned by Licensee by publishing, distributing and selling the Game (excluding any value-added tax) including any and all (i) revenue earned by

 

Licensee by selling in-game virtual items and currency to End Users, (ii) revenue earned by Licensee by selling Peripheral Products, (iii) revenue earned by Licensee by charging End Users for downloads of the Game, (iv) revenue share from Platforms that were approved by Licensee and (v) cash received from Platforms in consideration for the publication of the Game on such Platform.

 

(b)

Each of the following terms is defined in the Section set forth opposite such term:

 

Term	Section
Action	‎Section 9.02
Affected Party	‎Section 10.01
Agreement	Preamble
Bona Fide Offeror	‎Section 8.01(a)
Confidential Information	‎Section 6.01
Confidential Material	‎Section 6.03
Derivative ARK Game Notice	‎Section 8.02(a)
Derivative ARK Game License Agreement	‎Section 8.02(b)
Disclosing Party	‎Section 6.02
Effective Date	Preamble
Election Period	‎Section 8.01(b)
Game License	‎Section 2.01
Initial Term	‎Section 5.01
Licensee	Preamble
Licensee Indemnitees	‎Section 7.03
Licensee Obligations	‎Section 3.01
Licensor	Preamble
Licensor Obligations	‎Section 3.02
Offered Interests	‎Section 8.01(a)
Party	Preamble
Peripheral Products License	‎Section 2.01(b)
Proposed Price	‎Section 8.01(a)
Proposed Purchaser	‎Section 8.01(a)
Proposed Terms	‎Section 8.01(a)
Receiving Party	‎Section 6.02
Related Parties	‎Section 6.02
Renewal Term	‎Section 5.01
Royalty Payment	‎Section 4.02
Sale Notice	‎Section 8.01(a)
Settlement Process	‎Section 4.06
Term	‎Section 5.01
Third Party Infringement	‎Section 9.01

 

 

Section 1.02.         Interpretation.

 

(a)

The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(b)

The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

(c)

References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified.

 

(d)

Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.

 

(e)

Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.

 

(f)

“Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.

 

(g)

References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations.

 

(h)

References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

 

(i)

References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 

(j)

References to one gender include all genders.

 

(k)

References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law.

 

Article 2
License and Intellectual Property

 

Section 2.01.         License Grant. (a) Licensor hereby grants to Licensee an exclusive, sublicensable license to use, operate, service (including by way of server maintenance), distribute, offer, sell, charge fees for, market, reproduce, advertise, promote, publish or otherwise commercialize the Game (and any and all Intellectual Property Rights therein), during the Term, within the Territory (such license, the “Game License”). In furtherance of the foregoing, Licensor hereby authorizes Licensee to establish the Early Access Date and the Commercial Release Date for the Game, as determined by Licensee in Licensee’s sole discretion.

 

 

(b)

Licensor hereby grants to Licensee an exclusive, sublicenseable license to manufacture, distribute, offer, sell, charge fees for, market, advertise, and promote Peripheral Products related to the Game, during the Term, within the Territory (such license, the “Peripheral Products License”). Notwithstanding the foregoing, Licensee shall not distribute Peripheral Products without the prior written consent of Licensor.

 

(c)

For purposes of this ‎Section 2.01, “exclusive” shall mean that Licensor shall not grant any applicable rights to any Person or itself exercise such rights during the Term.

 

Section 2.02.         Trademark Rights. Licensee shall be permitted to (a) to register and maintain Trademarks related to the Game, and (b) perform any localization necessary in different jurisdictions in order to apply for any trademark registrations in such jurisdictions.

 

Article 3
Obligations

 

Section 3.01.         Publication Obligations. As between the Parties, Licensee shall perform the following, at its own cost (collectively referred to herein as the “Licensee Obligations”):

 

(a)

Licensee shall set up the servers necessary to publish the Game, or shall assign such obligations to a third party consistent with Licensee’s obligations set forth in this Agreement (it being understood that the Parties shall discuss in good faith the server setup whenever necessary in order to facilitate the user experience consistent with past practice);

 

(b)

Licensee shall build a website for the purpose of advertising and marketing the Game and shall advertise and market the Game on such website and Licensee’s social media (it being understood that, as between the Parties, Licensee shall have sole and exclusive ownership in respect of any right, title or interest in or to such website);

 

(c)

Licensee shall publish, advertise, market, distribute, and provide online services for the latest version of the Game, wherein such publishing, advertising, marketing, distribution, and provision of services shall not violate the rights of any third party (it being understood that Licensee shall not be in breach of the foregoing to the extent such violation occurred as a result of the Game as provided by Licensor);

 

(d)

Licensee shall provide Licensor with prior written notice of the publication and distribution of the Game on any new Platform;

 

(e)

Licensee shall pay for of any game engine usage fees (such as the “Unreal Engine”), where such game engine is necessary for the commercial distribution of the Game;

 

(f)

Licensee shall provide End Users with a Closed Beta and Open Beta at such a time as is mutually agreed upon between the Parties, after the completion of Licensor’s obligations under ‎Section 3.02(e);

 

 

(g)

Licensee shall use commercially reasonable efforts to protect any and all Intellectual Property Rights in or to the Game pursuant to Applicable Laws (it being understood that Licensee shall promptly notify Licensor if Licensee becomes aware or has reasonable suspicion of any violation of such Intellectual Property Rights, and any enforcement of such Intellectual Property Rights shall be governed by ‎Article 9);

 

(h)

Without limiting ‎Section 3.01(g) above, Licensee shall use commercially reasonable efforts to protect the Game against piracy and hacking;

 

(i)

Licensee shall be responsible for ensuring that its employees do not violate any covenants or Applicable Laws relating to Licensor’s Intellectual Property Rights in and to the Game and shall take reasonable actions necessary to ensure that said employees will not copy, reverse engineer, disassemble, or modify the Game without the prior written permission of Licensor; and

 

(j)

From time to time, to assist Licensor in performing the Licensor Obligations, Licensee shall reasonably assist Licensor by (i) providing Licensor with a detailed list of technical information necessary (including information regarding appropriate servers, IP addresses, branding or specifications), (ii) configuring technical systems for hardware and software in order to provide Licensor with the necessary administrative privileges and (iii) providing Licensor with a billing query interface for billing data accuracy.

 

Section 3.02.         Development Obligations. As between the Parties, Licensor shall perform the following, at its own cost (collectively referred to herein as the “Licensor Obligations”):

 

(a)

Licensor shall keep developing and updating the Game (including the Client Software and Server Software) (it being understood that Licensor shall develop and create DLC upon reasonable written request by Licensee);

 

(b)

Licensor shall regularly provide Licensee with any and all source code relating to the latest version of the Game (including the Client Software and the Server Software); provided that Licensor shall promptly provide Licensee with such source code upon reasonable written request by Licensee;

 

(c)

Licensor shall ensure that the Client Software and Server Software provided to Licensee (i) is complete, (ii) is delivered to Licensee via the Internet or via CD, (iii) is able to provide an online gaming experience for End Users, and (iv) does not have a high severity of Errors;

 

(d)

Licensor shall provide Licensee with the latest complete Text File, as such Text File is periodically updated, necessary to enable Licensee to perform the translation and localization of the Game;

 

(e)

Licensor shall share with Licensee all data with respect to virtual characters and items created by End Users, together with all log data in connection with the Game;

 

(f)

Licensor shall recommend in good faith a commercially reasonable price for the Game (including related DLC);

 

 

(g)

Licensor shall provide Licensee with the Closed Beta and Open Beta necessary to launch the Game on future Platforms;

 

(h)

Without limiting ‎Section 3.01(g) above, Licensor shall use commercially reasonable efforts to protect the Game against piracy and hacking;

 

(i)

After receiving notice from Licensee of the existence of any Bugs, Licensor shall (i) resolve Emergency Bugs within twenty-four (24) hours after receiving such notice from Licensee and (ii) provide a solution plan for General Bugs (which shall provide for a solution within a reasonable timeframe) within forty-eight (48) hours after receiving such notice from Licensee;

 

(j)

Licensor shall (i) provide Licensee with appropriate support to localize the Game and (ii) at the written request of Licensee, produce assigned scenes, assigned quests, assigned characters, assigned events and assigned equipment within three (3) Business Days of receiving such request;

 

(k)

Licensor shall provide technical training to Licensee in the manner reasonably required by Licensee to complete the Licensee Obligations (it being understood that the Parties agree to negotiate in good faith the payment allocation of expenses incurred in connection with such training); and

 

(l)

Licensor shall provide Licensee with technical support as follows:

 

(i)

Licensor shall assist in obtaining expense information relating to server setup and purchase;

 

(ii)

Licensor shall provide remote assistance in the initial installation, software installation and server maintenance, and shall provide any necessary training for Licensee’s employees during the Closed Beta and Open Beta for future Platforms;

 

(iii)

Licensor shall provide technical solutions to any Errors that appear in the Game (including the Closed Beta and the Open Beta) or that otherwise appear in the translation and localization of the Game;

 

(iv)

Licensor shall provide technical advice for the security of the Game and the related servers; and

 

(v)

Licensor shall provide a complete version of the Client Software and Server Software.

 

Section 3.03.         Alignment Meetings. The Parties shall schedule and attend annual meetings to discuss the development of additional products for the Game.

 

Article 4
Payments and Fees

 

Section 4.01.         Monthly License Fee. Subject to the credit for Advance Payment under ‎Section 4.04, commencing with the Commercial Release Date (and not for any period prior to such date), and for the remainder of the Term, Licensee shall pay Licensor a monthly licensing fee of one million five hundred thousand U.S. dollars ($1,500,000), for a total of eighteen million U.S. dollars ($18,000,000) per year.

 

 

Section 4.02.         Royalty Payments. Licensee shall pay Licensor twenty-five percent (25%) of the Total Revenue of the Game (hereinafter referred to as the “Royalty Payment”). For the avoidance of doubt, Licensee shall retain the remaining seventy-five percent (75%) of the Total Revenue.

 

Section 4.03.         DLC Payments. Subsequent to the Commercial Release Date (and not prior to such date), Licensee shall pay Licensor a one-time payment of five million U.S. dollars ($5,000,000) upon the release of each DLC during the Term. Such DLC shall be agreed to by the Parties pursuant to ‎Section 3.02(a).

 

Section 4.04.         Advance Payment and Credit. (a) In connection with the negotiations of this Agreement, Licensee has previously remitted to Licensor, the sum of two million U.S. dollars ($2,000,000), and (b) concurrently with the execution and delivery of this Agreement, Licensee shall remit to Licensor, the sum of three million U.S. dollars ($3,000,000) (the aggregate sum of such payments, or $5,000,000, the “Advance Payment.”) The Parties acknowledge that sum of the Advance Payment shall be credited against any payments that may become due from Licensee to Licensor under ‎Section 4.01 (monthly Licenses Fee), prior to any further remittances by Licensee therefor; provided however, in the event no Monthly License Fee becomes due and payable to Licensor for any reason whatsoever, the Advance Payment shall be retained by Licensor in its entirety.

 

Section 4.05.         Other Payments. If Licensee intends to engage in sales activities related to the Game not contemplated by this Agreement, Licensee must (a) obtain prior written consent from Licensor and sign a supplemental agreement with Licensor regarding such sales activities and (b) provide Licensor with information regarding any potential agreements with third parties for such sales activities where such potential agreements would legally bind Licensee or Licensor.

 

Section 4.06.         Settlement. During the Term, the Parties shall verify and confirm the Royalty Payment through a settlement process each month (the “Settlement Process”). After verification and confirmation, Licensee shall submit a written proposal of the payments to be made for the prior month before the fifth day of the month. Licensor shall confirm receipt within five (5) Business Days after receiving Licensee’s proposal and verify the amount and return the proposal to Licensee. Licensee shall properly keep the settlement records for each month. After receipt of the returned proposal, pending any disputes pursuant to ‎Section 4.07 below, Licensee shall promptly remit payment to Licensor to the following bank account:

 

Bank of America, Account no: 325070338209, SDE Inc.

 

Section 4.07.         Disputes. If during the Settlement Process there is a discrepancy in the payments and a dispute arises, the following shall occur:

 

(a)

if the discrepancy is less than one percent (1%), Licensor’s amount prevails; and

 

 

(b)

if the discrepancy is equal to or greater than one percent (1%), the Parties shall negotiate in good faith to determine the correct amount and, if the discrepancy is not resolved after five (5) Business Days, the settlement amount for such month shall be the based upon the actual payments Licensor received from the Platforms.

 

Section 4.08.         Reimbursement. During the Settlement Process, Licensor shall propose the reasonable expenses that it incurred for the prior month in connection with costs that would otherwise have been covered as part of the Licensee Obligations (such as any marketing expenses or server costs). Licensee shall (a) review such proposal and (b) verify, confirm, and approve appropriate expenses to be reimbursed and paid at the Settlement Confirmation.

 

Section 4.09.         Tax Invoices. Licensee shall provide Licensor with the original copy of any withholding tax invoice or certificate within ten (10) Business Days after Licensee pays such withholding tax to the local tax authority or other Governmental Authority. If Licensee fails to provide Licensor with such withholding tax invoice or certificate, Licensee shall pay Licensor for any supplemental copyright payments and/or commissions.

 

Article 5
Term and Termination

 

Section 5.01.         License Term. The term of this Agreement shall commence on the Effective Date and continue until December 31, 2037 (the “Initial Term”). After the Initial Term, the term of this Agreement shall renew automatically for three (3) year terms (each, a “Renewal Term” and, together with the Initial Term, the “Term”), unless terminated sooner by (a) written notice of either Party to the other Party within three hundred sixty-five (365) days prior to the expiration of the Initial Term or the Renewal Term, as the case may be, (b) in accordance with ‎Section 5.02 or ‎Section 5.03, or (c) upon the consummation of a transaction pursuant to which Licensee acquires all or substantially all of the assets of Licensor, including all intellectual property of any kind whatsoever owned by Licensor (directly or indirectly through Licensor’s Subsidiaries), or if Licensee consummates a transaction to acquire the issued and outstanding equity interests of Licensor through a stock purchase, merger or any similar change of control transaction. In the case of a termination under clause ‎(a) of this ‎Section 5.01, prior to giving effect to such termination, Licensee shall have the exclusive right to negotiate with Licensor the terms of a new license agreement with respect to the subject matter of this Agreement for a period of one hundred twenty (120) days (it being understood that the Parties shall negotiate and cooperate in good faith during such 120-day period).

 

Section 5.02.         Material Breach. Either Party may terminate this Agreement if the other Party has breached any material provision contained in this Agreement; provided that the non-breaching Party provides the breaching Party with thirty (30) days prior written notice to cure such breach (it being understood that the exercise of such right to terminate shall be without prejudice of any rights or remedies that the non-breaching Party may have under Applicable Law including the right to seek compensation and any equitable relief from the breaching Party).

 

 

Section 5.03.         Insolvency. This Agreement may be terminated by a Party before the expiration of the Term if the other Party becomes insolvent, or is transferred to its creditors, or files in any court or agency a petition for bankruptcy, or is served with an involuntary petition in an insolvency proceeding.

 

Section 5.04.         Effects of Termination. Upon expiration or termination of the Term, the Parties shall proceed in a manner with the End Users’ interests as the top priority. Without limiting the generality of the foregoing, (a) the Parties shall arrange full-time staff to process and maintain the availability of the Game for at least one month; (b) Licensee shall, and shall ensure that its Affiliates, distribution partners and third party channels terminate the sales and publication of the Game on behalf of Licensee; (c) the Parties shall issue a statement together to Licensee’s Affiliates, distribution partners and third channels to terminate Licensee as the publisher of the Game; and (d) notwithstanding the foregoing, each Party shall ensure that all End Users existing before the expiration or termination of the Term shall have the right to continue to use the Game as permitted by the terms and conditions of the applicable end user agreement with such End User.

 

Section 5.05.         Survival. Notwithstanding any expiration or termination of this Agreement, the following provisions shall survive such expiration or termination: ‎Article 1; this ‎Section 5.05; ‎Article 6; ‎Section 7.03; ‎Section 7.04; ‎Section 7.05; ‎Article 8 and ‎Article 10.

 

Article 6
Confidentiality

 

Section 6.01.         Confidential Information. As used herein, “Confidential Information” refers to a Party’s confidential or proprietary information, including any design, drawing, plan, specification, formula, technology, procedure, system, new products or technical information, software, manufacture, development or marketing skills, business strategy and development plan, supplier information, client information, financial information and any other similar information (no matter in written form or any other tangible form), and any other business secret or nonpublic business information, including patent and trademark rights that have been filed yet not obtained and patent and trademark rights that are about to be filed.

 

Section 6.02.         Protection of Confidential Information. Each Party (the “Receiving Party”) shall, at all times (including the execution of this Agreement), keep the Confidential Information of the other Party (the “Disclosing Party”) confidential and, without prior written consent of the Disclosing Party (which shall not be unreasonably refused or delayed), the Receiving Party shall not use any Confidential Information of the Disclosing Party (unless for the purpose of this Agreement) or disclose any Confidential Information of the Disclosing Party to any third party; unless such information: (a) is known to the public prior to the disclosure; (b) is known to the public not because of breach of this Agreement; (c) is legally obtained from the third party not because of any breach by the Receiving Party or third party of any confidentiality obligations owed to the Disclosing Party; or (d) is required to be disclosed by Applicable Law or by any Governmental Authority, or by unappealable judgment, decree or order made by any court or arbitration board of competent jurisdiction. To the necessary extent of this Agreement, a Receiving Party can disclose Confidential Information of the Disclosing Party to any of its Affiliates, potential or actual suppliers, potential or actual service providers, and professional consultants or employees of the Receiving Party (collectively the “Related Parties”); provided, however, that before making any such disclosure, the Receiving Party shall inform such Related Parties of the confidentiality obligations under this Agreement, and shall take all reasonable efforts to get the Related Party’s commitment to undertake the confidentiality obligations hereunder. In the event that any Related Party does not agree to undertake such confidentiality obligations, the Receiving Party shall obtain written consent from the Disclosing Party before making any such disclosure.

 

 

Section 6.03.         Return of Confidential Material. All confidential documents and other records (no matter in what form) (hereinafter referred to as “Confidential Material”) that are provided to or obtained by the Receiving Party from the Disclosing Party shall be returned to the Disclosing Party immediately upon termination of this Agreement and copies shall not be retained. If the Receiving Party is required to return such Confidential Material as provided in this ‎Article 6, the Receiving Party shall confirm the completion of the return with the Disclosing Party in writing.

 

Section 6.04.         Survival. The obligations under this ‎Article 6 shall survive the expiration or termination of this Agreement for a period of six (6) years, provided that, notwithstanding the following, with respect to the trade secrets (including any source code) of either Party, the obligations under this ‎Article 6 shall survive in perpetuity.

 

Article 7
Representations and Warranties; Indemnification; Disclaimers

 

Section 7.01.         Licensor Representations. Licensor represents and warrants to Licensee that:

 

(a)

Licensor is a corporation duly organized, validly existing and in good standing in accordance with all Applicable Law;

 

(b)

Licensor has full power to enter into this Agreement, is the owner of all Intellectual Property Rights under the Game License and the Peripheral Products License including the Intellectual Property Rights used in the Game, and has the right to grant Licensee all licenses and rights granted under this Agreement, and has already obtained all necessary permissions, consents and approvals;

 

(c)

Licensor’s software and components of the Game, including all contents of the online games, products, logos, and any Intellectual Property Rights, licenses and materials that Licensor licenses or otherwise grants rights to Licensee to use according to this Agreement, do not and will not violate, infringe, misappropriate or in any other way harm any third party’s Intellectual Property Rights;

 

(d)

Licensor’s performance of this Agreement does not and will not violate any Applicable Laws of any country or region which has jurisdiction over Licensor’s or Licensee’s businesses or licensed rights and the Game currently does, and at all times in the future shall, comply with all Applicable Law;

 

 

(e)

The Game (including all contents) and Licensor’s logos do not and will not include any representations or content that is illegal, obscene, indecent, pornographic, provocative, defamatory, insulting, threatening, likely to incite racial hatred, discriminatory, menacing or in breach of confidence; and

 

(f)

None of the licensed rights under the Game License and the Peripheral Products License, including the Game and associated Intellectual Property Rights, that Licensor grants under this Agreement are currently commencing, pending or threatened to take action or proceedings under any court, arbitration board, administrative court or government agency.

 

Section 7.02.         Licensee Representations. Licensee represents and warrants to Licensor that:

 

(a)

Licensee can be the publisher of the Game in the Territory during the Term, and has all the necessary licenses, permissions, consents and permits from any applicable Governmental Authority; and

 

(b)

Licensee has full power to enter into this Agreement and is able to undertake the obligations under this Agreement.

 

Section 7.03.         Indemnification. Licensor shall indemnify and defend Licensee and any of Licensee’s Affiliates and their respective equityholders, officers, directors, managers, employees and agents (“Licensee Indemnitees”) against, and to hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all damages suffered or incurred by Licensee Indemnities to the extent arising out of, based upon, or relating to (a) any breach of this Agreement by Licensor or any of its Affiliates, (b) Licensor’s or any of its Affiliates’ willful misconduct, fraud or gross negligence or (c) any alleged or actual infringement, misappropriation or other violation of a third party’s Intellectual Property Rights by the Game or Licensee’s use thereof.

 

Section 7.04.         Indemnification Procedure. As a condition to Licensee’s right to receive indemnification under ‎Section 7.03, it shall: (a) promptly notify Licensor as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto; (b) cooperate, and cause Licensee Indemnitees to cooperate, with Licensor in the defense, settlement or compromise of such claim or suit; and (c) permit Licensor to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel. Notwithstanding anything to the contrary contained in this Agreement, in no event may Licensor compromise or settle any claim or suit in a manner which admits fault or negligence on the part of any Licensee Indemnitee without the prior written consent of such Licensee Indemnitee. Each Party shall reasonably cooperate with the other Party and its counsel in the course of the defense of any such suit, claim or demand, such cooperation to include using reasonable efforts to provide or make available documents, information and witnesses. Licensor shall have no liability under ‎Section 7.03 with respect to claims or suits settled or compromised without its prior written consent.

 

 

Section 7.05.         Indemnification Step-In. If Licensor does not assume and conduct the defense within sixty (60) days of Licensee’s notice of a claim pursuant to ‎Section 7.04, Licensee may defend against and consent to the entry of any judgment or enter into any settlement with respect to such claims in any manner Licensee deems reasonably appropriate (and Licensee need not consult with, or obtain any consent from, Licensor in connection therewith), and Licensor will remain responsible to indemnify Licensee as provided in ‎Section 7.03.

 

Section 7.06.         DISCLAIMER OF WARRANTIES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS ‎ARTICLE 7, THIS AGREEMENT IS ENTERED INTO WITHOUT WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

 

Section 7.07.         DISCLAIMER OF CONSEQUENTIAL AND OTHER DAMAGES. OTHER THAN IN CONNECTION WITH ANY BREACH OF ‎ARTICLE 6 OR A PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD, NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (PROVIDED THAT ANY SUCH LIABILITY WITH RESPECT TO A THIRD PARTY CLAIM SHALL BE CONSIDERED DIRECT DAMAGES) OF SUCH OTHER PARTY ARISING IN CONNECTION WITH THIS LICENSE.

 

Article 8
Rights of First Refusal and Negotiation

 

Section 8.01.         Right of First Refusal. Licensor covenants and agrees with Licensee as follows:

 

(a)

Notice. If Licensor receives an offer from, or desires to enter into an agreement with, any person or entity (the “Bona Fide Offeror”), to acquire all or any part of Licensor’s business (whether by means of a sale of stock or merger, a sale or lease of all or substantially all of the assets comprising Licensor’s business, or the Intellectual Property Rights with respect to only the Game), then Licensor shall not accept such offer or enter into such agreement, unless and until Licensor first shall have delivered to Licensee a written notice of such offer or agreement (the “Sale Notice”), which notice shall include a copy of any written agreement relating to the proposed sale and shall set forth (i) the securities or the assets being proposed to be transferred by Licensor (the “Offered Interests”), (ii) the proposed price and the terms and conditions of payment (the “Proposed Price”), (iii) all other terms and conditions of the proposed transaction (“Proposed Terms”), (iv) the name and address of the proposed transferee (the “Proposed Purchaser”), and (v) an offer to sell or transfer the Offered Interests to Licensee at the Proposed Price and on the Proposed Terms.

 

 

(b)

Licensee’s Right to Accept. Licensee shall have the right to purchase all or any portion of the Offered Interests upon the terms set forth in the Sale Notice. If Licensee desires to purchase the Offered Interests in whole or in part, Licensee may exercise such right by delivering to Licensor within thirty (30) days following its receipt of the Sale Notice (the “Election Period”), a written election (the “Election”) to purchase such portion of the Offered Interests as it wishes to acquire upon the terms set forth in the Sale Notice.

 

(c)

Failure to Exercise. In the event Licensee fails to make an Election within ten (10) Business Days after the expiration of the Election Period, Licensor may, within a period of one hundred twenty (120) days from the date of the Sale Notice complete the sale of all of the Offered Interests to the Bona Fide Offeror upon the terms set forth in the Sale Notice.

 

(d)

Closing. If Licensor does not complete the sale of such Offered Interests within the aforementioned 120-day period, the provisions of this ‎Section 8.01 shall again apply to the unsold Offered Interests, and no sale of such Offered Interests by Licensor shall be made otherwise than in accordance with the terms of this Agreement. If there is any change in the terms of the Bona Fide Offeror disclosed in the Sale Notice, the provisions of this ‎Section 8.01 shall retrigger and this ‎Section 8.01 must be again complied with in its entirety with respect to all such Offered Interests, and no sale of Offered Interests by Licensor shall be made otherwise than in accordance with the terms of this Agreement.

 

Section 8.02.         Right of First Negotiation for any Derivative ARK Game. Licensor covenants and agrees with Licensee as follows:

 

(a)

Communications and Notice. From time to time, Licensor shall provide Licensee with updates regarding the development of any Derivative ARK Game. Licensor agrees to consider, in good faith, any suggested feedback or input from Licensee with respect to the development of any such Derivative ARK Game. Licensor shall notify Licensee in writing when the development of any such Derivative ARK Game has advanced to the point where it is appropriate to engage in discussions regarding the licensing, sale or publishing of any such Derivative ARK Game (a “Derivative ARK Game Notice”).

 

(b)

Licensee’s Exclusive Right of First Negotiation. Licensee shall have the exclusive right of first negotiation to enter into a license agreement for publishing of any such Derivative ARK Game (each, a “Derivative ARK Game License Agreement”). Licensor and Licensee shall negotiate in good faith the terms and conditions of each such Derivative ARK Game License Agreement.

 

(c)

Payments Credit. Any payments made by Licensee to Licensor under any Derivative ARK Game License Agreement shall be credited against the monthly licensing fee in ‎Section 4.01 on a monthly basis. If, at the end of a given calendar year, the payments made by Licensee to Licensor under any Derivative ARK Game License Agreement exceed eighteen million U.S. dollars ($18,000,000), Licensor shall refund to Licensee all payments made under ‎Section 4.01 for that given calendar year within thirty (30) days. For the avoidance of doubt, payments made under ‎Section 4.02 shall not be included in the foregoing credit and such payments shall remain unaffected by any Derivative ARK Game License Agreement unless expressly modified by such Derivative ARK Game License Agreement.

 

 

(d)

Failure to Exercise and Trademark License. In the event that the Parties fail to enter into a Derivative ARK Game License Agreement within one hundred twenty (120) days of Licensee receiving the applicable Derivative ARK Game Notice, Licensor may begin to seek to license the applicable Derivative ARK Game to a third party. If Licensor desires to enter into an agreement with any person or entity to license, sell or otherwise transfer the applicable Derivative ARK Game, then Licensor shall not enter into such agreement, unless and until Licensor first shall have delivered to Licensee (i) a written notice of such agreement, which notice shall include a copy of any written agreement relating to the proposed license, sale or transfer and (ii) an offer to license, sell or otherwise transfer the applicable Derivative ARK Game under the same terms and conditions that Licensor has offered to such person or entity. If Licensor enters into a definitive agreement for the applicable Derivative ARK Game with a third party, then (A) Licensor shall provide Licensee with prompt notice of the execution of such agreement, (B) Licensee’s payment obligations under ‎Section 4.01 shall cease immediately and (C) Licensee agrees to negotiate in good faith with such third party for a non-exclusive license to Licensee’s trademark rights under ‎Section 2.02.

 

Article 9
Intellectual Property Enforcement

 

Section 9.01.         Notice. If either Party believes that an infringement, unauthorized use, misappropriation or ownership claim or threatened infringement or other such activity by a third party exists with respect to any Intellectual Property Rights licensed under the Game License or Peripheral Products License or if a third party claims that any Intellectual Property Rights licensed under the Game License or Peripheral Products License is invalid or unenforceable (collectively “Third Party Infringement”), such Party shall inform the other Party and provide the details of such belief or claim.

 

Section 9.02.         Right to Bring an Action. Licensee shall have the first right, but not the obligation, to attempt to resolve any Third Party Infringement, including by filing an infringement suit, defending against such claim or taking other similar action, and to compromise or settle any such Third Party Infringement or claim (any of the foregoing, an “Action”). At Licensee’s request, Licensor shall immediately provide Licensee with all relevant documentation (as may be requested by Licensee) evidencing that Licensee is validly empowered by Licensor to take such an Action. Licensor shall be obligated to join Licensee in any such Action if Licensee determines that Licensor is a necessary and/or indispensable party to such Action, and Licensor hereby consents to being joined in, such Action. If Licensee does not intend to prosecute or defend an Action, Licensee shall promptly inform Licensor, and Licensor shall then have the right, but not the obligation, to attempt to resolve any Third Party Infringement or claim, including by filing an Action with respect to any Intellectual Property Rights licensed under the Game License or Peripheral Products License and to compromise or settle any such infringement or claim. Licensor shall cooperate and assist Licensee in all reasonable respects in connection with an Action brought under this ‎Article 9.

 

Section 9.03.         Cost of an Action. The respective Party taking Action against Third Party Infringement shall pay all costs associated with such Action.

 

 

Section 9.04.         Settlement. Neither Party shall settle, or otherwise compromise, any Action without the prior written consent of the other Party where such settlement or compromise would (a) give rise to liability (economic or otherwise) to the other Party or (b) in any manner alter, diminish or be in derogation of the other Party’s rights under this Agreement.

 

Section 9.05.         Reasonable Assistance. The Party not enforcing or defending the Intellectual Property Rights licensed under the Game License or Peripheral Products License shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence and making its employees available, subject to the other Party’s reimbursement of any out-of-pocket costs incurred by the non-enforcing or non-defending Party in providing such assistance.

 

Section 9.06.         Distribution of Amounts Recovered. Any amounts recovered by the Party taking an Action pursuant to this ‎Article 9, whether by settlement or judgment, shall be allocated in the following order: (a) to reimburse the Party taking such Action for any costs incurred, (b) to reimburse the Party not taking such Action for its costs incurred in such Action, if it joins such Action; and (c) the remaining amount of such recovery shall be paid to or kept by Licensee; provided that such remaining amount be deemed to be Total Revenue and Licensee shall pay to Licensor a royalty on such remaining amount based on the royalty rates set forth in ‎Section 4.02.

 

Article 10
Miscellaneous

 

Section 10.01.         Force Majeure. In case of a Force Majeure Event, the result of which either Party (“Affected Party”) cannot perform any obligation under this Agreement after reasonable and industrious efforts, the Affected Party is not responsible for any liability. In the case of a Force Majeure Event, the Affected Party shall notify the other Party of the occurrence of the Force Majeure Event within ten (10) Business Days after the Force Majeure Event. The Parties shall work together in good faith and exert commercially reasonable efforts to cooperatively seek a solution that is mutually satisfactory.

 

Section 10.02.         Transfers. This Agreement shall be binding upon and shall be enforceable by the Parties and their respective successors and permitted assigns. Unless otherwise clearly expressed, without the prior written consent of the other Party, neither Party may transfer or assign its rights and obligations under this Agreement to any third party, except, in the case of Licensee, to an Affiliate or acquirer of all or substantially all of the business of Licensee.

 

Section 10.03.         Governing Law. The conclusion, effectiveness, interpretation and implementation of this Agreement shall be governed by the laws and regulations of the state of California in the United States of America.

 

Section 10.04.         Dispute Resolution. Any controversies, disputes, or requests arising from the interpretation, breach or termination of this Agreement or the effectiveness of this Agreement shall be settled through negotiation. If no settlement can be reached within thirty (30) days after the occurrence of the dispute, either Party may submit the dispute to the JAMS Los Angeles, California, seeking a resolution by the JAMS Streamlined Arbitration Rules.

 

 

Section 10.05.         Language and Copies. This Agreement shall have two (2) copies, which are written both in Chinese and English. Each Party shall hold one (1) Chinese original and one (1) English original. If there is any difference between Chinese and English texts, the English text shall prevail, govern and control.

 

Section 10.06.         Amendments. Any amendment, revision, waiver, absolution or voluntary termination of this Agreement and its provisions shall be signed by the Parties in writing.

 

Section 10.07.         Cost. The Parties shall pay for their respective expenses and costs incurred in connection with the negotiation and/or preparation of this Agreement.

 

Section 10.08.         Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersedes all prior discussion, understandings, letters, notes, memos, suggestions, negotiations, and other documents and agreements between the Parties with respect to the subject matter hereof and thereof.

 

Section 10.09.         Severability. If any term, provision, covenant or restriction 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, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

Section 10.10.         Non-Waiver. Neither Party’s non-executing, delayed executing or partial executing of any provisions under this Agreement should be construed to as a waiver of any of its rights under this Agreement. Any Party’s waiver of the other Party’s fault or breach pursuant to this Agreement shall not be construed as a waiver of any other or similar fault or breach in the future, and will not affect other provisions of this Agreement in any form.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized officers as of the Effective Date.

 

	SDE, INC.
	By:	/s/ Zhou Ying
		Name:	Zhou Ying
		Title:	Chief Executive Officer
		Date:	4/27/2022

 

	SNAIL GAMES USA, INC.
	By:	/s/ Jim Tsai
		Name:	Jim Tsai
		Title:	Chief Executive Officer
		Date:	4/27/2022

 

 

Exhibit 10.11

 

SNAIL, INC.
2022 OMNIBUS INCENTIVE PLAN

 

Section 1.                     Purpose. The purpose of the Snail, Inc. 2022 Omnibus Incentive Plan (as amended from time to time, the “Plan”) is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to the success of Snail, Inc. (the “Company”), thereby furthering the best interests of the Company and its shareholders.

 

Section 2.                     Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

 

(a)  “Affiliate” means any entity that, directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Company.

 

(b)  “Award” means any Option, SAR, Restricted Stock, RSU, Performance Award, Other Cash-Based Award or Other Stock-Based Award granted under the Plan.

 

(c)  “Award Agreement” means any agreement, contract or other instrument or document (including in electronic form) evidencing any Award granted under the Plan, which may, but need not, be executed or acknowledged by a Participant.

 

(d)  “Beneficial Owner” has the meaning ascribed to such term in Rule 13d-3 under the Exchange Act.

 

(e)  “Beneficiary” means a Person entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of a Participant’s death. If no such Person can be named or is named by a Participant, or if no Beneficiary designated by a Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at a Participant’s death, such Participant’s Beneficiary shall be such Participant’s estate.

 

(f)  “Board” means the Board of Directors of the Company.

 

(g)  “Cause” is as defined in the Participant’s Service Agreement, if any, or if not so defined, means the Participant’s: (i) intentional wrongdoing, gross negligence or willful misconduct in the performance of the Participant’s duties or otherwise in respect of the Company or its Affiliates, (ii) willful, deliberate or negligent conduct that is materially injurious to the Company or its Affiliates; (iii) commission of, conviction of, plea of guilty to, or plea of nolo contendere to, (x) a felony or (y) any other criminal offense involving moral turpitude, fraud or dishonesty, (iv) commission of an act of fraud, embezzlement or misappropriation, in each case, against the Company or any Affiliate, (v) material breach of any policies of the Company or its Affiliates or (vi) material breach of any applicable Service Agreement.

 

 

(h)  “Change in Control” means the occurrence of any one or more of the following events:

  

(i)  any Person, other than (A) any employee plan established by the Company or any Subsidiary, (B) the Company or any of its Affiliates, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an entity owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company, is (or becomes, during any 12-month period) the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of the total voting power of the stock of the Company; provided that the provisions of this subsection ‎(i) are not intended to apply to or include as a Change in Control any transaction that is specifically excepted from the definition of Change in Control under subsection ‎(iii) below;

 

(ii)  a change in the composition of the Board such that, during any 12-month period, the individuals who, as of the beginning of such period, constitute the Board (the “Existing Board”) cease for any reason to constitute at least 50% of the Board; provided, however, that any individual becoming a member of the Board subsequent to the beginning of such period whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Directors immediately prior to the date of such appointment or election shall be considered as though such individual were a member of the Existing Board; provided further, that, notwithstanding the foregoing, no individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 or Regulation 14A promulgated under the Exchange Act or successor statutes or rules containing analogous concepts) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or Person other than the Board, shall in any event be considered to be a member of the Existing Board;

 

(iii)  the consummation of a merger, amalgamation or consolidation of the Company with any other corporation or other entity, or the issuance of voting securities in connection with such a transaction pursuant to applicable stock exchange requirements; provided that immediately following such transaction the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of such transaction or parent entity thereof) 50% or more of the total voting power and total fair market value of the Company’s stock (or, if the Company is not the surviving entity of such merger or consolidation, 50% or more of the total voting power and total fair market value of the stock of such surviving entity or parent entity thereof); and provided, further, that such a transaction effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of either the then-outstanding Shares or the combined voting power and total fair market value of the Company’s then-outstanding voting securities shall not be considered a Change in Control; or

 

 

(iv)  the sale or disposition by the Company of all or substantially all of the Company’s assets in which any Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.

 

Notwithstanding the foregoing, (A) no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the Shares immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of the Company immediately prior to such transaction or series of transactions and (B) no Change in Control shall be deemed to have occurred upon the acquisition of additional control of the Company by any Person that is considered to effectively control the Company. In no event will a Change in Control be deemed to have occurred if any Participant is part of a “group” within the meaning of Section 13(d)(3) of the Exchange Act that effects a Change in Control. Notwithstanding the foregoing or any provision of any Award Agreement to the contrary, for any Award that provides for accelerated distribution on a Change in Control of amounts that constitute “deferred compensation” (as defined in Section 409A of the Code), if the event that constitutes such Change in Control does not also constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets (in either case, as defined in Section 409A of the Code), such amount shall not be distributed on such Change in Control but instead shall vest as of such Change in Control and shall be distributed on the scheduled payment date specified in the applicable Award Agreement, except to the extent that earlier distribution would not result in the Participant who holds such Award incurring interest or additional tax under Section 409A of the Code.

 

(i)  “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Code shall include any successor provision thereto.

 

(j)  “Committee” means the compensation committee of the Board unless another committee is designated by the Board. If there is no compensation committee of the Board and the Board does not designate another committee, references herein to the “Committee” shall refer to the Board.

 

(k)  “Consultant” means any individual, including an advisor, who is providing services to the Company or any Subsidiary or who has accepted an offer of service or consultancy from the Company or any Subsidiary.

 

(l)  “Director” means any member of the Board.

 

(m)  “Effective Date” means the date on which the registration statement covering the initial public offering (“IPO”) of the Shares is declared effective by the Securities and Exchange Commission.

 

 

(n)  “Employee” means any individual, including any officer, employed by the Company or any Subsidiary or any prospective employee or officer who has accepted an offer of employment from the Company or any Subsidiary, with the status of employment determined based upon such factors as are deemed appropriate by the Committee in its discretion, subject to any requirements of the Code or applicable laws.

 

(o)  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Exchange Act shall include any successor provision thereto.

 

(p)  “Fair Market Value” means (i) with respect to Shares, the closing price of a Share on the applicable date of determination (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred), on the principal stock market or exchange on which the Shares are quoted or traded, or if Shares are not so quoted or traded, the fair market value of a Share as determined by the Committee, and (ii) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. In the case of grants made in connection with an IPO, Fair Market Value means the per share price initially offered for sale to the public in connection with the IPO.

 

(q)  “Incentive Stock Option” means an option representing the right to purchase Shares from the Company, granted pursuant to ‎Section 6, that meets the requirements of Section 422 of the Code.

 

(r)  “Intrinsic Value” with respect to an Option or SAR Award means (i) the excess, if any, of the price or implied price per Share in a Change in Control or other event over (ii) the exercise or hurdle price of such Award multiplied by (iii) the number of Shares covered by such Award.

 

(s)  “Non-Qualified Stock Option” means an option representing the right to purchase Shares from the Company, granted pursuant to ‎Section 6, that is not an Incentive Stock Option.

 

(t)  “Option” means an Incentive Stock Option or a Non-Qualified Stock Option.

 

(u)  “Other Cash-Based Award” means an Award granted pursuant to ‎Section 11, including cash awarded as a bonus or upon the attainment of specified performance criteria or otherwise as permitted under the Plan.

 

(v)  “Other Stock-Based Award” means an Award granted pursuant to ‎Section 11 that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, dividend rights or dividend equivalent rights or Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee.

 

 

(w)  “Participant” means the recipient of an Award granted under the Plan.

 

(x)  “Performance Award” means an Award granted pursuant to ‎Section 10.

 

(y)  “Performance Period” means the period established by the Committee with respect to any Performance Award during which the performance goals specified by the Committee with respect to such Award are to be measured.

 

(z)  “Person” has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

 

(aa)                                “Restricted Stock” means any Share subject to certain restrictions and forfeiture conditions, granted pursuant to ‎Section 8.

 

(bb)                                “RSU” means a contractual right granted pursuant to ‎Section 9 that is denominated in Shares. Each RSU represents a right to receive the value of one Share (or a percentage of such value) in cash, Shares or a combination thereof. Awards of RSUs may include the right to receive dividend equivalents.

 

(cc)                                “SAR” means a right granted pursuant to ‎Section 7 to receive upon exercise by the Participant or settlement, in cash, Shares or a combination thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise or settlement over (ii) the exercise or hurdle price of the right on the date of grant.

 

(dd)                                “Service Agreement” means any employment, severance, consulting or similar agreement between the Company or any of its Affiliates and a Participant.

 

(ee)                                “Share” means a share of the Company’s Class A common stock, $0.0001 par value.

 

(ff)                                 “Subsidiary” means an entity of which the Company directly or indirectly holds all or a majority of the value of the outstanding equity interests of such entity or a majority of the voting power with respect to the voting securities of such entity. Whether employment by or service with a Subsidiary is included within the scope of the Plan shall be determined by the Committee.

 

(gg)                                “Substitute Award” means an Award granted in assumption of, or in substitution for, an outstanding award previously granted by a company or other business acquired by the Company or with which the Company combines.

 

(hh)                                “Termination of Service” means, in the case of a Participant who is an Employee, cessation of the employment relationship such that the Participant is no longer an employee of the Company or any Subsidiary, or, in the case of a Participant who is a Consultant or other service provider (including non-employee Director), the date the performance of services for the Company or any Subsidiary has ended; provided, however, that in the case of a Participant who is an Employee, the transfer of employment from the Company to a Subsidiary, from a Subsidiary to the Company, from one Subsidiary to another Subsidiary or, unless the Committee determines otherwise, the cessation of employee status but the continuation of the performance of services for the Company or a Subsidiary as a Director or Consultant shall not be deemed a cessation of service that would constitute a Termination of Service; provided, further, that a Termination of Service shall be deemed to occur for a Participant employed by, or performing services for, a Subsidiary when such Subsidiary ceases to be a Subsidiary unless such Participant’s employment or service continues with the Company or another Subsidiary. Notwithstanding the foregoing, with respect to any Award subject to Section 409A of the Code (and not exempt therefrom), a Termination of Service occurs when a Participant experiences a “separation of service” (as such term is defined under Section 409A of the Code).

 

 

Section 3.                      Eligibility.

 

(a)  Any Employee, non-employee Director or Consultant shall be eligible to be selected to receive an Award under the Plan, to the extent that an offer or receipt of an Award is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.

 

(b)  Holders of equity compensation awards granted by a company that is acquired by the Company (or whose business is acquired by the Company) or with which the Company combines are eligible for grants of Substitute Awards under the Plan to the extent permitted under applicable regulations of any stock exchange on which the Company is listed.

 

Section 4.                      Administration.

 

(a)  Administration of the Plan. The Plan shall be administered by the Committee. The Board may designate one or more directors of the Company as a subcommittee who may act for the Committee if necessary to satisfy the requirements of this Section. All decisions of the Committee shall be final, conclusive and binding upon all parties, including the Company, its shareholders, Participants and any Beneficiaries thereof. The Committee may issue rules and regulations for administration of the Plan.

 

(b)  Delegation of Authority. To the extent permitted by applicable law, including under Section 157(c) of the Delaware General Corporation Law, the Committee may delegate to one or more officers of the Company some or all of its authority under the Plan, including the authority to grant Options and SARs or other Awards in the form of Share rights (except that such delegation shall not apply to any Award for a Person then covered by Section 16 of the Exchange Act), and the Committee may delegate to one or more committees of the Board (which may consist of solely one Director) some or all of its authority under the Plan, including the authority to grant all types of Awards, in accordance with applicable law.

 

(c)  Authority of Committee. Subject to the terms of the Plan and applicable law, the Committee (or its delegate) shall have full discretion and authority to: (i) designate Participants; (ii) determine the type or types of Awards (including Substitute Awards) to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards; (iv) determine the terms and conditions of any Award and prescribe the form of each Award Agreement, which need not be identical for each Participant; (v) determine whether, to what extent, under what circumstances and by which methods Awards may be settled or exercised in cash, Shares, other Awards, other property, net settlement (including broker-assisted cashless exercise), or any combination thereof, or canceled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) amend terms or conditions of any outstanding Awards; (viii) correct any defect, supply any omission and reconcile any inconsistency in the Plan or any Award, in the manner and to the extent it shall deem desirable to carry the Plan into effect; (ix) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents, trustees, brokers, depositories and advisors and determine such terms of their engagement as it shall deem appropriate for the proper administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations. Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or administer the Plan. In any such case, the Board shall have all of the authority and responsibility granted to the Committee herein.

 

 

Section 5.                     Shares Available for Awards.

 

(a)  Subject to adjustment as provided in ‎Section 5(c) and except for Substitute Awards, the maximum number of Shares available for issuance under the Plan shall not exceed in the aggregate 7,530,000 Shares. The total number of Shares available for issuance under the Plan shall be increased on the first day of each Company fiscal year following the Effective Date in an amount equal to the least of (i) 7,530,000 Shares, (ii) 1% of the aggregate number of Shares and shares of the Company’s Class B common stock outstanding (on a fully diluted basis) on the last day of the immediately preceding fiscal year and (iii) such number of Shares as determined by the Board in its discretion. Shares underlying Substitute Awards and Shares remaining available for grant under a plan of an acquired company or of a company with which the Company combines (whether by way of merger, amalgamation, sale and purchase of shares or other securities or otherwise), appropriately adjusted to reflect the acquisition or combination transaction, shall not reduce the number of Shares remaining available for grant hereunder.

 

(b)  If any Award is forfeited, cancelled, expires, terminates or otherwise lapses or is settled in cash, in whole or in part, without the delivery of Shares, then the Shares covered by such forfeited, expired, terminated or lapsed Award shall again be available for grant under the Plan. The following shall become available for issuance under the Plan: (i) any Shares withheld in respect of taxes relating to any Award and (ii) any Shares tendered or withheld to pay the exercise price of Options.

 

 

(c)  In the event that the Committee determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split (stock subdivision), reverse stock split (stock consolidation), reorganization, merger, amalgamation, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to acquire Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Shares, or of changes in applicable laws, regulations or accounting principles, an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, subject to ‎Section 19 and applicable law, adjust equitably so as to ensure no undue enrichment or harm (including by payment of cash), any or all of:

 

(i)  the number and type of Shares (or other securities) which thereafter may be made the subject of Awards, including the aggregate limits specified in ‎Section 5(a) and ‎Section 5(f);

 

(ii)  the number and type of Shares (or other securities) subject to outstanding Awards;

 

(iii)  the grant, acquisition, exercise or hurdle price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; and

 

(iv)  the terms and conditions of any outstanding Awards, including the performance criteria of any Performance Awards;

 

provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

 

(d)  Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or Shares acquired by the Company.

 

(e)  A Participant who is a non-employee Director may not receive compensation for any calendar year in excess of $750,000 in the aggregate, including cash payments and Awards.

 

(f)  Subject to adjustment as provided in ‎Section 5(c)(i), the maximum number of Shares available for issuance with respect to Incentive Stock Options shall be 7,530,000.

 

 

Section 6.                     Options. The Committee is authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(a)  The exercise price per Share under an Option shall be determined by the Committee at the time of grant; provided, however, that, except in the case of Substitute Awards, such exercise price shall not be less than the Fair Market Value of a Share on the date of grant of such Option.

 

(b)  The term of each Option shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such Option. The Committee shall determine the time or times at which an Option becomes vested and exercisable in whole or in part.

 

(c)  The Committee shall determine the methods by which, and the forms in which payment of the exercise price with respect thereto may be made or deemed to have been made, including cash, Shares, other Awards, other property, net settlement (including broker-assisted cashless exercise) or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price.

 

(d)  To the extent an Option is not previously exercised as to all of the Shares subject thereto, and, if the Fair Market Value of one Share is greater than the exercise price then in effect, then the Option shall be deemed automatically exercised immediately before its expiration.

 

(e)  No grant of Options may be accompanied by a tandem award of dividend equivalents or provide for dividends, dividend equivalents or other distributions to be paid on such Options (except as provided under ‎Section 5(c)).

 

(f)  The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Incentive Stock Options may be granted only to employees of the Company or of a parent or subsidiary corporation (as defined in Section 424 of the Code). Notwithstanding any designation as an Incentive Stock Option, to the extent that the aggregate Fair Market Value of Shares subject to a Participant’s incentive stock options that become exercisable for the first time during any calendar year exceeds $100,000, such excess Options shall be treated as Non-Qualified Stock Options. For purposes of the foregoing, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date of the grant of such Option. No Incentive Stock Options may be issued more than ten years following the earlier of (i) the date of adoption or (ii) the most recent date of approval of the Plan by the shareholders of the Company.

 

Section 7.                     Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(a)  SARs may be granted under the Plan to Participants either alone (“freestanding”) or in addition to other Awards granted under the Plan (“tandem”) and may, but need not, relate to a specific Option granted under ‎Section 6.

  

 

(b)  The exercise or hurdle price per Share under a SAR shall be determined by the Committee; provided, however, that, except in the case of Substitute Awards, such exercise or hurdle price shall not be less than the Fair Market Value of a Share on the date of grant of such SAR.

 

(c)  The term of each SAR shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such SAR. The Committee shall determine the time or times at which a SAR may be exercised or settled in whole or in part.

 

(d)  Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of Shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one Share on the exercise date over the exercise or hurdle price of such SAR. The Company shall pay such excess in cash, in Shares valued at Fair Market Value, or any combination thereof, as determined by the Committee.

 

(e)  To the extent a SAR is not previously exercised as to all of the Shares subject thereto, and, if the Fair Market Value of one Share is greater than the exercise price then in effect, then the SAR shall be deemed automatically exercised immediately before its expiration.

 

(f)  No grant of SARs may be accompanied by a tandem award of dividend equivalents or provide for dividends, dividend equivalents or other distributions to be paid on such SARs (except as provided under ‎Section 5(c)).

 

Section 8.                     Restricted Stock. The Committee is authorized to grant Awards of Restricted Stock to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(a)  The Award Agreement shall specify the vesting schedule.

 

(b)  Awards of Restricted Stock shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.

 

(c)  Subject to the restrictions set forth in the applicable Award Agreement, a Participant generally shall have the rights and privileges of a shareholder with respect to Awards of Restricted Stock, including the right to vote such Shares of Restricted Stock and the right to receive dividends.

 

(d)  The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividends or other distributions paid on Awards of Restricted Stock prior to vesting be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividends or other distributions may be reinvested in additional Shares, which may be subject to the same restrictions as the underlying Awards.

 

(e)  Any Award of Restricted Stock may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.

 

 

(f)  The Committee may provide in an Award Agreement that an Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to an Award of Restricted Stock, such Participant shall be required to file promptly a copy of such election with the Company and the applicable Internal Revenue Service office.

 

Section 9.                     RSUs. The Committee is authorized to grant Awards of RSUs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(a)  The Award Agreement shall specify the vesting schedule and the delivery schedule (which may include deferred delivery later than the vesting date).

 

(b)  Awards of RSUs shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.

 

(c)  An RSU shall not convey to a Participant the rights and privileges of a shareholder with respect to the Share subject to such RSU, such as the right to vote or the right to receive dividends, unless and until and to the extent a Share is issued to such Participant to settle such RSU.

 

(d)  The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividend equivalents or other distributions paid on Awards of RSUs prior to vesting or settlement, as applicable, be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividend equivalents or other distributions may be reinvested in additional Shares, which may be subject to the same restrictions as such Awards.

 

(e)  Shares delivered upon the vesting and settlement of an RSU Award may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.

 

(f)  The Committee may determine the form or forms (including cash, Shares, other Awards, other property or any combination thereof) in which payment of the amount owing upon settlement of any RSU Award may be made.

 

Section 10.                   Performance Awards. The Committee is authorized to grant Performance Awards to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(a)  Performance Awards may be denominated as a cash amount, number of Shares or units or a combination thereof and are Awards that may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the grant to a Participant or the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Subject to the terms of the Plan, the performance goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.

 

 

(b)  Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis, and may be established on a corporate-wide basis, with respect to one or more business units, divisions, Subsidiaries or business segments, or on an individual basis. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable such that it does not provide any undue enrichment or harm. Performance measures may vary from Performance Award to Performance Award and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The Committee shall have the power to impose such other restrictions on Awards subject to this ‎Section 10(b) as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements of any applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.

 

(c)  Settlement of Performance Awards shall be in cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined in the discretion of the Committee.

 

(d)  A Performance Award shall not convey to a Participant the rights and privileges of a shareholder with respect to the Share subject to such Performance Award, such as the right to vote (except as relates to Restricted Stock) or the right to receive dividends, unless and until and to the extent a Share is issued to such Participant to settle such Performance Award. The Committee, in its sole discretion, may provide that a Performance Award shall convey the right to receive dividend equivalents on the Shares subject to such Performance Award with respect to any dividends declared during the period that such Performance Award is outstanding, in which case, such dividend equivalent rights shall accumulate and shall be paid in cash or Shares on the settlement date of the Performance Award, subject to the Participant’s earning of the Shares with respect to which such dividend equivalents are paid upon achievement or satisfaction of performance conditions specified by the Committee. Shares delivered upon the vesting and settlement of a Performance Award may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration. For the avoidance of doubt, unless otherwise determined by the Committee, no dividend equivalent rights shall be provided with respect to any Shares subject to Performance Awards that are not earned or otherwise do not vest or settle pursuant to their terms.

 

(e)  The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with a Performance Award.

 

Section 11.                   Other Cash-Based Awards and Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant Other Cash-Based Awards (either independently or as an element of or supplement to any other Award under the Plan) and Other Stock-Based Awards. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this ‎Section 11 shall be purchased for such consideration, and paid for at such times, by such methods and in such forms, including cash, Shares, other Awards, other property, net settlement, broker-assisted cashless exercise or any combination thereof, as the Committee shall determine; provided that the purchase price therefor shall not be less than the Fair Market Value of such Shares on the date of grant of such right.

 

Section 12.                   Effect of Termination of Service or a Change in Control on Awards.

 

(a)  The Committee may provide, by rule or regulation or in any applicable Award Agreement, or may determine in any individual case, the circumstances in which, and the extent to which, an Award may be exercised, settled, vested, paid or forfeited in the event of a Participant’s Termination of Service prior to the end of a Performance Period or vesting, exercise or settlement of such Award.

 

(b)  Subject to the last sentence of ‎Section 2(jj), the Committee may determine, in its discretion, whether, and the extent to which, (i) an Award will vest during a leave of absence, (ii) a reduction in service level (for example, from full-time to part-time employment) will cause a reduction, or other change, to an Award and (iii) a leave of absence or reduction in service will be deemed a Termination of Service.

 

(c)  In the event of a Change in Control, the Committee may, in its sole discretion, and on such terms and conditions as it deems appropriate, take any one or more of the following actions with respect to any outstanding Award, which need not be uniform with respect to all Participants and/or Awards:

 

(i)  continuation or assumption of such Award by the Company (if it is the surviving corporation) or by the successor or surviving entity or its parent;

 

(ii)  substitution or replacement of such Award by the successor or surviving entity or its parent with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving entity (or a parent or subsidiary thereof), with substantially the same terms and value as such Award (including any applicable performance targets or criteria with respect thereto);

 

(iii)  acceleration of the vesting of such Award and the lapse of any restrictions thereon and, in the case of an Option or SAR Award, acceleration of the right to exercise such Award during a specified period (and the termination of such Option or SAR Award without payment of any consideration therefor to the extent such Award is not timely exercised), in each case, either (A) immediately prior to or as of the date of the Change in Control, (B) upon a Participant’s involuntary Termination of Service (including upon a termination of the Participant’s employment by the Company (or a successor corporation or its parent) without Cause, by a Participant for “good reason” and/or due to a Participant’s death or “disability”, as such terms may be defined in the applicable Award Agreement and/or a Participant’s Service Agreement, as the case may be) on or within a specified period following the Change in Control or (C) upon the failure of the successor or surviving entity (or its parent) to continue or assume such Award;

 

 

(iv)  in the case of a Performance Award, determination of the level of attainment of the applicable performance condition(s); and

 

(v)  cancellation of such Award in consideration of a payment, with the form, amount and timing of such payment determined by the Committee in its sole discretion, subject to the following: (A) such payment shall be made in cash, securities, rights and/or other property; (B) the amount of such payment shall equal the value of such Award, as determined by the Committee in its sole discretion; provided that, in the case of an Option or SAR Award, if such value equals the Intrinsic Value of such Award, such value shall be deemed to be valid; provided further that, if the Intrinsic Value of an Option or SAR Award is equal to or less than zero, the Committee may, in its sole discretion, provide for the cancellation of such Award without payment of any consideration therefor (for the avoidance of doubt, in the event of a Change in Control, the Committee may, in its sole discretion, terminate any Option or SAR Awards for which the exercise or hurdle price is equal to or exceeds the per Share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor); and (C) such payment shall be made promptly following such Change in Control or on a specified date or dates following such Change in Control; provided that the timing of such payment shall comply with Section 409A of the Code.

 

Section 13.                   General Provisions Applicable to Awards.

 

(a)  Awards shall be granted for such cash or other consideration, if any, as the Committee determines; provided that in no event shall Awards be issued for less than such minimal consideration as may be required by applicable law.

 

(b)  Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other Award or any award granted under any other plan of the Company. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

 

(c)  Subject to the terms of the Plan, payments or transfers to be made by the Company upon the grant, exercise or settlement of an Award may be made in the form of cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined by the Committee in its discretion at the time of grant, and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents in respect of installment or deferred payments.

 

 

(d)  Except as may be permitted by the Committee or as specifically provided in an Award Agreement, (i) no Award and no right under any Award shall be assignable, alienable, saleable or transferable by a Participant other than by will or pursuant to ‎Section 13(e) and (ii) during a Participant’s lifetime, each Award, and each right under any Award, shall be exercisable only by such Participant or, if permissible under applicable law, by such Participant’s guardian or legal representative. The provisions of this ‎Section 13(d) shall not apply to any Award that has been fully exercised or settled, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof.

 

(e)  A Participant may designate a Beneficiary or change a previous Beneficiary designation only at such times as prescribed by the Committee, in its sole discretion, and only by using forms and following procedures approved or accepted by the Committee for that purpose.

 

(f)  All certificates, if any, for Shares and/or other securities delivered under the Plan pursuant to any Award or the exercise or settlement thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

(g)  The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Committee’s satisfaction, (ii) as determined by the Committee, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws, stock market or exchange rules and regulations or accounting or tax rules and regulations and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Committee deems necessary or appropriate to satisfy any applicable laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Committee determines is necessary to the lawful issuance and sale of any Shares, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

 

(h)  The Committee may impose restrictions on any Award with respect to non-competition, non-solicitation, confidentiality and other restrictive covenants, or requirements to comply with minimum share ownership requirements, as it deems necessary or appropriate in its sole discretion, which such restrictions may be set forth in any applicable Award Agreement or otherwise.

 

 

Section 14.                   Amendments and Terminations.

 

(a)  Amendment or Termination of the Plan. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan, the Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided, however, that no such amendment, alteration, suspension, discontinuation or termination shall be made without (i) shareholder approval if such approval is required by applicable law or the rules of the stock market or exchange, if any, on which the Shares are principally quoted or traded or (ii) subject to ‎Section 5(c) and ‎Section 12, the consent of the affected Participant, if such action would materially adversely affect the rights of such Participant under any outstanding Award, except (x) to the extent any such amendment, alteration, suspension, discontinuance or termination is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations or (y) to impose any “clawback” or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with ‎Section 18. Notwithstanding anything to the contrary in the Plan, the Committee may amend the Plan, or create sub-plans, in such manner as may be necessary or desirable to enable the Plan to achieve its stated purposes in any jurisdiction in a tax-efficient manner and in compliance with local rules and regulations.

 

(b)  Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award shall terminate immediately prior to the consummation of such action, unless otherwise determined by the Committee.

 

(c)  Terms of Awards. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate any Award theretofore granted (including by substituting another Award of the same or a different type), prospectively or retroactively, without the consent of any relevant Participant or holder or Beneficiary of an Award; provided, however, that, subject to ‎Section 5(c) and ‎Section 12, no such action shall materially adversely affect the rights of any affected Participant or holder or Beneficiary under any Award theretofore granted under the Plan, except (x) to the extent any such action is made to cause the Plan or Award to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations, or (y) to impose any “clawback” or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with ‎Section 18. The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of events (including the events described in ‎Section 5(c)) affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

 

(d)  No Repricing. Except as provided in ‎Section 5(c), the Committee may not, without shareholder approval, seek to effect any re-pricing of any previously granted “underwater” Option, SAR or similar Award by: (i) amending or modifying the terms of the Option, SAR or similar Award to lower the exercise price; (ii) cancelling the underwater Option, SAR or similar Award and granting either (A) replacement Options, SARs or similar Awards having a lower exercise price or (B)  Restricted Shares, RSUs, Performance Awards or Other Share-Based Awards in exchange; or (iii) cancelling or repurchasing the underwater Options, SARs or similar Awards for cash or other securities. An Option, SAR or similar Award will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award.

 

 

Section 15.                   Miscellaneous.

 

(a)  No Employee, Consultant, non-employee Director, Participant, or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of employees, Participants or holders or Beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.

 

(b)  The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate. Further, the Company or any applicable Affiliate may at any time dismiss a Participant, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or in any other agreement binding on the parties. The receipt of any Award under the Plan is not intended to confer any rights on the receiving Participant except as set forth in the applicable Award Agreement.

 

(c)  No payment pursuant to the Plan shall be taken into account in determining any benefits under any severance, pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate, except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

(d)  Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, including the grant of options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.

 

(e)  The Company shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other Awards, other property, net settlement, or any combination thereof) of applicable withholding taxes due in respect of an Award, its exercise or settlement or any payment or transfer under such Award or under the Plan and to take such other action (including providing for elective payment of such amounts in cash or Shares by such Participant) as may be necessary to satisfy all obligations for the payment of such taxes and, unless otherwise determined by the Committee in its discretion, to the extent such withholding would not result in liability classification of such Award (or any portion thereof) pursuant to FASB ASC Subtopic 718-10.

 

 

(f)  If any provision of the Plan or any Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and any such Award Agreement shall remain in full force and effect.

 

(g)  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

(h)  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

 

(i)  Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, tax policy or custom. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Participants on assignments outside their home country.

 

Section 16.                   Effective Date of the Plan. The Plan shall be effective as of the Effective Date.

 

Section 17.                  Term of the Plan. No Award shall be granted under the Plan after the earliest to occur of (i) the 10-year anniversary of the Effective Date; (ii) the maximum number of Shares available for issuance under the Plan have been issued; or (iii) the Board terminates the Plan in accordance with ‎Section 14(a). However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.

 

 

Section 18.                   Cancellation or “Clawback” of Awards.

 

(a)  The Committee may specify in an Award Agreement that a Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include a Termination of Service with or without Cause (and, in the case of any Cause that is resulting from an indictment or other non-final determination, the Committee may provide for such Award to be held in escrow or abeyance until a final resolution of the matters related to such event occurs, at which time the Award shall either be reduced, cancelled or forfeited (as provided in such Award Agreement) or remain in effect, depending on the outcome), violation of material policies, breach of non-competition, non-solicitation, confidentiality or other restrictive covenants, or requirements to comply with minimum share ownership requirements, that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.

 

(b)  The Committee shall have full authority to implement any policies and procedures necessary to comply with Section 10D of the Exchange Act and any rules promulgated thereunder and any other regulatory regimes. Notwithstanding anything to the contrary contained herein, any Awards granted under the Plan (including any amounts or benefits arising from such Awards) shall be subject to any clawback or recoupment arrangements or policies the Company has in place from time to time, and the Committee may, to the extent permitted by applicable law and stock exchange rules or by any applicable Company policy or arrangement, and shall, to the extent required, cancel or require reimbursement of any Awards granted to the Participant or any Shares issued or cash received upon vesting, exercise or settlement of any such Awards or sale of Shares underlying such Awards.

 

Section 19.                   Section 409A of the Code. With respect to Awards subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any Award Agreement shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Plan to the contrary, if the Board considers a Participant to be a “specified employee” under Section 409A of the Code at the time of such Participant’s “separation from service” (as defined in Section 409A of the Code), and any amount hereunder is “deferred compensation” subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to such Participant with respect to an Award as a result of such “separation from service” shall not be made until the date that is six months after such “separation from service,” except to the extent that earlier distribution would not result in such Participant’s incurring interest or additional tax under Section 409A of the Code. If an Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), a Participant’s right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment, and if an Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), a Participant’s right to such dividend equivalents shall be treated separately from the right to other amounts under the Award. Notwithstanding the foregoing, the tax treatment of the benefits provided under the Plan or any Award Agreement is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A of the Code.

 

 

Section 20.                   Successors and Assigns. The terms of the Plan shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by ‎Section 12(c).

 

Section 21.                   Data Protection. In connection with the Plan, the Company or its affiliates, as applicable, may need to process personal data (as such term, “personal information,” “personally identifiable information,” or any other term of comparable intent, is defined under applicable laws or regulations, in each case to the extent applicable) provided by the Participant to, or otherwise obtained by, the Company or its affiliates, their respective third party service providers or others acting on the Company’s or its affiliates’ behalf. Examples of such personal data may include, without limitation, the Participant’s name, account information, social security number, tax number and contact information. The Company or its affiliates may process such personal data for the performance of the contract with the Participant in connection with the Plan and in its legitimate business interests for all purposes relating to the operation and performance of the Plan, including but not limited to:

 

(a)      administering and maintaining Participant records;

 

(b)      providing the services described in the Plan;

 

(c)      providing information to future purchasers or merger partners of the Company or any Affiliate, or the business in which such Participant works; and

 

(d)      responding to public authorities, court orders and legal investigations and complying with law, as applicable.

 

The Company or its affiliates may share the Participant’s personal data with (i) Subsidiaries and affiliates, (ii) trustees of any employee benefit trust, (iii) registrars, (iv) brokers, (v) third party administrators of the Plan, (vi) third party service providers acting on the Company’s or its affiliates’ behalf to provide the services described above, (vii) future purchasers or merger partners (as described above) or (viii) regulators and others, as required by law or in order to provide the services described in the Plan.

 

If necessary, the Company or its affiliates may transfer the Participant’s personal data to any of the parties mentioned above in a country or territory that may not provide the same protection for the information as the Participant’s home country. Any transfer of the Participant’s personal data to recipients in a third country will be made subject to appropriate safeguards or applicable derogations provided for, and to the extent required, under applicable law. Further information on those safeguards or derogations can be obtained through, and other questions regarding this ‎Section 21 may be directed to, the contact set forth in the applicable employee privacy notice or other privacy policy that previously has been made available by the Company or its applicable affiliate to the Participant (as applicable, and as updated from time to time by the Company or its applicable affiliate upon notice to the Participant, the “Employee Privacy Notice”). The terms set forth in this ‎Section 21 are supplementary to the terms set forth in the Employee Privacy Notice (which, among other things, further describes the Company’s and its affiliates’ processing activities, and the rights of the Participant, with respect to the Participant’s personal data); provided that, in the event of any conflict between the terms of this ‎Section 21 and the terms of the Employee Privacy Notice, the terms of this ‎Section 21 shall govern and control in relation to the processing of such personal data in connection with the Plan.

 

 

The Company and its affiliates will keep personal data collected in connection with the Plan for as long as necessary to operate the Plan or as necessary to comply with any legal or regulatory requirements and in accordance with the Company’s and its affiliates’ backup and archival policies and procedures.

 

Certain Participants may have a right, as further described in the Employee Privacy Notice, to (i) request access to and rectification or erasure of the personal data provided, (ii) request the restriction of the processing of his or her personal data, (iii) object to the processing of his or her personal data, (iv) receive the personal data provided to the Company or its affiliates and transmit such data to another party, and (v) to lodge a complaint with a supervisory authority.

 

Section 22.                   Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without application of the conflicts of law principles thereof.

 

 

Exhibit 10.12

 

AMENDED AND RESTATED EXCLUSIVE SOFTWARE LICENSE AGREEMENT

 

THIS AMENDED AND RESTATED EXCLUSIVE SOFTWARE LICENSE AGREEMENT (this “Agreement”) is effective as of January 1, 2022 (the “Effective Date”), by and between SDE Inc., corporation organized under the laws of California and having its principal place of business at 200 E. Sandpointe Avenue, Suite 600, Santa Ana, CA 92707 (“Licensor”), and Snail Games USA Inc., a corporation organized under the laws of California and having its principal place of business at 12049 Jefferson Blvd., Culver City, CA 90230 (“Licensee”). Each of Licensor and Licensee may be individually referred to herein as a “Party” and collectively as the “Parties”.

 

W I T N E S S E T H:

 

WHEREAS, the Parties entered into a certain Exclusive Software License Agreement (the “Original Agreement”) dated November 25, 2015 (the “Original Effective Date”) pursuant to which Licensee obtained, and Licensor granted to Licensee, a license under certain intellectual property to publish, distribute or sell the Game (as defined herein) in the Territory (as defined herein);

 

WHEREAS, the Parties subsequently entered into additional supplements to the Original Agreement including: (i) a supplement on July 1, 2016; (ii) a supplement on April 4, 2017; (iii) a supplement on September 19, 2017; (iv) a supplement on May 1, 2018; (v) two supplements on January 1, 2020; and (vi) a letter agreement on February 2, 2022 (collectively, and including all prior amendments, supplements or understandings, whether written or unwritten, the “Prior Supplements”); and

 

WHEREAS, the Parties wish to amend and restate the Original Agreement to supersede the Original Agreement and all Prior Supplements and to clarify and confirm their respective rights and obligations with respect to the Game in the Territory, in each case upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

 

Article 1
Definitions

 

Section 1.01. Definitions. (a) The following terms, as used herein, have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person, whether now or in the future. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

 

“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

 

“Business Day” means a day on which commercial banks are open for business in Los Angeles, California, U.S.

 

“Bug” means any defect of design or bug in the Game which prevents it from performing in accordance with the specifications and expectations of a reasonable End User, or a malfunction in the software of the Game that degrades the experience of the End User, including such defects or bugs. As used herein, “Emergency Bugs” refers to Bugs which have a severe impact on the balanced experience of the Game for End Users (such as farming), and “General Bugs” refers to all other Bugs.

 

“Closed Beta” means a version of the Game released to a selected group of individuals, for free, the release of which is intended to (i) test the stability and compatibility of Client Software and Server Software and (ii) help further develop the Game.

 

“Derivative ARK Game” means any game (other than the Game) subsequently developed by Licensor after the Original Effective Date, which is based upon or relating to the “ARK: Survival Evolved” creative universe.

 

“DLC” means optional downloadable additional content (such as a game add-on or in-game items) which may be offered to an End User for a fee.

 

“End User” means an individual or entity who enters into an end user agreement with respect to the Game that permits such individual or entity to rightfully play the Game.

 

“Error” means any software error, such as logic errors, in the Game that may result in incorrect on unexpected behavior, and includes any Bug.

 

“Force Majeure Event” means an event beyond a Party’s reasonable control that affects such Party’s ability to fulfill or perform any term of this Agreement including (i) strikes, lockouts or other labor difficulties; (ii) fires, floods, acts of God, extremes of weather, earthquakes, tornadoes, or similar occurrences; (iii) riot, insurrection or other hostilities; (iv) embargo; (v) fuel or energy shortages; (vi) delays by unaffiliated suppliers or carriers; (vii) inability to obtain necessary labor, materials or utilities; or (viii) any epidemic, pandemic or disease outbreak (including COVID-19) or worsening thereof.

 

 

“Game” means any and all versions of the software product known, as of the Original Effective Date, as “ARK: Survival Evolved”, in any and all languages, including (i) downloadable software that is required to be installed on a suitable computer for an End User to play such software product (“Client Software”), (ii) software installed by Licensor on a server designated by Licensee to process code and data in order to enable an End User to play such software product (“Server Software”), (iii) text files in all languages contained in the such software product (“Text File”), (iv) DLC related to such software product, (v) any additional or derivative content created for such software product by Licensor (vi) any content created by End Users for such software product, to the extent Licensor or Licensee has rights to such content under their respective agreements with such End Users and (vii) any Bug fixes.

 

“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

 

“Intellectual Property Rights” means any and all intellectual property rights or similar proprietary rights throughout the world, including any and all (i) trademarks, service marks, certification marks, logos, trade names, trade dress, domain names and other indications of origin, including all registrations and applications for registration of, and all goodwill associated with, any of the foregoing (“Trademarks”); (ii) copyrights and registrations and applications for registration thereof; (iii) trade secrets, know-how and other confidential or proprietary information (including processes, techniques and research and development information); (v) database rights, publicity rights and privacy rights and (v) rights to assert, claim or sue and collect damages, losses and expenses for the past, present or future infringement, misappropriation or other violation of any of the foregoing.

 

“Open Beta” means a version of the Game released to the public, for free, the release of which is intended to (i) test the stability and compatibility of Client Software and Server Software and (ii) help further develop the Game.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

 

“Peripheral Products” means any and all non-software products intended for promotional purposes of the Game, including toys, clothes, gifts, ornaments, books, cartoons, movies and souvenirs, but expressly excluding stamps.

 

“Platform” means any online software platform that distributes video games and content to End Users including Steam, Epic Games, Xbox and PlayStation.

 

“Retail Products” means any physical version of the Game (e.g. a CD version) that is sold to End Users in retail stores, rather than through a Platform.

 

“Retail Revenue” means any revenue generated from sales of Retail Products, including revenue generated from DLC sold to End Users who initially purchased a Retail Product.

 

“Territory” means worldwide.

 

 

“Total Revenue” means any and all revenue earned by Licensee by publishing, distributing and selling the Game (excluding any value-added tax) including any and all (i) revenue earned by Licensee by selling in-game virtual items and currency to End Users, (ii) revenue earned by Licensee by selling Peripheral Products, (iii) revenue earned by Licensee by charging End Users for downloads of the Game, (iv) revenue share from Platforms that were approved by Licensee and (v) cash received from Platforms in consideration for the publication of the Game on such Platform; provided, however, that, notwithstanding any of the foregoing, “Total Revenue” shall not include Retail Revenue.

 

(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term	Section
Action	‎9.02
Affected Party	‎10.01
Agreement	Preamble
Bona Fide Offeror	‎8.01(a)
Confidential Information	‎6.01
Confidential Material	‎6.03
Derivative ARK Game Notice	‎8.02(a)
Derivative ARK Game License Agreement	‎8.02(b)
Disclosing Party	‎6.02
Effective Date	Preamble
Election Period	‎8.01(b)
Game License	‎2.01(a)
Initial Term	‎5.01
Offered Interests	‎8.01(a)
Original Agreement	Recitals
Original Effective Date	Recitals
Licensee	Preamble
Licensor	Preamble
Licensee Indemnitees	‎7.03
Licensee Obligations	‎3.01
Licensor Obligations	‎3.02
Peripheral Products License	‎2.01(b)
Party	Preamble
Proposed Price	‎8.01(a)
Proposed Purchaser	‎8.01(a)
Proposed Terms	‎8.01(a)
Prior Supplements	Recitals
Receiving Party	‎6.02
Related Parties	‎6.02
Renewal Term	‎5.01
Royalty Payment	‎4.02
Sale Notice	‎8.01(a)

 

 

Term	Section
Settlement Process	‎4.05
Term	‎5.01
Third Party Infringement	‎9.01

 

Section 1.02.

Interpretation.

 

(a)           The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(b)           The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

(c)           References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified.

 

(d)           Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.

 

(e)           Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.

 

(f)           “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.

 

(g)           References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations.

 

(h)           References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

 

(i)           References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 

(j)           References to one gender include all genders.

 

(k)           References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law.

 

 

Article 2
License and Intellectual Property

 

Section 2.01.  License Grant. (a) Licensor hereby grants to Licensee an exclusive, sublicensable license to use, operate, service (including by way of server maintenance), distribute, offer, sell, charge fees for, market, reproduce, advertise, promote, publish or otherwise commercialize the Game (and any and all Intellectual Property Rights therein), during the Term, within the Territory (such license, the “Game License”). For the avoidance of doubt, such Game License shall include the exclusive right to commercialize Retail Products, during the Term, within the Territory.

 

(b)           Licensor hereby grants to Licensee an exclusive, sublicenseable license to manufacture, distribute, offer, sell, charge fees for, market, advertise, and promote Peripheral Products related to the Game, during the Term, within the Territory (such license, the “Peripheral Products License”). Notwithstanding the foregoing, Licensee shall not distribute Peripheral Products without the prior written consent of Licensor.

 

(c)           For purposes of this ‎Section 2.01, “exclusive” shall mean that Licensor shall not grant any applicable rights to any Person or itself exercise such rights during the Term.

 

Section 2.02. Trademark Rights. Licensee shall be permitted to (a) register and maintain Trademarks related to the Game and (b) perform any localization necessary in different jurisdictions in order to apply for any trademark registrations in such jurisdictions.

 

Article 3
Obligations

 

Section 3.01. Publication Obligations. As between the Parties, Licensee shall perform the following, at its own cost (collectively referred to herein as the “Licensee Obligations”):

 

(a)           Licensee shall set up the servers necessary to publish the Game, or shall assign such obligations to a third party consistent with Licensee’s obligations set forth in this Agreement (it being understood that Licensee shall use its reasonable discretion to determine what server setup is required, and the Parties shall discuss in good faith whenever necessary in order to facilitate the user experience consistent with Licensee’s past practice);

 

(b)           Licensee shall build a website for the purpose of advertising and marketing the Game and shall advertise and market the Game on such website and Licensee’s social media (it being understood that, as between the Parties, Licensee shall have sole and exclusive ownership in respect of any right, title or interest in or to such website or social media content, including the Intellectual Property Rights contained therein);

 

(c)           Licensee shall publish, advertise, market, distribute, and provide online services for the latest version of the Game, wherein such publishing, advertising, marketing, distribution, and provision of services shall not violate the rights of any third party (it being understood that Licensee shall not be in breach of the foregoing to the extent such violation occurred as a result of the Game as provided by Licensor);

 

 

(d)           Licensee shall provide Licensor with prior written notice of the publication and distribution of the Game on any new Platform;

 

(e)           Licensee shall pay for of any game engine usage fees (such as the “Unreal Engine”), where such game engine is necessary for the commercial distribution of the Game;

 

(f)           Licensee shall provide End Users with a Closed Beta and Open Beta at such a time as is mutually agreed upon between the Parties, after the completion of Licensor’s obligations under ‎Section 3.02(e);

 

(g)           Licensee shall use commercially reasonable efforts to protect any and all Intellectual Property Rights in or to the Game pursuant to Applicable Laws (it being understood that Licensee shall promptly notify Licensor if Licensee becomes aware or has reasonable suspicion of any violation of such Intellectual Property Rights, and any enforcement of such Intellectual Property Rights shall be governed by ‎Article 9);

 

(h)           Without limiting ‎Section 3.01(g) above, Licensee shall use commercially reasonable efforts to protect the Game against piracy and hacking;

 

(i)            Licensee shall be responsible for ensuring that its employees do not violate any covenants or Applicable Laws relating to Licensor’s Intellectual Property Rights in and to the Game and shall take reasonable actions necessary to ensure that said employees will not copy, reverse engineer, disassemble, or modify the Game without the prior written permission of Licensor; and

 

(j)            Upon the reasonable written request by Licensor, Licensee shall reasonably assist Licensor by (i) providing Licensor with a reasonably detailed list of technical information to assist Licensor in performing the Licensor Obligations (including information regarding appropriate servers, IP addresses, branding or specifications), (ii) configuring technical systems for hardware and software in order to provide Licensor with the necessary administrative privileges and (iii) providing Licensor with a billing query interface for billing data verification.

 

Section 3.02. Development Obligations. As between the Parties, Licensor shall perform the following, at its own cost (collectively referred to herein as the “Licensor Obligations”):

 

(a)           Licensor shall continue developing and updating the Game on a regular basis (including the Client Software and Server Software) (it being understood that Licensor shall develop and create DLC upon reasonable written request by Licensee);

 

(b)           Licensor shall regularly provide Licensee with any and all source code relating to the latest version of the Game (including the Client Software and the Server Software); provided that Licensor shall promptly provide Licensee with such source code upon reasonable written request by Licensee;

 

(c)           Licensor shall ensure that the Client Software and Server Software provided to Licensee (i) is accurate and complete, (ii) is delivered to Licensee via the Internet or via CD, (iii) is able to provide an online gaming experience for End Users in accordance with the online gaming experiences intended by Licensor’s development of the Game, (iv) is protected in accordance with Applicable Laws and secure upon transmission to Licensee (including all data embedded within such Client Software and Server Software), and (v) is free from Bugs and does not have a high severity of Errors;

 

 

(d)           Licensor shall provide Licensee with the latest complete Text File, as such Text File is periodically updated, necessary to enable Licensee to perform the translation and localization of the Game;

 

(e)           Licensor shall share with Licensee all data with respect to virtual characters and items created by End Users, together with all log data in connection with the Game;

 

(f)           Licensor shall recommend in good faith a commercially reasonable price for the Game (including related DLC);

 

(g)           Licensor shall provide Licensee with the Closed Beta and Open Beta necessary to launch the Game on future Platforms;

 

(h)           Without limiting ‎Section 3.01(g) above, Licensor shall use commercially reasonable efforts to protect the Game against piracy and hacking;

 

(i)           After receiving notice from Licensee of the existence of any Bugs, Licensor shall (i) resolve Emergency Bugs within twenty-four (24) hours after receiving such notice from Licensee and (ii) provide a solution plan for General Bugs (which shall provide for a solution within a reasonable timeframe) within forty-eight (48) hours after receiving such notice from Licensee;

 

(j)           Licensor shall (i) provide Licensee with appropriate support to localize the Game and (ii) at the written request of Licensee, produce assigned scenes, assigned quests, assigned characters, assigned events and assigned equipment within three (3) Business Days of receiving such request;

 

(k)           Licensor shall provide technical training to Licensee in the manner reasonably required by Licensee to complete the Licensee Obligations (it being understood that the Parties agree to negotiate in good faith the payment allocation of expenses incurred in connection with such training); and

 

(l)           Licensor shall provide Licensee with technical support as follows:

 

(i)           Licensor shall assist in obtaining expense information relating to server setup and purchase;

 

(ii)          Licensor shall provide remote assistance in the initial installation, software installation and server maintenance, and shall provide any necessary training for Licensee’s employees during the Closed Beta and Open Beta for future Platforms;

 

(iii)         Licensor shall provide technical solutions to any Errors that appear in the Game (including the Closed Beta and the Open Beta) or that otherwise appear in the translation and localization of the Game;

 

 

(iv)         Licensor shall provide technical advice for the security of the Game and the related servers; and

 

(v)         Licensor shall provide a complete version of the Client Software and Server Software.

 

Section 3.03. No Retail Obligations. Notwithstanding anything to the contrary contained in this Agreement, the Licensee Obligations shall not include any obligations to commercialize Retail Products.

 

Section 3.04. Alignment Meetings. The Parties shall schedule and attend annual meetings to discuss the development of additional products for the Game.

 

Article 4
Payments and Fees

 

Section 4.01. Monthly License Fee. During the Term, Licensee shall pay Licensor a monthly licensing fee of one million five hundred thousand U.S. dollars ($1,500,000), for a total of eighteen million U.S. dollars ($18,000,000) per year.

 

Section 4.02. Royalty Payments. Licensee shall pay Licensor twenty-five percent (25%) of the Total Revenue of the Game (hereinafter referred to as the “Royalty Payment”). For the avoidance of doubt, Licensee shall retain the remaining seventy-five percent (75%) of the Total Revenue. For the avoidance of doubt, Licensee shall not owe Licensor any royalty payments based on Retail Revenue.

 

Section 4.03. DLC Payments. Licensee shall pay Licensor a one-time payment of five million U.S. dollars ($5,000,000) upon the release of each DLC during the Term. Such DLC shall be agreed to by the Parties pursuant to ‎Section 3.02(a).

 

Section 4.04. Other Payments. If Licensee intends to engage in sales activities related to the Game not contemplated by this Agreement, Licensee must (a) obtain prior written consent from Licensor and sign a supplemental agreement with Licensor regarding such sales activities and (b) provide Licensor with information regarding any potential agreements with third parties for such sales activities where such potential agreements would legally bind Licensee or Licensor.

 

Section 4.05. Settlement. During the Term, on a date that is [five (5) days] after the end of each month, Licensee shall prepare and deliver to Licensor a preliminary report containing its calculations of the Royalty Payment, in a format to be mutually agreed-upon by the Parties, in order to verify and confirm the Royal Payment through a settlement process (the “Settlement Process”). Licensor shall confirm receipt within five (5) Business Days after receiving Licensee’s proposal and verify the amount and promptly return the confirmed proposal to Licensee no later than five (5) days after receipt thereof. Licensee shall properly keep the settlement records for each month. After receipt of the returned proposal, pending any disputes pursuant to ‎Section 4.06 below, Licensee shall promptly remit payment to Licensor to the following bank account:

 

Bank of America, Account no: 325070338209, SDE Inc.

 

 

Section 4.06. Disputes. If during the Settlement Process there is a discrepancy in the payments and a dispute arises, the following shall occur:

 

(a)           if the discrepancy is less than one percent (1%), Licensor’s amount prevails; and

 

(b)           if the discrepancy is equal to or greater than one percent (1%), the Parties shall negotiate in good faith to determine the correct amount and, if the discrepancy is not resolved after five (5) Business Days following the date the discrepancy is raised, the settlement amount for such month shall be the based upon the actual payments Licensor received from the Platforms.

 

Section 4.07. Reimbursement. During the Settlement Process, Licensor shall propose the reasonable expenses that it incurred for the prior month in connection with costs that would otherwise have been covered as part of the Licensee Obligations (such as any marketing expenses or server costs). Licensee shall (a) review such proposal and (b) reimburse Licensor for appropriate expenses that Licensee approves, which are to be paid at the settlement confirmation.

 

Section 4.08. Tax Invoices. Licensee shall provide Licensor with the original copy of any withholding tax invoice or certificate within ten (10) Business Days after Licensee pays such withholding tax to the local tax authority or other Governmental Authority. If Licensee fails to provide Licensor with such withholding tax invoice or certificate, Licensee shall pay Licensor for any supplemental copyright payments and/or commissions.

 

Article 5
Term and Termination

 

Section 5.01. License Term. The term of this Agreement shall commence on the Effective Date and continue until December 31, 2035 (the “Initial Term”). After the Initial Term, the term of this Agreement shall renew automatically for three (3) year terms (each, a “Renewal Term” and, together with the Initial Term, the “Term”), unless terminated sooner by (a) written notice of either Party to the other Party within three hundred sixty-five (365) days prior to the expiration of the Initial Term or the Renewal Term, as the case may be, or (b) in accordance with ‎Section 5.02 or ‎Section 5.03. In the case of a termination under clause (a) of this ‎Section 5.01, prior to giving effect to such termination, Licensee shall have the exclusive right to negotiate with Licensor the terms of a new license agreement with respect to the subject matter of this Agreement for a period of one hundred twenty (120) days (it being understood that the Parties shall negotiate and cooperate in good faith during such 120-day period).

 

Section 5.02. Material Breach. Either Party may terminate this Agreement if the other Party has breached any material provision contained in this Agreement; provided that the non-breaching Party provides the breaching Party with thirty (30) days prior written notice to cure such breach (it being understood that the exercise of such right to terminate shall be without prejudice of any rights or remedies that the non-breaching Party may have under Applicable Law including the right to seek compensation and any equitable relief from the breaching Party).

 

Section 5.03. Insolvency. This Agreement may be terminated by a Party before the expiration of the Term if the other Party becomes insolvent, or is transferred to its creditors, or files in any court or agency a petition for bankruptcy, or is served with an involuntary petition in an insolvency proceeding.

 

 

Section 5.04. Effects of Termination. Upon expiration or termination of the Term, the Parties shall proceed in a manner with the End Users’ interests as the top priority. Without limiting the generality of the foregoing, (a) the Parties shall arrange full-time staff to process and maintain the availability of the Game for at least one month; (b) Licensee shall, and shall ensure that its Affiliates, distribution partners and third party channels terminate the sales and publication of the Game on behalf of Licensee; (c) the Parties shall issue a statement together to Licensee’s Affiliates, distribution partners and third channels to terminate Licensee as the publisher of the Game; and (d) notwithstanding the foregoing, each Party shall ensure that all End Users existing before the expiration or termination of the Term shall have the right to continue to use the Game as permitted by the terms and conditions of the applicable end user agreement with such End User.

 

Section 5.05. Survival. Notwithstanding any expiration or termination of this Agreement, the following provisions shall survive such expiration or termination: ‎Article 1; this ‎Section 5.05; ‎Article 6; ‎Section 7.03; ‎Section 7.04; ‎Section 7.05; ‎Article 8 and ‎Article 10.

 

Article 6
Confidentiality

 

Section 6.01. Confidential Information. As used herein, “Confidential Information” refers to a Party’s confidential or proprietary information, including any design, drawing, plan, specification, formula, technology, procedure, system, new products or technical information, software, manufacture, development or marketing skills, business strategy and development plan, supplier information, client information, financial information and any other similar information (no matter in written form or any other tangible form), and any other business secret or nonpublic business information, including patent and trademark rights that have been filed yet not obtained and patent and trademark rights that are about to be filed.

 

Section 6.02. Protection of Confidential Information. Each Party (the “Receiving Party”) shall, at all times (including the execution of this Agreement), keep the Confidential Information of the other Party (the “Disclosing Party”) confidential and, without prior written consent of the Disclosing Party (which shall not be unreasonably refused or delayed), the Receiving Party shall not use any Confidential Information of the Disclosing Party (unless for the purpose of this Agreement) or disclose any Confidential Information of the Disclosing Party to any third party; unless such information: (a) is known to the public prior to the disclosure; (b) is known to the public not because of breach of this Agreement; (c) is legally obtained from the third party not because of any breach by the Receiving Party or third party of any confidentiality obligations owed to the Disclosing Party; or (d) is required to be disclosed by Applicable Law or by any Governmental Authority, or by unappealable judgment, decree or order made by any court or arbitration board of competent jurisdiction. To the necessary extent of this Agreement, a Receiving Party can disclose Confidential Information of the Disclosing Party to any of its Affiliates, potential or actual suppliers, potential or actual service providers, and professional consultants or employees of the Receiving Party (collectively the “Related Parties”); provided, however, that before making any such disclosure, the Receiving Party shall inform such Related Parties of the confidentiality obligations under this Agreement, and shall take all reasonable efforts to get the Related Party’s commitment to undertake the confidentiality obligations hereunder. In the event that any Related Party does not agree to undertake such confidentiality obligations, the Receiving Party shall obtain written consent from the Disclosing Party before making any such disclosure.

 

 

Section 6.03. Return of Confidential Material. All confidential documents and other records (no matter in what form) (hereinafter referred to as “Confidential Material”) that are provided to or obtained by the Receiving Party from the Disclosing Party shall be returned to the Disclosing Party immediately upon termination of this Agreement and copies shall not be retained. If the Receiving Party is required to return such Confidential Material as provided in this ‎Article 6, the Receiving Party shall confirm the completion of the return with the Disclosing Party in writing.

 

Section 6.04. Survival. The obligations under this ‎Article 6 shall survive the expiration or termination of this Agreement for a period of six (6) years, provided that, notwithstanding the following, with respect to the trade secrets (including any source code) of either Party, the obligations under this ‎Article 6 shall survive in until they are no longer deemed a trade secret under Applicable Law.

 

Article 7
Representations and Warranties; Indemnification; Disclaimers

 

Section 7.01. Licensor Representations. Licensor represents and warrants to Licensee that:

 

(a)           Licensor is a corporation duly organized, validly existing and in good standing in accordance with all Applicable Law;

 

(b)           Licensor has full power to enter into this Agreement, is the owner of all Intellectual Property Rights under the Game License and the Peripheral Products License including the Intellectual Property Rights used in the Game, and has the right to grant Licensee all licenses and rights granted under this Agreement, and has already obtained all necessary permissions, consents and approvals;

 

(c)           Licensor’s software and components of the Game, including all contents of the online games, products, logos, and any Intellectual Property Rights, licenses and materials that Licensor licenses or otherwise grants rights to Licensee to use according to this Agreement, do not and will not violate, infringe, misappropriate or in any other way harm any third party’s Intellectual Property Rights;

 

(d)           Licensor’s performance of this Agreement does not and will not violate any Applicable Laws of any country or region which has jurisdiction over Licensor’s or Licensee’s businesses or licensed rights and the Game currently does, and at all times in the future shall, comply with all Applicable Law;

 

(e)           The Game (including all contents) and Licensor’s logos do not and will not include any representations or content that is illegal, obscene, indecent, pornographic, provocative, defamatory, insulting, threatening, likely to incite racial hatred, discriminatory, menacing or in breach of confidence; and

 

 

(f)           None of the licensed rights under the Game License and the Peripheral Products License, including the Game and associated Intellectual Property Rights, that Licensor grants under this Agreement are currently commencing, pending or threatened to take action or proceedings under any court, arbitration board, administrative court or government agency.

 

Section 7.02. Licensee Representations. Licensee represents and warrants to Licensor that:

 

(a)           Licensee can be the publisher of the Game in the Territory during the Term, and has all the necessary licenses, permissions, consents and permits from any applicable Governmental Authority; and

 

(b)           Licensee has full power to enter into this Agreement and is able to undertake the obligations under this Agreement.

 

Section 7.03. Indemnification. Licensor shall indemnify and defend Licensee and any of Licensee’s Affiliates and their respective equityholders, officers, directors, managers, employees and agents (“Licensee Indemnitees”) against, and to hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all damages suffered or incurred by Licensee Indemnities to the extent arising out of, based upon, or relating to (a) any breach of this Agreement by Licensor or any of its Affiliates, (b) Licensor’s or any of its Affiliates’ willful misconduct, fraud or gross negligence or (c) any alleged or actual infringement, misappropriation or other violation of a third party’s Intellectual Property Rights by the Game or Licensee’s use thereof.

 

Section 7.04. Indemnification Procedure. As a condition to Licensee’s right to receive indemnification under ‎Section 7.03, it shall: (a) promptly notify Licensor as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto; (b) cooperate, and cause Licensee Indemnitees to cooperate, with Licensor in the defense, settlement or compromise of such claim or suit; and (c) permit Licensor to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel. Notwithstanding anything to the contrary contained in this Agreement, in no event may Licensor compromise or settle any claim or suit in a manner which admits fault or negligence on the part of any Licensee Indemnitee without the prior written consent of such Licensee Indemnitee. Each Party shall reasonably cooperate with the other Party and its counsel in the course of the defense of any such suit, claim or demand, such cooperation to include using reasonable efforts to provide or make available documents, information and witnesses. Licensor shall have no liability under ‎Section 7.03 with respect to claims or suits settled or compromised without its prior written consent.

 

Section 7.05. Indemnification Step-In. If Licensor does not assume and conduct the defense within sixty (60) days of Licensee’s notice of a claim pursuant to ‎Section 7.04, Licensee may defend against and consent to the entry of any judgment or enter into any settlement with respect to such claims in any manner Licensee deems reasonably appropriate (and Licensee need not consult with, or obtain any consent from, Licensor in connection therewith), and Licensor will remain responsible to indemnify Licensee as provided in ‎Section 7.03.

 

 

Section 7.06. DISCLAIMER OF WARRANTIES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS ARTICLE  7, THIS AGREEMENT IS ENTERED INTO WITHOUT WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

 

Section 7.07. DISCLAIMER OF CONSEQUENTIAL AND OTHER DAMAGES. OTHER THAN IN CONNECTION WITH ANY BREACH OF ARTICLE 6 OR A PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD, NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (PROVIDED THAT ANY SUCH LIABILITY WITH RESPECT TO A THIRD PARTY CLAIM SHALL BE CONSIDERED DIRECT DAMAGES) OF SUCH OTHER PARTY ARISING IN CONNECTION WITH THIS LICENSE.

 

Article 8
Rights of First Refusal and Negotiation

 

Section 8.01. Right of First Refusal. Licensor covenants and agrees with Licensee as follows:

 

(a)           Notice. If Licensor receives an offer from, or desires to enter into an agreement with, any person or entity (the “Bona Fide Offeror”), to acquire all or any part of Licensor’s business (whether by means of a sale of stock or merger, a sale or lease of all or substantially all of the assets comprising Licensor’s business), then Licensor shall not accept such offer or enter into such agreement, unless and until Licensor first shall have delivered to Licensee a written notice of such offer or agreement (the “Sale Notice”), which notice shall include a copy of any written agreement relating to the proposed sale and shall set forth (i) the securities or the assets being proposed to be transferred by Licensor (the “Offered Interests”), (ii) the proposed price and the terms and conditions of payment (the “Proposed Price”), (iii) all other terms and conditions of the proposed transaction (“Proposed Terms”), (iv) the name and address of the proposed transferee (the “Proposed Purchaser”), and (v) an offer to sell or transfer the Offered Interests to Licensee at the Proposed Price and on the Proposed Terms.

 

(b)           Licensee’s Right to Accept. Licensee shall have the right to purchase all or any portion of the Offered Interests upon the terms set forth in the Sale Notice. If Licensee desires to purchase the Offered Interests in whole or in part, Licensee may exercise such right by delivering to Licensor within thirty (30) days following its receipt of the Sale Notice (the “Election Period”), a written election (the “Election”) to purchase such portion of the Offered Interests as it wishes to acquire upon the terms set forth in the Sale Notice.

 

(c)           Failure to Exercise. In the event Licensee fails to make an Election within ten (10) Business Days after the expiration of the Election Period, Licensor may, within a period of one hundred twenty (120) days from the date of the Sale Notice complete the sale of all of the Offered Interests to the Bona Fide Offeror upon the terms set forth in the Sale Notice.

 

 

(d)           Closing. If Licensor does not complete the sale of such Offered Interests within the aforementioned 120-day period, the provisions of this ‎Section 8.01 shall again apply to the unsold Offered Interests, and no sale of such Offered Interests by Licensor shall be made otherwise than in accordance with the terms of this Agreement. If there is any change in the terms of the Bona Fide Offeror disclosed in the Sale Notice, the provisions of this ‎Section 8.01 shall retrigger and this ‎Section 8.01 must be again complied with in its entirety with respect to all such Offered Interests, and no sale of Offered Interests by Licensor shall be made otherwise than in accordance with the terms of this Agreement.

 

Section 8.02. Right of First Negotiation for any Derivative ARK Game. Licensor covenants and agrees with Licensee as follows:

 

(a)           Communications and Notice. From time to time, Licensor shall provide Licensee with updates regarding the development of any Derivative ARK Game. Licensor agrees to consider, in good faith, any suggested feedback or input from Licensee with respect to the development of any such Derivative ARK Game. Licensor shall promptly notify Licensee in writing when the development of any such Derivative ARK Game has advanced to the point where it is appropriate to engage in discussions regarding the licensing, sale or publishing of any such Derivative ARK Game (a “Derivative ARK Game Notice”).

 

(b)           Licensee’s Exclusive Right of First Negotiation. Licensee shall have the exclusive right of first negotiation to enter into a license agreement for publishing of any such Derivative ARK Game (each, a “Derivative ARK Game License Agreement”). Licensor and Licensee shall negotiate in good faith the terms and conditions of each such Derivative ARK Game License Agreement.

 

(c)           Payments Credit. Any payments made by Licensee to Licensor under any Derivative ARK Game License Agreement shall be credited against the monthly licensing fee in ‎Section 4.01 on a monthly basis. If, at the end of a given calendar year, the payments made by Licensee to Licensor under any Derivative ARK Game License Agreement exceed eighteen million U.S. dollars ($18,000,000), Licensor shall refund to Licensee all payments made under ‎Section 4.01 for that given calendar year within thirty (30) days. For the avoidance of doubt, payments made under ‎Section 4.02 shall not be included in the foregoing credit and such payments shall remain unaffected by any Derivative ARK Game License Agreement unless expressly modified by such Derivative ARK Game License Agreement.

 

(d)           Failure to Exercise and Trademark License. In the event that the Parties fail to enter into a Derivative ARK Game License Agreement within one hundred twenty (120) days of Licensee receiving the applicable Derivative ARK Game Notice, Licensor may begin to seek to license the applicable Derivative ARK Game to a third party. If Licensor desires to enter into an agreement with any third party person or entity to license, sell, convey or otherwise transfer the applicable Derivative ARK Game, then Licensor shall not enter into such agreement, unless and until Licensor first shall have delivered to Licensee, and Licensee shall have received (i) a written notice of such agreement, which notice shall include a copy of any written agreement relating to the proposed license, sale, conveyance or transfer and (ii) an offer to license, sell, convey or otherwise transfer to Licensee the applicable Derivative ARK Game under the same terms and conditions that Licensor has offered to such person or entity, and Licensee is given a reasonable period (but no less than ten (10) Business Days) to accept such offer, before Licensor enters into a definitive agreement with such person or entity. If Licensor enters into a definitive agreement for the applicable Derivative ARK Game with a third party, then (A) Licensor shall provide Licensee with prompt notice of the execution of such agreement, (B) Licensee’s payment obligations under ‎Section 4.01 shall cease immediately and (C) at Licensor’s request, Licensee agrees to negotiate in good faith with such third party for a non-exclusive license to Licensee’s trademark rights under ‎Section 2.02.

 

 

Article 9
Intellectual Property Enforcement

 

Section 9.01. Notice. If either Party believes that an infringement, unauthorized use, misappropriation or ownership claim or threatened infringement or other such activity by a third party exists with respect to any Intellectual Property Rights licensed under the Game License or Peripheral Products License or if a third party claims that any Intellectual Property Rights licensed under the Game License or Peripheral Products License is invalid or unenforceable (collectively “Third Party Infringement”), such Party shall inform the other Party and provide the details of such belief or claim.

 

Section 9.02. Right to Bring an Action. Licensee shall have the first right, but not the obligation, to attempt to resolve any Third Party Infringement, including by filing an infringement suit, defending against such claim or taking other similar action, and to compromise or settle any such Third Party Infringement or claim (any of the foregoing, an “Action”). At Licensee’s request, Licensor shall immediately provide Licensee with all relevant documentation (as may be requested by Licensee) evidencing that Licensee is validly empowered by Licensor to take such an Action. Licensor shall be obligated to join Licensee in any such Action if Licensee determines that Licensor is a necessary and/or indispensable party to such Action, and Licensor hereby consents to being joined in, such Action. If Licensee does not intend to prosecute or defend an Action, Licensee shall promptly inform Licensor, and Licensor shall then have the right, but not the obligation, to attempt to resolve any Third Party Infringement or claim, including by filing an Action with respect to any Intellectual Property Rights licensed under the Game License or Peripheral Products License and to compromise or settle any such infringement or claim. Licensor shall cooperate and assist Licensee in all reasonable respects in connection with an Action brought under this ‎Article 9.

 

Section 9.03. Cost of an Action. The respective Party taking Action against Third Party Infringement shall pay all costs associated with such Action.

 

Section 9.04. Settlement. Neither Party shall settle, or otherwise compromise, any Action without the prior written consent of the other Party where such settlement or compromise would (a) give rise to liability (economic or otherwise) to the other Party or (b) in any manner alter, diminish or be in derogation of the other Party’s rights under this Agreement.

 

Section 9.05. Reasonable Assistance. The Party not enforcing or defending the Intellectual Property Rights licensed under the Game License or Peripheral Products License shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence and making its employees available, subject to the other Party’s reimbursement of any out-of-pocket costs incurred by the non-enforcing or non-defending Party in providing such assistance.

 

 

Section 9.06. Distribution of Amounts Recovered. Any amounts recovered by the Party taking an Action pursuant to this ‎Article 9, whether by settlement or judgment, shall be allocated in the following order: (a) to reimburse the Party taking such Action for any costs incurred, (b) to reimburse the Party not taking such Action for its costs incurred in such Action, if it joins such Action; and (c) the remaining amount of such recovery shall be paid to or kept by Licensee; provided that such remaining amount be deemed to be Total Revenue and Licensee shall pay to Licensor a royalty on such remaining amount based on the royalty rates set forth in ‎Section 4.02.

 

Article 10
Miscellaneous

 

Section 10.01. Force Majeure. In case of a Force Majeure Event, the result of which either Party (“Affected Party”) cannot perform any obligation under this Agreement after reasonable and industrious efforts, the Affected Party is not responsible for any liability. In the case of a Force Majeure Event, the Affected Party shall notify the other Party of the occurrence of the Force Majeure Event within ten (10) Business Days after the Force Majeure Event. The Parties shall work together in good faith and exert commercially reasonable efforts to cooperatively seek a solution that is mutually satisfactory.

 

Section 10.02. Transfers. This Agreement shall be binding upon and shall be enforceable by the Parties and their respective successors and permitted assigns. Unless otherwise clearly expressed, without the prior written consent of the other Party, neither Party may transfer or assign its rights and obligations under this Agreement to any third party, except, in the case of Licensee, to an Affiliate or acquirer of all or substantially all of the business of Licensee.

 

Section 10.03. Governing Law. The conclusion, effectiveness, interpretation and implementation of this Agreement shall be governed by the laws and regulations of the state of California in the United States of America.

 

Section 10.04. Dispute Resolution. Any controversies, disputes, or requests arising from the interpretation, breach or termination of this Agreement or the effectiveness of this Agreement shall be settled through negotiation. If no settlement can be reached within thirty (30) days after the occurrence of the dispute, either Party may submit the dispute to the JAMS Los Angeles, California, seeking a resolution by the JAMS Streamlined Arbitration Rules.

 

Section 10.05. Language and Copies. This Agreement shall have two (2) copies, which are written both in Chinese and English. Each Party shall hold one (1) Chinese original and one (1) English original. If there is any difference between Chinese and English texts, the English text shall prevail, govern and control.

 

Section 10.06. Amendments. Any amendment, revision, waiver, absolution or voluntary termination of this Agreement and its provisions shall be signed by the Parties in writing.

 

Section 10.07. Cost. The Parties shall pay for their respective expenses and costs incurred in connection with the negotiation and/or preparation of this Agreement.

 

 

Section 10.08. Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersedes all prior discussion, understandings, letters, notes, memos, suggestions, negotiations, and other documents and agreements between the Parties with respect to the subject matter hereof and thereof, including the Original Agreement and all Prior Supplements.

 

Section 10.09. Severability. If any term, provision, covenant or restriction 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, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

Section 10.10. Non-Waiver. Neither Party’s non-executing, delayed executing or partial executing of any provisions under this Agreement should be construed to as a waiver of any of its rights under this Agreement. Any Party’s waiver of the other Party’s fault or breach pursuant to this Agreement shall not be construed as a waiver of any other or similar fault or breach in the future, and will not affect other provisions of this Agreement in any form.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized officers as of the Effective Date.

 

	SDE, INC.
	By:	/s/ Zhou Ying
		Name:	Zhou Ying
		Title:	CEO
		Date:	9/20/2022

 

 

	SNAIL GAMES USA, INC.
	By:	/s/ Jim Tsai
		Name:	Jim Tsai
		Title:	CEO
		Date:	9/20/2022

 

 

 

Exhibit 10.13

 

INDEPENDENT DIRECTOR AGREEMENT

 

THIS INDEPENDENT DIRECTOR AGREEMENT is made effective as of [·] (the “Agreement”), between SNAIL, INC., a Delaware corporation (the “Company”), and [·], residing at [·] (“Director”).

 

WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available to serve on the board of directors of the Company (the “Board”); and

 

WHEREAS, the Company believes that Director possesses the necessary qualifications and abilities to serve as a director of the Company and to perform the functions and meet the Company’s needs related to the Board; and

 

WHEREAS, the Company appointed Director effective as of the date hereof (the “Effective Date”) and desires to enter into an agreement with Director with respect to such appointment; and

 

WHEREAS, Director is willing to accept such appointment and to serve the Company on the terms set forth herein and in accordance with the provisions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.             Position. Subject to the terms and provisions of this Agreement, the Company shall cause Director to be appointed, and Director hereby agrees, to serve the Company in such position upon the terms and conditions hereinafter set forth; provided, however, that Director’s continued service on the Board after the initial annual term on the Board, which shall end on the first annual meeting of the Company’s stockholders following the completion of the Company’s initial public offering of its Class A common stock (the “IPO”), shall be subject to any necessary approval by the Company’s stockholders in accordance with the Company’s certificate of incorporation and bylaws as in effect at the time of the IPO and the General Corporation Law of the State of Delaware

 

2.             Service.

 

(a)               Director will serve as a director of the Company and perform all duties as a director of the Company, including without limitation (a) attending meetings of the Board, (b) serving on one or more committees of the Board (each a “Committee”) and attending meetings of each Committee of which Director is a member, and (c) using reasonable efforts to promote the business of the Company. The Company currently intends to hold at least one in-person regular meeting of the Board and each Committee each quarter, together with additional meetings of the Board and Committees as may be required by the business and affairs of the Company. In fulfilling his/her responsibilities as a director of the Company, Director agrees that Director shall act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

 

 

(b)               The Company recognizes that Director: (i) is or may become a full-time executive employee of another entity and that his/her responsibilities to such entity must have priority and (ii) sits or may sit on the board of directors of other entities, subject to any limitations set forth by the Sarbanes-Oxley Act of 2002 and limitations provided by any exchange or quotation service on which the Company’s Class A common stock is listed or traded. Notwithstanding the same, Director will provide the Company with prior written notice of any future commitments to such entities and use reasonable business efforts to coordinate his respective commitments so as to fulfill his obligations to the Company and, in any event, will fulfill his legal obligations as a director. Other than as set forth above, Director will not, without the prior notification to the Board, engage in any other business activity which could materially interfere with the performance of his/her duties, services and responsibilities hereunder or which is in violation of the reasonable policies established from time to time by the Company, provided that the foregoing shall in no way limit his/her activities on behalf of (i) any current employer and its affiliates or (ii) the board of directors of any entities on which he/she currently sits. At such time as the Board receives such notification, the Board may require the resignation of Director if it determines that such business activity does in fact materially interfere with the performance of Director’s duties, services and responsibilities hereunder.

 

3.             Compensation.

 

(a)               Cash Compensation. Director shall receive [·] ($[·]) each quarter in arrears for participation in quarterly Board and Committee meetings, including the annual stockholders’ meeting. There will be no additional compensation for ad hoc or preparatory meetings or for being the chair of a Committee, other than the audit committee of the Board (the “Audit Committee”) and only if appointed the chair of the Audit Committee or for being a regular or non-chair member of the Audit Committee and holding a valid CPA license.

 

(b)               Restricted Stock Units. Director shall receive [·] under the Company’s equity incentive plan (the “IPO Equity Grant”); provided that the IPO Equity Grant is wholly conditional on, and shall only become effective upon (i) the consummation of the initial public offering of ordinary shares of the Company and (ii) the approval of the equity incentive plan by the Board and shareholders. Such units shall vest as follows [·]. Notwithstanding the foregoing, if Director ceases to be a member of Board at any time during the vesting period for any reason (such as resignation, withdrawal, death, disability or any other reason), then any unvested units shall be irrefutably forfeited. Furthermore, Director agrees that the shares shall be subject to any “lock up” agreement required to be signed by the Company’s officers in connection with any financing.

 

(c)               Independent Contractor. Director’s status during the Directorship Term (as defined below) shall be that of an independent contractor and not, for any purpose, that of an employee or agent with authority to bind the Company in any respect. All payments and other consideration made or provided to Director under this Section 3 shall be made or provided without withholding or deduction of any kind, and Director shall assume sole responsibility for discharging all tax or other obligations associated therewith.

 

(d)               Expense Reimbursements. Upon submission of appropriate receipts, invoices or vouchers as may be reasonably required by the Company, the Company will reimburse Director for all reasonable out-of-pocket expenses incurred in connection with the performance of Director’s duties under this Agreement during the Directorship Term (as defined below). Any reimbursements for out-of-pocket expenses of Director in excess of $[·] must be approved in advance by the Company.

 

 

4.             Directorship Term. The “Directorship Term,” as used in this Agreement, shall mean the period commencing on the Effective Date and terminating on the earliest of the following to occur: (a) the death or disability of Director; (b) the termination of Director from membership on the Board by the Company; (c) the annual meeting of the Company’s stockholders in which Director is not re-elected to the Board by the Company’s stockholders in accordance with the Company’s certificate of incorporation and bylaws; and (d) the resignation by Director from the Board.

 

5.             Director’s Representation and Acknowledgment. Director represents to the Company that Director does not know of any conflict or legal prohibition that would restrict Director from serving the Company per the terms of this Agreement, and that the execution and performance of this Agreement shall not be in violation of any agreement or obligation (whether or not written) that Director may have with or to any person or entity, including without limitation, any prior or current employer. Director hereby acknowledges and agrees that this Agreement (and any other agreement or obligation referred to herein) shall be an obligation solely of the Company, and Director shall have no recourse whatsoever against any stockholder of the Company or any of their respective affiliates with regard to this Agreement.

 

6.             Director Covenants.

 

(a)               Unauthorized Disclosure. Director agrees and understands that in Director’s position with the Company, Director has been and will be exposed to and receive information relating to the confidential affairs of the Company, including, but not limited to, technical information, business and marketing plans, strategies, customer information, other information concerning the Company’s products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. Director agrees that during the Directorship Term and thereafter, Director will keep such information confidential and will not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company; provided, however, that (i) Director shall have no such obligation to the extent such information is or becomes publicly known or generally known in the Company’s industry other than as a result of Director’s breach of his/her obligations hereunder and (ii) Director may, after giving prior notice to the Company to the extent practicable under the circumstances, disclose such information to the extent required by applicable laws or governmental regulations or judicial or regulatory process. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Directorship Term, Director will promptly return to the Company and/or destroy at the Company’s direction all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data, other product or document, and any summary or compilation of the foregoing, in whatever form, including, without limitation, in electronic form, which has been produced by, received by or otherwise submitted to Director in the course or otherwise as a result of Director’s position with the Company during or prior to Directorship Term, provided that the Company shall retain such materials and make them available to Director if requested in connection with any litigation against Director under circumstances in which (i) Director demonstrates to the reasonable satisfaction of the Company that the materials are necessary to his/her defense in the litigation and (ii) the confidentiality of the materials is preserved to the reasonable satisfaction of the Company.

 

 

(b)               Notwithstanding anything in this Agreement or otherwise, Director understands that Director has the right under federal law to certain protections for cooperating with or reporting legal violations to the Securities and Exchange Commission (the “SEC”) and/or its Office of the Whistleblower, as well as certain other governmental authorities and self-regulatory organizations, and as such, nothing in this Agreement or otherwise is intended to prohibit Director from disclosing this Agreement to, or from cooperating with or reporting violations to, the SEC or any other such governmental authority or self-regulatory organization, and Director may do so without notifying the Company. The Company may not retaliate against Director for any of these activities, and nothing in this Agreement or otherwise would require Director to waive any monetary award or other payment that Director might become entitled to from the SEC or any other governmental authority.

 

(c)               Non-Solicitation. During Directorship Term and for a period of two (2) years thereafter, Director shall not interfere with the Company’s relationship with, or endeavor to entice away from the Company, any person who, on the date of the termination of the Directorship Term and/or at any time during the one year period prior to the termination of the Directorship Term, was an employee or customer of the Company or otherwise had a material business relationship with the Company.

 

(d)               Non-Compete. Director agrees that during the Directorship Term and for a period of two (2) years thereafter, Director shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise; engage in the business of developing, marketing, selling or supporting technology to or for businesses in which the Company engages in or in which the Company has an actual intention, as evidenced by the Company’s written business plans, to engage in, within any geographic area in which the Company is then conducting such business. Nothing in this Section 6 shall prohibit Director from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than three percent (3%) of the outstanding stock of any class of securities of a corporation, which are publicly traded, so long as Director has no active participation in the business of such corporation.

 

(e)               Code of Ethics and Insider Trading Policy. Director agrees to comply with the Company’s Code of Ethics and Insider Trading Policy. The Code of Ethics and Insider Trading Policy may either or both be amended by the Company from time to time.

 

7.             Director and Officer Liability Insurance. Director shall be covered by the Company’s director and officer’s liability insurance policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

 

8.             Limitation of Liability; Right to Indemnification. Director shall be entitled to limitations of liability and the right to indemnification against expenses and damages in connection with claims against Director relating to his/her service to the Company to the fullest extent permitted by the Company’s Certificate of Incorporation and Bylaws (as such documents may be amended from time to time) and other applicable law.

 

 

9.             Amendments and Waiver. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by both parties. No waiver of any provision of this Agreement on a particular occasion will be deemed or will constitute a waiver of that provision on a subsequent occasion or a waiver of any other provision of this Agreement.

 

10.           Binding Effect, Assignments. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Notwithstanding the provisions of the immediately preceding sentence, neither Director nor the Company shall assign all or any portion of this Agreement without the prior written consent of the other party.

 

11.          Severability. The provisions of this Agreement are severable, and any provision of this Agreement that is held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable in any respect will not affect the validity or enforceability of any other provision of this Agreement.

 

12.           Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws.

 

13.           Entire Agreement. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understanding relating to such subject matter.

 

14.           Miscellaneous. This Agreement may be executed by the Company and Director in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Counterparts may be delivered via fax, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. Director acknowledges that this Agreement does not constitute a contract of employment and does not imply that the Company will continue his/her service as a director for any period of time.

 

Signature Page Follows.

 

 

IN WITNESS WHEREOF, the parties have executed this Independent Director Agreement as of the date shown above.

 

	SNAIL, INC.
	a Delaware corporation
	By:
	Name:	[·]
	Title:	[·]
	DIRECTOR
	By:
	Name:	[·]

 

 

 

Exhibit 10.14

 

FORM OF SECURITIES EXCHANGE AGREEMENT

 

THIS SECURITIES EXCHANGE AGREEMENT (this “Agreement”) is made and entered into as of [•], 2022, by and among (i) Snail, Inc., a Delaware corporation (the “Company”), (ii) each holder of outstanding shares of common stock of Snail Games USA Inc., a California corporation (“SGUSA”), as listed on Exhibit A hereto (each, a “Securityholder” and, collectively, the “Securityholders”), (the Company and the Securityholders, collectively, the “Parties”). The Parties are also parties to that certain Second Amended and Restated Restructuring Framework Agreement, dated as of May 30, 2022 (the “RFA”).

 

RECITALS

 

WHEREAS, the Securityholders collectively own 100% of the issued and outstanding shares of SGUSA, each in the amounts set forth on Exhibit A hereto under the heading “Number of SGUSA Exchange Securities” (collectively, the “Exchange Securities”), and SGUSA has issued no other capital stock;

 

WHEREAS, the Parties desire that the Company acquires 100% of the Exchange Shares from the Securityholders pursuant to the terms and conditions set forth herein (the “Securities Exchange”), in exchange for the issuance to the Securityholders of shares of the Company’s capital stock in the amounts and of the classes set forth on Exhibit A hereto under the heading “Number and Class of Company Replacement Securities” (the “Replacement Securities”);

 

WHEREAS, as a result of the Securities Exchange, SGUSA will become a wholly owned subsidiary of the Company;

 

WHEREAS, the Company has filed a Registration Statement on Form S-1 (Registration No. 333-267483) (the “Registration Statement”) with the U.S. Securities and Exchange Commission in connection with its initial public offering (the “IPO”);

 

WHEREAS, the Board of Directors of SGUSA has approved the Securities Exchange and the other terms of this Agreement; and

 

WHEREAS, the Securityholders have unanimously approved the Securities Exchange and the other terms of this Agreement and certain other matters set forth therein;

 

WHEREAS, the Securities Exchange is intended to qualify as an exchange under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”);

 

NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which the Parties acknowledge, the Parties hereby agree as follows:

 

1.

Agreement to Exchange Securities.

 

1.1.

Authorization. As of the Closing (as defined below), the Company will have authorized the issuance to the Securityholders, pursuant to the terms and conditions of this Agreement, of the full number of Replacement Securities that are to be issued to the Securityholders hereunder.

 

 

1.2.

Agreement to Exchange; Full Satisfaction. On the terms and subject to the conditions set forth herein, at the Closing, each Securityholder shall transfer, convey and assign all of such Securityholder’s right, title and interest in and to all of the Exchange Securities held by such Securityholder, free and clear of any liens or encumbrances, to the Company, and shall receive in exchange therefor a number of newly issued Replacement Securities, all as set forth opposite such Securityholder’s name on Exhibit A hereto under the heading “Number and Class of Company Replacement Securities.” The Exchange Securities shall be transferred to the Company together with all rights attaching to or arising from those Exchange Securities on or after Closing. The Replacement Securities delivered in accordance with the terms hereof shall be deemed to have been delivered in full satisfaction of all rights pertaining to the Exchange Securities.

 

1.3.

New Governance Documents. Each Party hereby approves (i) the Company’s Amended and Restated Certificate of Incorporation substantially in the form attached hereto as Exhibit B, (ii) the Company’s Amended and Restated Bylaws substantially in the form attached hereto as Exhibit C.

 

1.4.

Tax Treatment. The Securities Exchange is intended to qualify as an exchange under Section 351 of the Code. The Parties agree not to take any position inconsistent with the foregoing.

 

2.

Closing.

 

2.1.

The Closing. Subject to the satisfaction or waiver of the conditions set forth in Sections 6 and ‎7 hereof, the Securities Exchange of the Replacement Securities for the Exchange Securities and the other transactions contemplated by this Agreement will take place immediately prior to the closing of the Company’s IPO (the “Closing”). Promptly following the Closing, each Securityholder shall deliver to the Company (i) if the Securityholder is a U.S citizen or otherwise a “U.S. person” for purposes of the Code, a properly completed and executed U.S. Internal Revenue Service Form W-9 or (ii) if the Securityholder is not a U.S citizen or a “U.S. person” for purposes of the Code, a properly completed and executed U.S. Internal Revenue Service Form W-8BEN.

 

3.

Representations and Warranties of the Company.

 

The Company hereby represents and warrants to each Securityholder as of immediately prior to the Closing that:

 

3.1.

Organization, Good Standing, Corporate Power and Qualification. The Company has been duly incorporated and organized, and is validly existing in good standing, under the laws of the State of Delaware. The Company has the requisite corporate power and authority to enter into and perform this Agreement, to own and operate its properties and assets and to carry on its business as currently conducted.

 

 

3.2.

Due Authorization. All corporate action on the part of the Company’s directors and stockholders necessary for (i) the authorization, execution, delivery of, and the performance of all obligations of the Company under this Agreement and (ii) the authorization, issuance, reservation for issuance and delivery of all of the Replacement Securities pursuant to this Agreement has been taken. This Agreement, when executed and delivered, will constitute valid and legally binding obligations of the Company, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) applicable securities laws limits on indemnification and (iii) the effect of rules of law governing the availability of equitable remedies (collectively, the “Enforceability Exceptions”).

 

3.3.

Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 1,000 shares of common stock, par value $0.0001 per share, 100 of which are issued and outstanding (the “Initial Shares”). At the Closing and giving effect to the transactions contemplated by this Agreement, all of the Initial Shares will be canceled for no consideration and the authorized capital stock of the Company shall consist of: (a) 500,000,000 shares of Class A common stock, par value $0.0001 per share (the “Class A common stock”), (b) 100,000,000 shares of Class B common stock, par value $0.0001 per share (the “Class B common stock”) and (c) 100,000,000 shares of preferred stock, $0.0001 par value per share. There are no outstanding options, warrants, rights, calls, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other commitments, contingent or otherwise, of any kind obligating the Company to issue, directly or indirectly, any additional shares of its capital stock or other equity securities.

 

4.

Representations, Warranties and Certain Agreements of the Securityholders.

 

Each Securityholder hereby represents and warrants, solely with respect to itself, to the Company as of immediately prior to the Closing that:

 

4.1.

Authorization. This Agreement constitutes such Securityholder’s valid and legally binding obligation, enforceable in accordance with its terms except as may be limited by the Enforceability Exceptions. Such Securityholder has full power and authority to enter into this Agreement. All corporate action on the part of SGUSA’s directors and stockholders necessary for the authorization, execution, delivery of, and the performance of all obligations of such Securityholder under this Agreement has been taken.

 

4.2.

Status of SGUSA. SGUSA has been duly incorporated and organized, and is validly existing in good standing, under the laws of the State of California. SGUSA has the requisite corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted. The information on the issued and outstanding shares of SGUSA set forth in the recitals and in Exhibit A hereto under the heading “SGUSA Exchange Securities” with respect to the Exchange Securities held by such Securityholder is correct and complete.

 

 

4.3.

Title to Exchange Securities. The Exchange Securities to be exchanged by such Securityholder under this Agreement have been validly issued to such Securityholder in compliance with all applicable laws and have been fully paid-in, either in cash or in kind, and have not been repaid or returned in any way. Such Securityholder holds full and unrestricted title to, and is the legal and beneficial owner of, the Exchange Securities to be exchanged by such Securityholder under this Agreement; they are free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest. Such Securityholder agrees not to sell or transfer, or create or subject to any encumbrance, pledge, lien or mortgage, any interest in the Exchange Securities. As of the Closing, such Securityholder has no interest in or rights to securities of SGUSA that are not being exchanged into securities of the Company; and all of such Securityholder’s interests in and rights to securities of the SGUSA have been so exchanged or extinguished.

 

4.4.

Exchange for Own Account. The Replacement Securities to be acquired by such Securityholder hereunder will be acquired for investment for such Securityholder’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the U.S. Securities Act of 1933, as amended (“1933 Act”), and such Securityholder has no present intention of selling, granting any participation in or otherwise distributing the same.

 

4.5.

Disclosure of Information. At no time was such Securityholder presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale, purchase or exchange of the Replacement Securities. Such Securityholder has received or has had full access to all the information that such Securityholder considers necessary or appropriate to make an informed investment decision with respect to the Replacement Securities to be acquired by such Securityholder under this Agreement. Such Securityholder has reviewed the disclosure in the prospectus included in Registration Statement and has satisfied itself with respect to the nature of the IPO and any effect of the Securities Exchange and the other transactions contemplated by this Agreement with respect to such Securityholder. Such Securityholder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Replacement Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Securityholder or to which such Securityholder had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.

 

4.6.

Investment Experience. Such Securityholder understands that the acquisition of the Replacement Securities involves substantial risk. Such Securityholder: (i) has experience as a holder of securities of companies in the development stage and acknowledges that such Securityholder is able to fend for himself, herself or itself, as applicable, can bear the economic risk of such Securityholder’s investment in the Replacement Securities and has such knowledge and experience in financial or business matters that such Securityholder is capable of evaluating the merits and risks of this investment in the Replacement Securities and protecting such Securityholder’s own interests in connection with this investment and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Securityholder to be aware of the character, business acumen and financial circumstances of such persons. Such Securityholder’s current address and contact information is as set forth on Exhibit A hereto.

 

 

4.7.

Exempt Offerings. Such Securityholder:

 

(a)

certifies that such Securityholder is an “accredited investor” within the meaning of the Rule 501 of Regulation D promulgated under the 1933 Act, as presently in effect; or

 

(b)

(i) certifies that such Securityholder is not a “U.S. person” within the meaning of Rule 902 of Regulation S promulgated under the Securities Act, as presently in effect, and that such Securityholder is not acquiring the Replacement Securities for the account or benefit of any U.S. person, (ii) agrees to resell the Replacement Securities only in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from the registration requirements of the U.S. securities laws, and agrees not to engage in hedging transactions with regard to such Replacement Securities unless in compliance with the 1933 Act, (iii) agrees that such Replacement Securities shall be subject to a legend to the effect that transfer is prohibited except in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act or pursuant to an available exemption from registration and that hedging transactions involving such Replacement Securities may not be conducted unless in compliance with the 1933 Act, and (iv) agrees that the Company is hereby required to refuse to register any transfer of any Replacement Securities issued to such Securityholder not made in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration.

 

4.8.

Restricted Securities. Such Securityholder understands that the Replacement Securities are characterized as “restricted securities” under the 1933 Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the 1933 Act and applicable regulations thereunder such securities may be resold without registration under the 1933 Act only in certain limited circumstances. In this connection, such Securityholder is familiar with Rule 144 promulgated under the 1933 Act, as presently in effect (“Rule 144”), and understands the resale limitations imposed thereby and by the 1933 Act. Such Securityholder understands that the Company is as of the date hereof under no obligation to register any of the securities sold hereunder. Such Securityholder understands that no public market now exists for any of the Replacement Securities and that it is uncertain whether a public market will ever exist for the Replacement Securities.

 

 

4.9.

Legends. Such Securityholder understands that the Replacement Securities will be notated with one or all of the following legends (which will apply even if the Replacement Securities are in book-entry form and not certificated):

 

(a)

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO TRANSFER of THESE SHARES MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. Hedging transactions involving these Shares may not be conducted unless in compliance with the Act.”

 

(b)

Any legend required by the Company’s Certificate of Incorporation, Bylaws or any other United States federal or state securities laws.

 

4.10.

Compliance with Law. Such Securityholder has fully observed the laws of any jurisdiction applicable to such Securityholder in connection with any invitation to subscribe for the Replacement Securities or any use of this Agreement, including (a) the legal requirements within each jurisdiction applicable to such Securityholder for the acquisition of the Replacement Securities, (b) any foreign exchange restrictions applicable to such acquisition, (c) any foreign direct investment requirements applicable to such acquisition, (d) any governmental or other consents that may need to be obtained and (e) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, exchange or other transfer of any Replacement Securities. Such Securityholder’s subscription and payment for the Replacement Securities, such Securityholder’s continued beneficial ownership of the Replacement Securities, and any offers made by the Company offering any Replacement Securities to such Securityholder, will not violate any applicable securities or other laws of any jurisdiction applicable to such Securityholder.

 

4.11.

Taxation. Such Securityholder has reviewed with such Securityholder’s own tax advisors the United States federal, state and local and any foreign tax consequences of the acquisition of the Replacement Securities and the transactions contemplated by this Agreement. Such Securityholder relies solely on such advisors and not on any statements or representations of the Company, SGUSA, or any counsel or agents of the Company or SGUSA. Such Securityholder understands that such Securityholder (and not the Company or SGUSA) shall be responsible for such Securityholder’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. Such Securityholder understands that (i) it may not rely on any opinion from U.S. legal counsel (including, without limitation, Davis Polk & Wardwell LLP (“Davis Polk”)) regarding the United States federal, state and local and foreign tax consequences associated with this Agreement, the Securities Exchange, the ownership and disposition of the Replacement Securities or the other transactions contemplated hereby (the “Tax Opinions”) received by the Company, (ii) no Tax Opinion will be delivered to the Securityholders and (iii) unless otherwise agreed by the Company, no Tax Opinion delivered to the Company will be shared with the Securityholders.

 

4.12.

Securityholder. Such Securityholder (a) is not bankrupt, of unsound mind, or incapable of managing such Securityholder’s own affairs; (b) has full legal capacity to enter into this Agreement and to perform such Securityholder’s obligations under this Agreement, to carry out the transactions contemplated by this Agreement and to own such Securityholder’s property and assets and carry on such Securityholder’s business; and (c) is able to pay such Securityholder’s debts as and when they fall due.

 

 

4.13.

Individual Shareholders. If such Securityholder is an individual and is married: (a) such Securityholder has obtained any required consent from such Securityholder’s spouse for the purposes of entering into this Agreement and the RFA; and (b) such Securityholder agrees to indemnify and hold harmless the Company for any damages arising from any defect in such consent or failure to obtain such consent.

 

5.

Waivers.

 

5.1.

Waivers. Each Securityholder hereby unconditionally and irrevocably waives any and all provisions of the SGUSA Certificate of Incorporation, the SGUSA Bylaws, the RFA and any other agreement or instrument to which such Securityholder is a party or is otherwise subject to the extent that such provision or provisions may otherwise be violated, implicated or affected by the execution and delivery hereof or by the performance of the transactions contemplated hereby.

 

6.

Conditions to Securityholders’ Obligations at Closing.

 

The obligations of each Securityholder under this Agreement are subject to the fulfillment or waiver, at or before the Closing, of each of the following conditions:

 

6.1.

Bringdown of Representations and Warranties. Each of the representations and warranties of the Company contained in Section 3 shall be true and correct on and as of the date of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

6.2.

Performance. The Company shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing.

 

7.

Conditions to the Company’s Obligations at Closing.

 

The obligations of the Company to the Securityholders under this Agreement are subject to the fulfillment or waiver at or before the Closing of each of the following conditions:

 

7.1.

Bringdown of Representations and Warranties. The representations and warranties of the Securityholders contained in Section 4 shall be true and correct on the date of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

7.2.

Performance. The Securityholders shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing.

 

 

8.

Right of Termination

 

8.1.

Until the Closing has occurred, this Agreement may be terminated by the Company or SGUSA at any time by written notice to all Parties. This Section 8.1 is the only means by which this Agreement may be terminated.

 

9.

General provisions.

 

9.1.

Survival of Warranties. The representations, warranties and covenants of the Company and the Securityholders contained in or made pursuant to this Agreement shall terminate as of the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Securityholders or the Company, as the case may be.

 

9.2.

Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the Parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives; provided that (1) such party consents in writing to be bound by the terms, conditions and obligations under this Agreement; and (2) (A) in the case of any Party other than the Company, the Company gives prior written consent to such assignment; or (B) in the case of the Company, the Company may assign its rights or obligations to an affiliate without prior consent of any other Parties to this Agreement.

 

9.3.

Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware.

 

9.4.

Jurisdiction. The Parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any Party or any of its affiliates or against any Party or any of its affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 9.8 shall be deemed effective service of process on such Party.

 

9.5.

WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

 

9.6.

Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

9.7.

Titles and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Agreement.

 

9.8.

Notices. Any and all notices required or permitted to be given to a Party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such Party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) at the time of transmission by e-mail, addressed to the other Party at its e-mail address specified herein (or hereafter modified by subsequent notice to the Parties hereto); (iii) one business day after deposit with an express overnight courier for United States deliveries, or two business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (iv) three business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices not delivered personally or by e-mail will be sent with postage and/or other charges prepaid and properly addressed to the Party to be notified at the address or e-mail address as such other Party may designate by one of the indicated means of notice herein to the other Parties hereto.

 

All communications shall be sent to the respective Parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 9.8.

 

If notice is given to the Company, it shall be made to:

 

Snail, Inc.

12049 Jefferson Blvd.

Culver City, CA 90230

United States of America

Attention: Jim Tsai, Chief Executive Officer

E-mail: jimt@snailgamesusa.com

 

with a copy to:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention: Byron Rooney and John Runne

E-mail: byron.rooney@davispolk.com and john.runne@davispolk.com

 

 

9.9.

Amendments and Waivers. Any term of this Agreement may be amended and 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 Company and the holders of 66 2/3% of the Exchange Shares then outstanding. Any amendment or waiver effected in accordance with this Section 9.9 shall be binding upon each Party. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. No waiver granted under this Agreement as to any one provision herein shall constitute a subsequent waiver of such provision or of any other provision herein, nor shall it constitute the waiver of any performance other than the actual performance specifically waived.

 

9.10.

Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or any other governmental, regulatory or administrative authority, agency or official to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

9.11.

Entire Agreement. This Agreement, the documents referred to herein and the related resolutions, together with all the Exhibits hereto and thereto, constitute the entire agreement and understanding of the Parties with respect to the subject matter of this Agreement, and supersede any and all prior understandings and agreements, whether oral or written, between or among the Parties hereto with respect to the specific subject matter hereof.

 

9.12.

Further Assurances. The Parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement and the Securities Exchange. At and after the Closing, the officers and directors, or any of them individually, of the Company and SGUSA shall be authorized to execute and deliver, in the name and on behalf of the Company, SGUSA or the Securityholders, as applicable, any documents or filings and to take and do any other actions and things to effect the Securities Exchange and the other transactions contemplated by this Agreement, including, without limitation, any “blue sky” or other securities filings required by the Securities Exchange.

 

9.13.

Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the Parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement, other than as set forth in Section 9.14.

 

9.14.

Independent Counsel. Each Securityholder acknowledges that: (a) this Agreement has been prepared on behalf of the Company by Davis Polk, legal counsel to the Company, and that such legal counsel only represents the Company and does not represent, and is not acting on behalf of, such Securityholder or any other Party; and (b) such Securityholder has been provided with an opportunity to consult with his, her or its own counsel with respect to this Agreement.

 

* * *

 

 

IN WITNESS WHEREOF, the Parties have executed this Securities Exchange Agreement as of the date first written above.

 

	SNAIL, INC.
	By:
		Name:
		Title:

 

 

IN WITNESS WHEREOF, the Parties have executed this Securities Exchange Agreement as of the date first written above.

 

	[SECURITYHOLDER]
	By:
		Name:
		Title:

 

	Email:
	Address:

 

 

Schedule A

 

Securityholders

 

Name	Contact Information	Number of SGUSA Exchange Securities	Number and Class of Company Replacement Securities

 

 

 

Exhibit 10.15

 

SNAIL, INC.

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

This Restricted Stock Unit Award Agreement (“Agreement”) is entered into by and between Snail, Inc. (the “Company”) and the participant whose name appears below (the “Participant”) in order to set forth the terms and conditions of the Restricted Stock Units (the “RSUs”) granted to the Participant under the Snail, Inc. 2022 Omnibus Incentive Plan (the “Plan”).

 

Participant’s Name:

 

Award Type		“Date of Grant”		Number of RSUs		“Vesting Schedule”
RSUs		[●]		[●]		See Schedule I

 

Subject to the attached Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, the Company hereby grants to the Participant, on the Date of Grant, and the Participant hereby accepts, the number of RSUs, with the Vesting Schedule as set forth in Schedule I below. Capitalized terms used but not otherwise defined herein or in the attached Terms and Conditions shall have the meanings ascribed to such terms in the Plan.

 

IN WITNESS WHEREOF, the Company and Participant have duly executed and delivered this Agreement as of the Date of Grant.

 

SNAIL, INC.			PARTICIPANT
By:
	Name:  [●]		Name: [●]
	Title:  [●]

 

PLEASE RETURN ONE SIGNED COPY OF THIS AGREEMENT TO:

 

Snail, Inc.

12049 Jefferson Boulevard

Culver City, CA 90230

Attn: [●]

 

 

SNAIL, INC.

2022 OMNIBUS INCENTIVE PLAN

Terms and Conditions of RSU Grant

 

1.

GRANT OF RSUs. The RSUs have been granted to the Participant to motivate and reward the Participant to perform at the highest level and contribute significantly to the success of the Company, thereby furthering the best interests of the Company and its shareholders. Each RSU represents the right to receive the value of one share of the Company’s Class A common stock, $0.0001 par value (“Common Share”). Each RSU constitutes a contingent and unsecured promise by the Company to deliver one Common Share on the settlement date, as set forth in Section ‎3.

 

2.

VESTING. The RSUs shall vest in accordance with the Vesting Schedule, subject to the Participant’s continuous service with the Company or any Subsidiary through each applicable vesting date.

 

a.

Except as set forth in Section 2, unvested RSUs shall be immediately forfeited upon the Participant’s Termination of Service for any reason.

 

b.

In the event of the Participant’s Termination of Service by the Company and its Subsidiaries without Cause or by the Participant for Good Reason, in either case, within 24 months following a Change in Control, the RSUs shall become fully vested.

 

c.

For purposes of this Agreement, “Good Reason” shall be as defined in the Participant’s employment or service agreement, if any, or if not so defined, shall mean (i) a material reduction by the Company or its Subsidiaries in the Participant’s base salary or target bonus opportunity, other than any such reduction that applies generally to similarly situated employees of the Company and its Subsidiaries; or (ii) the relocation of the Participant’s principal place of employment to a location outside a 50 mile radius from its current location; provided that, for the avoidance of doubt, this clause (ii) shall not give rise to Good Reason in the event Participant is provided with a remote work arrangement including, without limitation, in lieu of relocation; provided, further, that, in each case, (x) the Participant shall provide the Company with written notice specifying the circumstances alleged to constitute Good Reason within 60 days following the first occurrence of such circumstances; (y) the Company shall have 30 days following receipt of such notice to cure such circumstances; and (z) if the Company has not cured such circumstances within such 30-day period, the Participant shall terminate his or her employment or service no later than 30 days after the end of 30-day period. For the avoidance of doubt, if the Participant does not deliver a written notice to the Company specifying the circumstances alleged to constitute Good Reason within 60 days following the first occurrence of such circumstances, the event will no longer constitute Good Reason.

 

 

3.

SETTLEMENT. Except as otherwise set forth in the Plan, the RSUs will be settled in Common Shares and the Participant shall receive Common Shares that corresponds to the number of RSUs that have become vested as of the applicable vesting date, which shall be delivered on the date that is no later than fifteen (15) days following the applicable vesting date, as determined in the sole discretion of the Committee.

 

4.

DIVIDEND EQUIVALENT PAYMENTS. Until the RSUs settle in the manner set forth in Section ‎3, if the Company pays a dividend on Common Shares, the Participant will be entitled to a payment in the same amount as the dividend the Participant would have received if he or she held Common Shares in respect of his or her vested and unvested RSUs held but not previously forfeited immediately prior to the record date of the dividend (a “Dividend Equivalent”). No such Dividend Equivalents will be paid to the Participant with respect to any RSU that is thereafter cancelled or forfeited prior to the applicable vesting date. The Committee will determine the form of payment in its sole discretion and may pay Dividend Equivalents in cash, Common Shares, or a combination thereof. The Company will pay the Dividend Equivalents within fifteen (15) days of the vesting date of the RSUs to which such Dividend Equivalents relate.

 

5.

NONTRANSFERABILITY. Except as may be permitted by the Committee, no portions of the RSUs shall be assignable, alienable, saleable or transferable by a Participant other than (i) by will, (ii) pursuant to Section 13(e) in the Plan, or (iii) to the Company as a result of forfeiture of the RSUs as provided herein, unless and until payment is made in respect of vested RSUs in accordance with the provisions hereof and the Participant has become the holder of record of the vested Common Shares issuable hereunder.

 

6.

TAX AND WITHHOLDING. Pursuant to rules and procedures that the Company or any of its Subsidiaries establishes, federal, state, local or foreign income or other tax or other withholding obligations arising upon settlement of the RSUs may be satisfied, in the Committee’s sole discretion, by having the Company or a Subsidiary withhold Common Shares, by having the Participant tender Common Shares or by having the Company or such Subsidiary withhold cash if the Company provides for a cash withholding option, in each case in an amount sufficient to satisfy the tax or other withholding obligations. Common Shares withheld or tendered will be valued using the Fair Market Value of the Common Shares on the date the RSUs are settled. Any withholding or tendering of Common Shares shall comply with the requirements of Financial Accounting Standards Board, Accounting Standards Codification, Topic 718, and any withholding satisfied through a net-settlement of the RSUs shall be limited to the maximum statutory withholding requirements. The Participant acknowledges that, if he or she is subject to taxes in more than one jurisdiction, the Company and the applicable Subsidiary may be required to withhold or account for taxes in more than one jurisdiction.

 

7.

RIGHTS AS STOCKHOLDER. The Participant will not have any rights as a stockholder in the Common Shares corresponding to the RSUs prior to settlement of the RSUs other than the rights set forth herein.

 

 

8.

SECURITIES LAW COMPLIANCE.

 

a.

All certificates, if any, for Common Shares and/or other securities delivered under the Plan pursuant to any award or the exercise or settlement thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

b.

The Company will not be obligated to deliver any Common Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all award conditions have been met or removed to the Committee’s satisfaction, (ii) as determined by the Committee, all other legal matters regarding the issuance and delivery of such Common Shares have been satisfied, including any applicable securities laws, stock market or exchange rules and regulations or accounting or tax rules and regulations and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Committee deems necessary or appropriate to satisfy any applicable laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Committee determines is necessary to the lawful issuance and sale of any Shares, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

 

9.

MISCELLANEOUS.

 

a.

No Right To Continued Employment or Service. This Agreement shall not confer upon the Participant any right to continue in the employ or service of the Company or to be entitled to any remuneration or benefits not set forth in this Agreement or the Plan nor interfere with or limit the right of the Company to modify the terms of or terminate the Participant’s employment or service at any time.

 

b.

No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan or acquisition or sale of the underlying Common Shares. The Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan or the RSUs. Notwithstanding any provision of the Plan or this Agreement to the contrary, in no event shall the Company or its Subsidiaries be liable to the Participant on account of failure of the RSUs to (i) qualify for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment under U.S. or foreign law, including, without limitation under Section 409A.

 

 

c.

Cancellation or Clawback. The Participant hereby acknowledges and agrees that the Participant and the RSUs are subject to the terms and conditions of Section 18 of the Plan (regarding reduction, cancellation, forfeiture or recoupment of Awards upon the occurrence of certain specified events).

 

d.

Plan to Govern. This Agreement and the rights of the Participant hereunder are subject to all of the terms and conditions of the Plan as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for the administration of the Plan.

 

e.

Amendment. Subject to the restrictions set forth in the Plan, the Company may from time to time amend, alter, discontinue, or terminate this Agreement or the Plan. Subject to the Company’s rights pursuant to Section 16 of the Plan, no amendment of the Plan or this Agreement may, without the consent of the Participant, materially adversely affect the rights of the Participant with respect to the RSUs granted pursuant to this Agreement.

 

f.

Severability. In the event that any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

 

g.

Entire Agreement. This Agreement and the Plan contain all of the understandings between the Company and the Participant concerning the RSUs granted hereunder and supersede all prior agreements and understandings.

 

h.

Successors. This Agreement shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by Section 12(c) of the Plan, and any person or persons who shall, upon the Participant’s death, acquire any rights hereunder in accordance with this Agreement or the Plan.

 

SCHEDULE I

 

Vesting Schedule of RSUs

 

1.

DEFINITIONS. Capitalized terms not defined herein shall have the meaning set forth in the Restricted Stock Unit Award Agreement (the “Agreement”) to which this Schedule I (this “Appendix”) is appended. For purposes of this Appendix:

 

a.

“Average Annual Growth Rate” or “AAGR” means the Company’s average annual revenue growth rate, as calculated by measuring “Revenues, net” on the Company’s most recently available quarterly financial statements prepared by the Company’s independent auditors under the U.S. Generally Accepted Accounting Principles as of each of the Vesting Date (as defined below), expressed as a percentage return.

 

 

As an example, The AAGR between the IPO Date and the third anniversary of the IPO Date will be calculated as follows:

 

AAGR (third anniversary) =	Revenues, net (third anniversary) – Revenues, net (IPO Date)
	Revenues, net (IPO Date)

 

b.

“IPO Date” means the effective date on which the Registration Statement is declared effective by the Securities and Exchange Commission in connection with the Company’s initial public offering.

 

2.

VESTING SCHEDULE. In order for the RSUs to vest, the award recipient must be continuously employed as a service provider by the Company or one of its subsidiaries through each of the first five anniversaries of the IPO Date (each, a “Vesting Date”) (the “Continuous Service Requirement”). Assuming the satisfaction of the Continuous Service Requirement, the number of RSUs that will be earned and vest on the Vesting Date shall be determined by application of the performance conditions as set forth below, subject to the terms set forth in the Agreement and the terms and conditions contained therein. The Committee shall retain the sole discretion to adjust any or all of the performance conditions to reflect any significant event that the Committee determines, in its good faith judgment, is likely to have a meaningful impact on the likelihood of the achievement of the performance conditions. Final determinations regarding the levels of performance conditions achieved (and corresponding number of RSUs earned) shall be made by the Committee in good faith, based on its beliefs regarding the spirit and intent of the Plan.

 

Except as otherwise set forth in the Plan or the Agreement or as may be determined by the Committee in its sole discretion and subject to the Continuous Service Requirement, the RSUs awarded under this Agreement shall vest according to the following schedule:

 

a.

10% of the RSUs awarded under this Agreement shall vest on the first anniversary of the Company’s IPO Date if the Company’s AAGR is 15% or above during the period between the Company’s IPO Date and the first anniversary of the Company’s IPO Date.

 

b.

An additional 15% of the RSUs awarded under this Agreement shall vest on the second anniversary of the IPO Date if the Company’s AAGR is 30% or above during the period between the Company’s IPO Date and the second anniversary of the Company’s IPO Date.

 

 

c.

An additional 20% of the RSUs awarded under this Agreement shall vest on the third anniversary of the IPO Date if the Company’s AAGR is 45% or above during the period between the Company’s IPO Date and the third anniversary of the Company’s IPO Date.

 

d.

An additional 25% of the RSUs awarded under this Agreement shall vest on the fourth anniversary of the IPO Date if the Company’s AAGR is 60% or above during the period between the Company’s IPO Date and the fourth anniversary of the Company’s IPO Date.

 

e.

An additional 30% of the RSUs awarded under this Agreement shall vest on the fifth anniversary of the IPO Date if the Company’s AAGR is 75% or above during the period between the Company’s IPO Date and the fifth anniversary of the Company’s IPO Date.

 

Notwithstanding the foregoing, if the 75% AAGR is achieved during the period between the Company’s IPO Date and the fifth anniversary of the Company’s IPO Date, any unvested RSUs that did not vest solely due to failure to satisfy the relevant target AAGR on each of the prior Vesting Dates shall be earned and vest in full.

 

 

 

Exhibit 10.16

 

SNAIL, INC.

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

(NON-EMPLOYEE DIRECTOR)

 

This Restricted Stock Unit Award Agreement (“Agreement”) is entered into by and between Snail, Inc. (the “Company”) and the participant whose name appears below (the “Participant”) in order to set forth the terms and conditions of the Restricted Stock Units (the “RSUs”) granted to the Participant under the Snail, Inc. 2022 Omnibus Incentive Plan (the “Plan”).

 

Participant’s Name:

 

Award Type		“Date of Grant”		Number of RSUs		“Vesting Schedule”
RSUs		[●]		[●]		Except as provided in Section ‎2 of the Terms and Conditions set forth below, all of the RSUs awarded on the Date of Grant will vest on the first anniversary of the Date of Grant.

 

Subject to the attached Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, the Company hereby grants to the Participant, on the Date of Grant, and the Participant hereby accepts, the number of RSUs, with the Vesting Schedule as set forth in Schedule I below. Capitalized terms used but not otherwise defined herein or in the attached Terms and Conditions shall have the meanings ascribed to such terms in the Plan.

 

 

IN WITNESS WHEREOF, the Company and Participant have duly executed and delivered this Agreement as of the Date of Grant.

 

SNAIL, INC.			PARTICIPANT
By:
	Name:  [●]		Name: [●]
	Title:  [●]

 

PLEASE RETURN ONE SIGNED COPY OF THIS AGREEMENT TO:

 

Snail, Inc.

12049 Jefferson Boulevard

Culver City, CA 90230

Attn: [●]

 

 

SNAIL, INC.

2022 OMNIBUS INCENTIVE PLAN

Terms and Conditions of RSU Grant

 

(Non-Employee Director)

 

1.

GRANT OF RSUs. The RSUs have been granted to the Participant to motivate and reward the Participant to perform at the highest level and contribute significantly to the success of the Company, thereby furthering the best interests of the Company and its shareholders. Each RSU represents the right to receive the value of one share of the Company’s Class A common stock, $0.0001 par value (“Common Share”). Each RSU constitutes a contingent and unsecured promise by the Company to deliver one Common Share on the settlement date, as set forth in Section ‎3.

 

2.

VESTING. The RSUs shall vest in accordance with the Vesting Schedule, subject to the Participant’s continuous service with the Company or any Subsidiary through each applicable vesting date.

 

a.

Except as set forth in Section 2, unvested RSUs shall be immediately forfeited upon the Participant’s Termination of Service for any reason.

 

b.

Notwithstanding the foregoing, in the event of a Change in Control, unvested RSUs shall become fully vested, subject to the Participant’s continuous service at such time as immediately prior to such Change in Control.

 

3.

SETTLEMENT. Except as otherwise set forth in the Plan, the RSUs will be settled in Common Shares and the Participant shall receive Common Shares that corresponds to the number of RSUs that have become vested as of the applicable vesting date, which shall be delivered on the date that is no later than fifteen (15) days following the applicable vesting date, as determined in the sole discretion of the Committee.

 

4.

DIVIDEND EQUIVALENT PAYMENTS. Until the RSUs settle in the manner set forth in Section ‎3, if the Company pays a dividend on Common Shares, the Participant will be entitled to a payment in the same amount as the dividend the Participant would have received if he or she held Common Shares in respect of his or her vested and unvested RSUs held but not previously forfeited immediately prior to the record date of the dividend (a “Dividend Equivalent”). No such Dividend Equivalents will be paid to the Participant with respect to any RSU that is thereafter cancelled or forfeited prior to the applicable vesting date. The Committee will determine the form of payment in its sole discretion and may pay Dividend Equivalents in cash, Common Shares, or a combination thereof. The Company will pay the Dividend Equivalents within fifteen (15) days of the vesting date of the RSUs to which such Dividend Equivalents relate.

 

 

5.

NONTRANSFERABILITY. Except as may be permitted by the Committee, no portions of the RSUs shall be assignable, alienable, saleable or transferable by a Participant other than (i) by will, (ii) pursuant to Section 13(e) in the Plan, or (iii) to the Company as a result of forfeiture of the RSUs as provided herein, unless and until payment is made in respect of vested RSUs in accordance with the provisions hereof and the Participant has become the holder of record of the vested Common Shares issuable hereunder.

 

6.

TAX AND WITHHOLDING. Pursuant to rules and procedures that the Company or any of its Subsidiaries establishes, federal, state, local or foreign income or other tax or other withholding obligations arising upon settlement of the RSUs may be satisfied, in the Committee’s sole discretion, by having the Company or a Subsidiary withhold Common Shares, by having the Participant tender Common Shares or by having the Company or such Subsidiary withhold cash if the Company provides for a cash withholding option, in each case in an amount sufficient to satisfy the tax or other withholding obligations. Common Shares withheld or tendered will be valued using the Fair Market Value of the Common Shares on the date the RSUs are settled. Any withholding or tendering of Common Shares shall comply with the requirements of Financial Accounting Standards Board, Accounting Standards Codification, Topic 718, and any withholding satisfied through a net-settlement of the RSUs shall be limited to the maximum statutory withholding requirements. The Participant acknowledges that, if he or she is subject to taxes in more than one jurisdiction, the Company and the applicable Subsidiary may be required to withhold or account for taxes in more than one jurisdiction.

 

7.

RIGHTS AS STOCKHOLDER. The Participant will not have any rights as a stockholder in the Common Shares corresponding to the RSUs prior to settlement of the RSUs other than the rights set forth herein.

 

8.

SECURITIES LAW COMPLIANCE.

 

a.

All certificates, if any, for Common Shares and/or other securities delivered under the Plan pursuant to any award or the exercise or settlement thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

b.

The Company will not be obligated to deliver any Common Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all award conditions have been met or removed to the Committee’s satisfaction, (ii) as determined by the Committee, all other legal matters regarding the issuance and delivery of such Common Shares have been satisfied, including any applicable securities laws, stock market or exchange rules and regulations or accounting or tax rules and regulations and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Committee deems necessary or appropriate to satisfy any applicable laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Committee determines is necessary to the lawful issuance and sale of any Shares, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

 

 

9.

MISCELLANEOUS.

 

a.

No Right To Continued Employment or Service. This Agreement shall not confer upon the Participant any right to continue in the service of the Company or to be entitled to any remuneration or benefits not set forth in this Agreement or the Plan nor interfere with or limit the right of the Company to modify the terms of or terminate the Participant’s service at any time.

 

b.

No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan or acquisition or sale of the underlying Common Shares. The Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan or the RSUs. Notwithstanding any provision of the Plan or this Agreement to the contrary, in no event shall the Company or its Subsidiaries be liable to the Participant on account of failure of the RSUs to (i) qualify for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment under U.S. or foreign law, including, without limitation under Section 409A.

 

c.

Cancellation or Clawback. The Participant hereby acknowledges and agrees that the Participant and the RSUs are subject to the terms and conditions of Section 18 of the Plan (regarding reduction, cancellation, forfeiture or recoupment of Awards upon the occurrence of certain specified events).

 

d.

Plan to Govern. This Agreement and the rights of the Participant hereunder are subject to all of the terms and conditions of the Plan as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for the administration of the Plan.

 

e.

Amendment. Subject to the restrictions set forth in the Plan, the Company may from time to time amend, alter, discontinue, or terminate this Agreement or the Plan. Subject to the Company’s rights pursuant to Section 16 of the Plan, no amendment of the Plan or this Agreement may, without the consent of the Participant, materially adversely affect the rights of the Participant with respect to the RSUs granted pursuant to this Agreement.

 

 

f.

Severability. In the event that any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

 

g.

Entire Agreement. This Agreement and the Plan contain all of the understandings between the Company and the Participant concerning the RSUs granted hereunder and supersede all prior agreements and understandings.

 

h.

Successors. This Agreement shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by Section 12(c) of the Plan, and any person or persons who shall, upon the Participant’s death, acquire any rights hereunder in accordance with this Agreement or the Plan.

 

 

 

Exhibit 21.1

 

Snail, Inc.

 

List of Subsidiaries

 

Snail Games USA Inc.	California
Frostkeep Studios, Inc.	California
Eminence Corp.	Delaware
Wandering Wizard LLC	Delaware
VRStudios, Inc.	Washington
Donkey Crew Limited Liability Company	Poland
Snail Innovation Institute	California
Project AWK Projections, LLC	Delaware
BTBX.IO, LLC	Delaware
Matrioshka Games LLC	Delaware

 

 

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

Snail, Inc. and Subsidiaries 

Culver City, California

 

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated May 26, 2022, relating to the consolidated financial statements of Snail Games USA Inc. and Subsidiaries, which are contained in that Prospectus.

 

We also consent to the reference to us under the caption “Experts” in the Prospectus.

 

/s/ BDO USA, LLP

 

Costa Mesa, California 

October 17, 2022

 

 

Exhibit 107

 

Calculation of Filing Fee Tables

 

S-1

(Form Type)

 

SNAIL, INC.

(Exact name of registrant as specified in its charter)

 

Table 1: Newly Registered and Carry Forward Securities

 

		Security Type		Security Class Title		Fee Calculation or Carry Forward Rule		Amount Registered				Proposed Maximum Offering Price Per Unit				Maximum Aggregate Offering Price(1)				Fee Rate		Amount of Registration Fee
Newly Registered Securities
Fees to Be Paid		Equity		Class A common stock		457(a)			5,750,000			$	7.00			$	40,250,000	(2)		$110.20 per $1,000,000		$	4,435.55
Fees to Be Paid		Equity		Warrants to purchase shares of Class A common stock		457(i)			200,000				—				—			—			—	(4)
Fees to Be Paid		Equity		Class A common stock		457(a)			200,000			$	8.75			$	1,750,000	(3)		$110.20 per $1,000,000		$	192.85
Carry Forward Securities
Carry Forward Securities
		Total Offering Amounts														$	42,000,000					$	4,628.40	(5)
		Total Fees Previously Paid																				$	92.70
		Total Fee Offsets																					—
		Net Fee Due																				$	4,535.70

 

(1)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

 

(2)

Includes 750,000 shares of Class A common stock which the underwriters have the option to purchase to cover over-allotments.

 

(3)

Includes up to 200,000 shares of Class A common stock issuable upon the exercise of warrants to purchase Class A common stock.

 

(4)

In accordance with Rule 457(i), the entire registration fee for the warrants is allocated to the shares of Class A common stock underlying the warrants, and no separate fee is payable for the warrants.

 

(5)

$92.70 of such fee was previously paid in connection with the initial filing of the Registration Statement on September 16, 2022.