Item 1.01 Entry Into a Material Definitive Agreement.
Equity Interest Purchase Agreement
Effective October 19, 2021, Grove Inc., a Nevada corporation (the “Company” or “Buyer”) entered into an Equity Interest Purchase Agreement (the “Agreement”) with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company (each a “Seller” and collectively called “Sellers”). The Sellers own all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”). The Company’s CEO and Chairman, Allan Marshall, is the controlling stockholder and the president of MFA Holdings Corp. MFA Holdings Corp. owns twenty percent of the outstanding membership interests in Interactive. Interactive provides programmatic advertising with its SAAS platform which allows for programmatic advertisement placement automatically on any partners’ sites from a simple dashboard.
Pursuant to the terms and conditions of the Agreement, the Company agreed to purchase all the outstanding membership interests of Interactive (the “Transaction”). The purchase price for the sale is $6,100,000, which consists of 666,667 shares of common stock of the Company (the “Shares”) and a cash payment of $2,100,000. The purchase price shall be reduced by the amount in which the Net Working Capital (as defined in the Agreement) at the closing date of the Transaction (the “Closing Date”) is below $100,000.
Additionally, Sellers will be paid up to an additional cash payment of $600,000 in the form of an earnout payment based on certain revenue milestone in accordance with and subject to the terms and conditions of the Agreement. Sellers are prohibited from transferring, assigning, or selling any of the Shares for a period of twelve months from the Closing Date.
The assertions embodied in those representations and warranties were made solely for purposes of the Agreement and are not intended to provide factual, business, or financial information about the Buyer and Sellers. Moreover, some of those representations and warranties (i) may not be accurate or complete as of any specified date, (ii) may be subject to a contractual standard of materiality different from those generally applicable to shareholders or different from what a shareholder might view as material, (iii) may have been used for purposes of allocating risk among the Buyer and Sellers, rather than establishing matters as facts, or (iv) may have been qualified by certain disclosures not reflected in the Agreement that were made to the other party in connection with the negotiation of the Agreement and generally were solely for the benefit of the parties to that agreement. The Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company that has been, is or will be contained in, or incorporated by reference into, documents that the Company files with the SEC.
Employment Agreements
On October 19, 2021, Interactive entered into employment agreements with Rafael Pereira, Joseph Lombas and Wesley DeSouza to serve as executives of Interactive for a monthly salary of $12,500, subject to certain adjustments. The term of these employment agreements is initially one year (the “Minimum Term”) and shall continue unless written notice of termination is given by either party at least 30 days in advance. If either employment agreement is terminated by Interactive without cause or by the executive for good reason (as defined therein), then the executive will be entitled to receive the executive’s salary for the remainder, if any, of the calendar month in which such termination is effective and for the shorter of (i) twelve (12) consecutive months thereafter, or (ii) until the end of the Minimum Term. The employment agreements also contain customary work product, confidentiality, non-competition, and non-solicitation provisions.