Exhibit 4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Amendment No. 1
Under the Securities Exchange Act of 1934
Flexible Solutions International Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
33938T104
(CUSIP Number)
Dan O’Brien
3-1287 Verdier Ave Brentwood Bay, BC,
Canada, V8M 1H1
250 413 7025
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 17, 2022
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check the following box: ☐
*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
CUSIP No. 33938T104
| 1. | NAME OF REPORTING PERSONS – Daniel B. O’Brien | |
| S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - N/A | ||
| 2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* | |
| (a) ☐ | ||
| (b) ☐ | ||
| 3. | SEC USE ONLY | |
| 4. | SOURCE OF FUNDS: N/A | |
| 5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ☐ |
| 6. | CITIZENSHIP OR PLACE OF ORGANIZATION - Canada | |
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER |
| Daniel B. O’Brien - 4,521,900 | ||
| 8 | SHARED VOTING POWER | |
| None | ||
| 9 | SOLE DISPOSITIVE POWER | |
| Daniel B. O’Brien 4,521,900 | ||
| 10 | SHARED DISPOSITIVE POWER | |
| None |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | |
| Dan O’Brien 4,521,900 | ||
| 12 | CHECK THIS BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | ☐ |
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | |
| Dan O’Brien (36.5%) | ||
| 14 | TYPE OF REPORTING PERSON* | |
| IN |
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SCHEDULE 13D
| ITEM 1. | SECURITY AND ISSUER |
Common Stock
Flexible Solutions International Inc.
5803 - 52 Ave.
Taber, Alberta
Canada T1G 1W9
| ITEM 2. | IDENTITY AND BACKGROUND |
| (a) | Daniel B. O’Brien |
| (b) | 3-1287 Verdier Ave Brentwood Bay |
BC, Canada, V8M 1H1
| (c) | Daniel O’Brien. CEO President and Director of Flexible Solutions International Inc. |
| (d) | During the last five years the Reporting Person has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). |
| (e) | During the last five years the Reporting Person has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction nor has any final order, judgment, or decree been entered enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. |
| (f) | Citizenship: Canada |
| ITEM 3. | SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION |
N/A
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| ITEM 4. | PURPOSE OF TRANSACTION |
Merger Agreement
On April 17, 2022, Flexible Solutions International Inc., an Alberta corporation (the “Company” or “FSI”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Lygos, Inc., a Delaware corporation (“Lygos”), FSI Merger Sub I, Inc., a Delaware corporation (“Merger Sub I”), and FSI Merger Sub II, Inc., a Delaware corporation (“Merger Sub II”). Pursuant to the Merger Agreement, (a) Merger Sub I will merge with and into Lygos, Merger Sub I will cease to exist, and Lygos will become a direct, wholly owned subsidiary of FSI (the “First Merger”), and (b) thereafter as part of the same overall transaction, Lygos will merge with and into Merger Sub II, Lygos will cease to exist, and Merger Sub II will survive as a direct, wholly owned subsidiary of FSI (the “Second Merger” and, collectively or in seriatim with the First Merger, as appropriate, the “Merger”).
The transaction was approved by the Boards of Directors of both FSI and Lygos
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) any shares of Lygos capital stock held as treasury stock prior to the Effective Time will be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor, (ii) each other outstanding share of Lygos capital stock will be converted solely into the right to receive a number of common shares of FSI (“FSI Common Shares”) equal to the Exchange Ratio; provided, that no fractional FSI Common Shares will be issued in connection with the Merger as a result of the conversion and any holder of Lygos common stock who would otherwise be entitled to receive a fraction of FSI Common Shares (after aggregating all fractional FSI Common Shares issuable to such holder) shall, in lieu of such fraction of a share, be entitled to receive, from FSI one FSI Common Share and (iii) each Lygos option that is outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) will automatically be assumed by FSI and converted into an option to acquire a number of FSI Common Shares at an adjusted exercise price per share (each such resulting option, a “Rollover Option”), and the number of FSI Common Shares subject to each Rollover Option shall be determined by multiplying the Exchange Ratio and rounding the resulting number down to the nearest whole number of FSI Common Shares. Prior to the Effective Time, unless otherwise determined by Lygos in its sole discretion, Lygos will use commercially reasonable efforts to enter into an agreement (“SAFE Conversion Agreement) with each person (“SAFE Party”) that has entered into a Simple Agreement for Future Equity with the Company (“SAFE”), pursuant to which each SAFE will be terminated, effective as of immediately prior to the Effective Time, with each SAFE Party receiving the number of shares of the Lygos common stock set forth in the applicable SAFE Conversion Agreement. Immediately following the effective time of the Merger, the former stockholders of Lygos are expected to own approximately 66.7% of the outstanding share capital of the Company.
The “Exchange Ratio” will equal the total number of FSI Common Shares on a fully diluted basis outstanding as of the end of the last trading day of the FSI Common Shares on the NYSE American before the Effective Time multiplied by two and then divided by the total number of shares of Lygos capital stock on fully diluted basis outstanding as of the same time.
The Merger Agreement contains customary representations, warranties and covenants made by FSI and Lygos, including covenants relating to obtaining the requisite approvals of the shareholders of FSI and stockholders Lygos, indemnification of directors and officers, and FSI’s and Lygos’s conduct of their respective businesses between the date of signing of the Merger Agreement and the Closing.
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In connection with the Merger, FSI will prepare and file with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will contain a prospectus and a proxy statement, and will seek the approval of FSI’s shareholders with respect to certain actions, including the following (collectively, the “FSI Shareholder Matters”):
| ● | the issuance of the FSI Common Shares to the Lygos stockholders in connection with the transactions contemplated by the Merger Agreement; | |
| ● | the change of control of FSI resulting from the Merger pursuant to pertinent NYSE American rules; | |
| ● | the adoption of the FSI 2022 Equity Incentive Plan; | |
| ● | the election of Eric Steen and other individuals designated by Lygos as directors of FSI; and | |
| ● | the ratification of the amended and restated bylaws of FSI. |
The Closing is subject to satisfaction or waiver of certain conditions including, among other things, (i) the required approvals by the parties’ stockholders and shareholders, as applicable, (ii) the accuracy of the representations and warranties, subject to certain materiality qualifications, (iii) compliance by the parties with their respective covenants, (iv) no law or order preventing the Merger and related transactions, and (v) the listing of the FSI Common Shares to be issued in the Merger on the NYSE American. In connection with the transaction contemplated by the Merger Agreement, Daniel O’Brien, the Company’s Chief Executive Officer, will sell 1,000,000 FSI Common Shares to FSI for $7.50 per share immediately after the Effective Time.
The Merger Agreement may be terminated prior to the Effective Time: (i) by mutual written consent of FSI and Lygos, (ii) by either FSI or Lygos if the Merger shall not have been consummated by September 30, 2022, (iii) by either FSI or Lygos if there is a law or order preventing the Merger and related transactions, (iv) by FSI if approval of the Lygos stockholders shall not have been obtained within forty-eight (48) hours after the date that the definitive Registration Statement / Proxy Statement is filed with the SEC, (v) by either FSI or the Company if the FSI Shareholder Matters are not approved, (vi) by Lygos upon a breach of any representation, warranty, covenant or agreement on the part of FSI or the Merger Subs, or if any representation or warranty of FSI or the Merger Subs shall have become inaccurate, subject to certain materiality qualifications and a thirty (30) day cure period, and (vii) by FSI, upon a breach of any representation, warranty, covenant or agreement on the part of Lygos, or if any representation or warranty of Lygos shall have become inaccurate, subject to certain materiality qualifications and a thirty (30) day cure period.
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Support Agreements
Also in connection with the Merger Agreement, (i) the officers, directors and certain shareholders of FSI holding approximately 37% of the outstanding share capital of FSI have each entered into a support agreement in favor of Lygos (the “FSI Support Agreements”). The FSI Support Agreements place certain covenants on the voting of such shares in favor of approving the FSI Shareholder Matters. The directors and certain stockholders of Lygos collectively holding a sufficient number, type and class of Lygos capital stock to obtain the requisite approval of the Lygos stockholders of the transactions contemplated by the Merger Agreement have entered into similar support agreements with FSI.
Other Agreements
Lygos has entered into a financing arrangement with certain investors which has provided to Lygos $160 million in capital. Under the terms of a note purchase agreement, Lygos issued 5.5% convertible notes with a $160 million principal amount. The conversion price of the convertible note will be set 12 months from the date of the note, and the pricing terms will be set upon the trading price of FSI Common Shares but will be no less than $250M or no greater than $350M. The combined company intends to use these proceeds, in addition to FSI’s cash balance at the closing of the Merger, to fund the development of the combined company’s business. The proceeds from the loan will be used to purchase a portion of the FSI Common Shares from Mr. O’Brien (as discussed above) and to provide working capital to Lygos.
Daniel O’Brien and FSI entered into a registration rights agreement in connection with the transactions contemplated by the Merger Agreement (the “Registration Rights Agreement”). The Registration Rights Agreement will become effective at the closing of the transaction contemplated by the Merger Agreement. The Registration Rights Agreement provides that the Company will file a resale shelf registration statement to provide for the resale of securities delivered in connection with the Merger for the benefit of parties to the Registration Rights Agreement. The Registration Rights Agreement also provides for piggy back registration rights to the parties thereto.
Upon the completion of the transactions contemplated by the Merger Agreement, the present management of the Company will resign and will be replaced by the management of Lygos.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement which is filed as Exhibit 1 hereto and which is incorporated herein by reference.
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Employment and Lock-Up Agreements
Employment Agreement
In connection with and contingent upon the closing of the Merger (the actual date of closing, the “Closing Date”), FSI and Mr. O’Brien entered into a new Employment Agreement, dated April 17, 2022 (the “Employment Agreement”), which will become effective as of the Closing Date. Under the terms of the Employment Agreement, Mr. O’Brien will be employed as FSI’s Head-Flexible Solutions Division, and he will receive an annual base salary of $500,000, which will be increased each year during the Term (as defined below) based on annual increases in the Consumer Price Index (the “Base Salary”). Also immediately after the Effective Time, FSI will purchase 1,000,000 shares of FSI common stock owned by Mr. O’Brien at a price of $7.50 per share (as discussed above). Additionally, on the Closing Date, Mr. O’Brien will receive an option to purchase 500,000 shares of FSI’s common stock pursuant to the FSI 2022 Equity Incentive Plan (the “Option”). The Option will vest and become exercisable on the twelve-month anniversary of the grant date; provided, however, the vesting will accelerate upon Mr. O’Brien’s termination of employment for any reason. While Mr. O’Brien’s Option will be granted with an exercise price equal to the fair market value per share on the date of grant, in the event FSI grants any options during the twelve-month period following the Option grant with an exercise price that is lower than the exercise price set for the Option, FSI will reprice the Option down to such lower exercise price; provided, however, the exercise price per share will in no event be lower than the fair market value per share on the date the Option is granted or, if applicable, the date the Option is subsequently repriced. Moreover, on each of the 20- and 30-month anniversaries of the Closing Date, FSI will issue Mr. O’Brien 1,000,000 shares of FSI’s common stock as a fully vested stock grant, regardless of his employment status at such time.
The term of the Employment Agreement will begin on the Closing Date and continue for a period of five years (the “Term”) or until earlier terminated by either the Company or Mr. O’Brien as provided in the Employment Agreement. If Mr. O’Brien resigns for “good reason” (as defined in the Employment Agreement) in connection with or within 12 months following a “change in control” (as defined in the Employment Agreement) or, if at any time during the Term, FSI terminates Mr. O’Brien’s employment without “cause” (as defined in the Employment Agreement) or Mr. O’Brien resigns from employment for “good reason,” then, in addition to any accrued benefits (as set forth in the Employment Agreement), he will be entitled to receive the following severance payments and benefits: (i) continued payments of any remaining unpaid Base Salary for the rest of the Term plus an additional three months of Mr. O’Brien’s then current Base Salary, (ii) (a) full vesting acceleration of any then-unvested stock options held by Mr. O’Brien and (b) an extension of the post-termination exercise period until the expiration date of any stock options held by Mr. O’Brien, and (iii) to the extent permissible under the terms of the applicable plans, continuation of all FSI welfare benefits, including medical, dental, vision, life and disability benefits Mr. O’Brien and/or his family were receiving, or otherwise reimbursement for the cost of continuing of state health coverage for Mr. O’Brien and/or his family, for up to 18 months following the date of his termination, provided, however, Mr. O’Brien will be required to pay any portion of such cost as required for key executives of the Company upon termination. If, however, Mr. O’Brien’s employment is terminated due to “disability” (as defined in the Employment Agreement), then, in addition to any accrued benefits, FSI will pay him a lump sum of one-months’ worth of his Base Salary, reduced by any disability insurance maintained by the Company to be received by Mr. O’Brien for 6 months following his termination.
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The Employment Agreement also provides that in the event of a change in control of FSI, FSI will engage a consultant to analyze any payments or benefits Mr. O’Brien will receive in connection with the change in control. In the event any such payments or benefits would subject Mr. O’Brien to the 20% excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), FSI will cutback the amount of such payments and benefits if and only if Mr. O’Brien will be economically better off as a result of such cutback on an after-tax basis to avoid the excise tax.
Mr. O’Brien also signed a confidential information and invention assignment agreement and FSI and Mr. O’Brien agreed to a mutual non-disparagement provision.
Lock-Up Agreement
Pursuant to a Lock-Up Agreement between Mr. O’Brien and FSI, Mr. O’Brien has also agreed that he will not sell, transfer or otherwise dispose of any shares of FSI that he owns, or might otherwise acquire, until April 8, 2023. Notwithstanding the above, the Lock-Up Agreement does not apply to the 1,000,000 shares Mr. O’Brien plans to sell after the Closing Date or shares sold or transferred to “Permitted Transferees” as that term is defined in the Lock-Up Agreement.
| ITEM 5. | INTEREST IN SECURITIES OF THE ISSUER |
| (a) | Aggregate number of shares owned: | 4,521,900 | |
| Percent of outstanding shares owned: | 36.5% | ||
| (b) | Sole Power of voting for Reporting Person: | 4,521,900 | |
| (c) | Transactions in securities in the past | ||
| 60 days for Reporting Person: | 0 | ||
| (d) | No other person is known to have power to direct receipt of dividends from, or proceeds from sale of such securities. | ||
| (e) | Not applicable. | ||
| ITEM 6. | CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-SHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. |
The information set forth under Item 4 of this Schedule 13D is incorporated herein by reference. Except for the agreements described in this Schedule 13D, to the best knowledge of Mr. O’Brien, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among Mr. O’Brien or, to the best knowledge of Mr. O’Brien, and any other person with respect to any securities of Flexible Solutions, Inc.
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| ITEM 7. | MATERIAL TO BE FILED AS EXHIBITS |
Exhibit No.
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SIGNATURE
After reasonable inquiry and to the best of the knowledge and belief, I certify that the information as set forth in this statement is true, complete and correct.
| Dated: May 6, 2022 | |
| /s/ Daniel B. O’Brien | |
| Daniel B. O’Brien |
Flexible O’Brien Amend 13D FINAL 5-6-22
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Exhibit 4
Exhibit 5
LOCK-UP AGREEMENT
This lock-up agreement (this “Agreement”) is dated as of April 17, 2022, by and between Flexible Solutions International Inc., an Alberta, Canada corporation (including any of its successors or assigns, “FSI”), and the undersigned stockholder (the “Holder”). Each of FSI and the Holder may be referred to herein as a “Party” and collectively as the “Parties”. Capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).
RECITALS
WHEREAS, concurrently with the execution of this Agreement, FSI has entered into an Agreement and Plan of Merger and Reorganization with Lygos, Inc., a Delaware corporation (the “Company”), FSI Merger Sub I, Inc., a Delaware corporation (“Merger Sub I”) and FSI Merger Sub II, Inc., a Delaware corporation (“Merger Sub II”) (as amended or modified from time to time in accordance with the terms of such agreement, the “Merger Agreement”), pursuant to which, among other things, on the date hereof, Merger Sub I merged with and into the Company, with the Company surviving as a subsidiary of FSI (the “First Merger”), and immediately following the consummation of the First Merger, the Company merged with and into Merger Sub II, with Merger Sub II being the surviving entity;
WHEREAS, the Parties desire to set forth their agreement with respect to certain matters, in each case, in accordance with the terms and conditions of this Agreement with respect to the Lock-Up Shares held by the Holder.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:
ARTICLE
I
Lock-Up
Section 1.1 Lock-Up.
(a) The Holder shall not Transfer, or make a public announcement of any intention to effect such Transfer, of any Lock-Up Shares Beneficially Owned or otherwise held by the Holder during the Lock-Up Period; provided, that such prohibition shall not apply to Transfers permitted pursuant to Section 1.2. The “Lock-Up Period” shall be the period commencing on the date hereof and ending on April 8, 2023. The term “Lock-Up Shares” means (i) any Common Stock held by the Holder as of the date hereof and (ii) any Equity Securities of FSI that would be considered to be “Lock-Up Shares” pursuant to Section 2.9.
(b) During the Lock-Up Period, any purported Transfer of Lock-Up Shares other than in accordance with this Agreement shall be null and void, and FSI shall refuse to recognize any such Transfer for any purpose.
(c) The Holder acknowledges and agrees that, notwithstanding anything to the contrary herein, shares of Common Stock Beneficially Owned by the Holder shall remain subject to any restrictions on Transfer under applicable securities Laws of any Governmental Entity, including all applicable holding periods under the Securities Act and other rules of the SEC.
(d) Notwithstanding any other provision of this Agreement, the Holder may sell to FSI, and FSI may purchase from the Holder, up to 1,000,000 Lock-Up Shares immediately after the Effective Time for a per share purchase price not to exceed $7.50.
Section 1.2 Permitted Transfers. Notwithstanding anything to the contrary contained in this Agreement, during the Lock-Up Period, the Holder may Transfer, without the consent of FSI, any of its Lock-Up Shares to (a) any of its Permitted Transferees, upon written notice to FSI or (b) (i) a bona fide charitable organization, upon written notice to FSI; (ii) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual; (iii) in the case of an individual, pursuant to a qualified domestic relations order; (iv) in the case of an entity, Transfers by virtue of the laws of the jurisdiction of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (v) pursuant to transactions of FSI Shares or other securities convertible into or exercisable or exchangeable for FSI Shares acquired in open market transactions after the Closing; (vi) pursuant to the exercise of any options or warrants to purchase FSI Shares (which exercises may be effected on a cashless basis to the extent the instruments representing such options or warrants permit exercises on a cashless basis); (vii) Transfers to FSI to satisfy tax withholding obligations pursuant to FSI’s equity incentive plans or arrangements, but only to the extent permitted pursuant to the terms of FSI’s equity incentive plans; (viii) Transfers to FSI pursuant to any contractual arrangement in effect at the Closing that provides for the repurchase by FSI or the Company or forfeiture of the Holder’s shares in FSI or the Company or other securities convertible into or exercisable or exchangeable for shares in FSI or the Company in connection with the termination of the Holder’s service to FSI or the Company; (ix) pursuant to the entry, by the Holder, at any time after the Closing, into any trading plan providing for the sale of FSI Shares by the Holder, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act, provided, however, that such plan does not provide for, or permit, the sale of any FSI Shares during the Lock-Up Period and no public announcement or filing is voluntarily made or required regarding such plan during the Lock-Up Period; (x) pursuant to transactions solely to satisfy any U.S. federal, state, or local income tax obligations of the Holder (or its direct or indirect owners) arising from a change in the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or the U.S. Treasury Regulations promulgated thereunder (the “Regulations”) after the date on which the Merger Agreement was executed by the parties thereto, and such change prevents the Transactions from qualifying as a “reorganization” pursuant to Section 368 or Section 351 of the Code (and the Transactions do not qualify for similar tax-free treatment pursuant to any successor or other provision of the Code or Regulations taking into account such changes) solely to the extent that such income tax obligations are actually due and required to be paid prior to the expiration of the Lock-Up Period; or (xi) pursuant to any liquidation, merger, stock exchange or other similar transaction which results in all of FSI’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property subsequent to the date hereof; provided, that in connection with any Transfer of such Lock-Up Shares pursuant to clause (a) or (b) above, (x) the restrictions and obligations contained in Section 1.1 and this Section 1.2 will continue to apply to such Lock-Up Shares after any Transfer of such Lock-Up Shares, and (y) the Transferee of such Lock-Up Shares shall have no rights under this Agreement, unless, for the avoidance of doubt, such Transferee is a Permitted Transferee in accordance with this Agreement. Any Transferee of Lock-Up Shares who is a Permitted Transferee of the Transferor or a Transferee pursuant to clause (a) or (b) above pursuant to this Section 1.2 shall be required, at the time of and as a condition to such Transfer, to become a party to this Agreement by executing and delivering a joinder in the form attached to this Agreement as Exhibit A, whereupon such Transferee will be treated as a Party (with the same rights and obligations as the Transferor) for all purposes of this Agreement. To the extent a Transfer of Lock-Up Shares is made during the Lock-Up Period with the prior consent of FSI, such consent shall also apply to a proportionate number of Lock-Up Shares or other securities of FSI owned by Holders party to a Lock-Up Agreement entered into in connection with the Merger Agreement.
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Section 1.3 Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Affiliate” shall have the meaning set forth in the Merger Agreement; provided that no Party shall be deemed an Affiliate of FSI or any of its Subsidiaries for purposes of this Agreement.
“Beneficially Own” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act; provided, that, a Transfer with respect to any Equity Securities shall, for purposes of this Agreement, mean that the Transferor no longer Beneficially Owns such Equity Securities (except, for the avoidance of doubt, for any Transfer to Permitted Transferees or with respect to pledges or encumbrances which do not Transfer economic risk). “Beneficially Owns,” “Beneficially Owned,” and “Beneficial Ownership” shall have correlative meanings.
“Certificate of Incorporation” means the certificate of incorporation of FSI, as in effect on the date hereof, and as the same may be amended from time to time.
“Common Stock” means, as applicable, (a) the common stock, par value $0.001 per share, of FSI, or (b) following any consolidation, merger, reclassification or other similar event involving FSI, any shares or other securities of FSI or any other Person that are issued or issuable in consideration for the common stock of FSI or into which the common stock of FSI is exchanged or converted as a result of such consolidation, merger, reclassification or other similar event, in each case, including any shares of Common Stock issuable upon the exercise of any warrant or other right to acquire shares of the Common Stock and.
“Equity Securities” means, with respect to any Person, all of the shares of capital stock or equity of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock or equity of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock or equity of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares or equity (or such other interests), restricted stock awards, restricted stock units, equity appreciation rights, phantom equity rights, profit participation and all of the other ownership or profit interests of such Person (including partnership or member interests therein), whether voting or nonvoting.
“Family Member” means with respect to any Person, a spouse, lineal descendant (whether natural or adopted) or spouse of a lineal descendant of such Person or any trust created for the benefit of such Person or of which any of the foregoing is a beneficiary.
“Permitted Transferee” means with respect to any Person, (a) any Family Member of such Person and (b) any Affiliate of such Person (including any partner, limited partner, stockholder, shareholder, member controlling or under common control with such Member and Affiliated investment fund or vehicle) of such Person, but excluding any Affiliate under this clause (b) who operates or engages in a business which competes with the business of FSI or its subsidiaries and any portfolio company.
“Transfer” means, when used as a noun, any voluntary or involuntary, direct or indirect, transfer, sale, pledge, hedge, encumbrance, or hypothecation or other disposition (whether by operation of law or otherwise), contract or legally binding agreement to undertake any of the foregoing, by the Transferor and, when used as a verb, the Transferor voluntarily or involuntarily, directly or indirectly, transfers, sells, pledges, hedges, encumbers or hypothecates or otherwise disposes of (whether by operation of law or otherwise), contracts or agrees (in a legally binding manner) to do any of the foregoing, including, in each case, (a) the establishment or increase of a put equivalent position or liquidation with respect to, or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any security or (b) entry into any swap or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise. The terms “Transferee,” “Transferor,” “Transferred,” and other forms of the word “Transfer” shall have the correlative meanings.
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ARTICLE
II
Miscellaneous
Section 2.1 Notices. All notices, requests, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered in person or by e-mail, (b) on the next Business Day when sent by overnight courier or (c) on the second (2nd) succeeding Business Day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
if to FSI, to:
Flexible Solutions International Inc.
6001 54th Ave.
Taber, Alberta, Canada T1G 1X4
Attn: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Orrick, Herrington & Sutcliffe LLP
The Orrick Building
405 Howard Street
San Francisco, CA 94105
Attention: Richard Smith
John Bautista
E-mail: rsmith@orrick.com
jbautista@orrick.com
if to the Holder, to the address set forth on the signature page of the Holder hereto.
All such notices, requests, demands, waivers and other communications shall be deemed received upon (i) actual receipt thereof by the addressee, or (ii) actual delivery thereof to the appropriate address.
Section 2.2 Assignment; Successors and Assigns; No Third Party Beneficiaries.
(a) Except as otherwise permitted hereunder, the Holder may not assign such Holder’s rights or obligations under this Agreement, in whole or in part, without the prior written consent of FSI and the Company. Any such assignee may not again assign those rights, other than in accordance with this Section 2.2(a). Any attempted assignment of rights or obligations in violation of this Section 2.2(a) shall be null and void.
(b) All of the terms and provisions of this Agreement shall be binding upon the Parties and their respective successors, assigns, heirs and representatives, but shall inure to the benefit of and be enforceable by the successors, assigns, heirs and representatives of any Party only to the extent that they are permitted successors, assigns, heirs and representatives pursuant to the terms hereof.
(c) Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the Parties and their respective permitted successors, assigns, heirs and representatives, any rights or remedies under this Agreement or otherwise create any third party beneficiary hereto; provided, however, that the Company and any successor or assign thereto shall be a third party beneficiary of this Agreement entitled to enforce this Agreement on behalf of FSI as if the Company had been a signatory hereto.
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Section 2.3 Termination. The Holder’s obligations under this Agreement shall terminate concurrently with the termination of the Lock-Up Period.
Section 2.4 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions hereof, to the extent permitted by Law, shall remain in full force and effect.
Section 2.5 Entire Agreement; Amendments; No Waiver.
(a) This Agreement, together with Exhibit A to this Agreement, the Merger Agreement, and all other documents required in connection with the Contemplated Transactions, constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements, understandings and discussions, whether oral or written, relating to such subject matter in any way and there are no warranties, representations or other agreements among the Parties in connection with such subject matter except as set forth in this Agreement and therein.
(b) No provision of this Agreement may be amended or modified in whole or in part at any time without the express written consent of FSI and the Company; provided that any such amendment or modification that would be materially adverse in any respect to the Holder shall require the prior written consent of the Holder; provided, further, that a provision that has terminated with respect to a Party shall not require any consent of such Party with respect to amending or modifying such provision.
(c) No waiver of any provision or default under, nor consent to any exception to, the terms of this Agreement shall be effective unless in writing and signed by the Party to be bound and then only to the specific purpose, extent and instance so provided.
Section 2.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or e-mail shall be as effective as delivery of a manually executed counterpart of the Agreement. Minor variations in the form of the signature page, including footers from earlier versions of this Agreement or any such other document, will be disregarded in determining a Party’s intent or the effectiveness of such signature.
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Section 2.7 Governing Law; Consent to Jurisdiction, etc. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof) as to all matters (including Legal Proceedings related hereto), including matters of validity, construction, effect, performance and remedies. Each Party hereby agrees, and any Person asserting rights as a third party beneficiary may do so only if he, she or it irrevocably agrees, that any Legal Proceeding shall be brought only to the exclusive jurisdiction of the courts of the State of Delaware or the federal courts located in the State of Delaware, and each Party hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Legal 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 Legal Proceeding in any such court or that any such Legal Proceeding that is brought in any such court has been brought in an inconvenient forum. During the period a Legal Proceeding that is filed in accordance with this Section 2.7 is pending before a court, all Legal Proceedings, including any counterclaim, cross-claim or interpleader, shall be subject to the exclusive jurisdiction of such court. Each Party hereby waives, and any Person asserting rights as a third party beneficiary may do so only if he, she or it hereby waives, and shall not assert as a defense in any Legal Proceeding, that (a) such Party is not personally subject to the jurisdiction of the above named courts for any reason, (b) such Legal Proceeding may not be brought or is not maintainable in such court, (c) such Party’s property is exempt or immune from execution, (d) such Legal Proceeding is brought in an inconvenient forum, or (e) the venue of such Legal Proceeding is improper. A final judgment in any Legal Proceeding described in this Section 2.7 following the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Laws. EACH OF THE PARTIES HEREBY UNCONDITIONALLY WAIVES, AND ANY PERSON ASSERTING RIGHTS AS A THIRD PARTY BENEFICIARY MAY DO SO ONLY IF HE, SHE OR IT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY RIGHT TO TRIAL BY JURY ON ANY CLAIMS OR COUNTERCLAIMS ASSERTED IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM RELATING THERETO. IF THE SUBJECT MATTER OF ANY SUCH LEGAL PROCEEDING IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY NOR ANY PERSON ASSERTING RIGHTS AS A THIRD PARTY BENEFICIARY SHALL ASSERT IN SUCH LEGAL PROCEEDING A NONCOMPULSORY COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. FURTHERMORE, NO PARTY NOR ANY PERSON ASSERTING RIGHTS AS A THIRD PARTY BENEFICIARY SHALL SEEK TO CONSOLIDATE ANY SUCH LEGAL PROCEEDING WITH A SEPARATE ACTION OR OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT BE WAIVED.
Section 2.8 Specific Performance. Each Party hereby agrees and acknowledges that it will be impossible to measure in money the damages that would be suffered if the Parties fail to comply with any of the obligations imposed on them by this Agreement and that, in the event of any such failure, an aggrieved Party will be irreparably damaged and will not have an adequate remedy at Law. Any such Party shall, therefore, be entitled (in addition to any other remedy to which such Party may be entitled at Law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond, and if any Action should be brought in equity to enforce any of the provisions of this Agreement, none of the Parties shall raise the defense that there is an adequate remedy at Law.
Section 2.9 Subsequent Acquisition of Shares. Any Equity Securities of FSI or the Company acquired by issuance from FSI or the Company subsequent to the date hereof and prior to the expiration of the Lock-Up Period by the Holder shall be subject to the terms and conditions of this Agreement and such shares shall be considered to be “Lock-Up Shares” as such term is used in this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, FSI and the Holder have duly executed this Agreement as of the date first written above.
| FSI: | ||
| FLEXIBLE SOLUTIONS INTERNATIONAL, INC. | ||
| By: | /s/ John Bientjes | |
| Name: | John Bientjes | |
| Title: | Director, Audit Committee Chair and Compensation Committee Member | |
| HOLDER | ||
| /s/ Daniel B. O’Brien | ||
| Name: Daniel B. O’Brien | ||
| Address: | ||
| 3-1287 Verdier Ave | ||
| Brentwood Bay, BC, | ||
| Canada, V8M 1H1 | ||
| Email: dan@flexiblesolutions.com | ||
[Signature Page - Lock-Up Agreement]
Exhibit A
Form of Joinder
This Joinder (this “Joinder”) to the Lock-Up Agreement (each as defined below), made as of , is between (“Transferor”) and (“Transferee”).
WHEREAS, as of the date hereof, Transferee is acquiring Equity Securities (the “Acquired Interests”) from Transferor;
WHEREAS, Transferor is a party to that certain Lock-Up Agreement, dated as of [____], 2021, by and between Flexible Solutions International, Inc. (“FSI”) and Transferor (the “Lock-Up Agreement”); and
WHEREAS, Transferee is required, at the time of and as a condition to such Transfer, to become a party to the Lock-Up Agreement by executing and delivering this Joinder, whereupon such Transferee will be treated as a Party (with the same rights and obligations as the Transferor) for all purposes of the Lock-Up Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1.1 Definitions. To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Lock-Up Agreement.
Section 1.2 Acquisition. The Transferor hereby Transfers to the Transferee all of the Acquired Interests.
Section 1.3 Joinder. Transferee hereby acknowledges and agrees that (a) such Transferee has received and read the Lock-Up Agreement, (b) such Transferee is acquiring the Acquired Interests in accordance with and subject to the terms and conditions of the Lock-Up Agreement, and (c) such Transferee will be treated as a Party (with the same rights and obligations as the Transferor) for all purposes of the Lock-Up Agreement.
Section 1.4 Notice. Any notice, request, demand, waiver or other communications under the Lock-Up Agreement to Transferee shall be given to Transferee at the address set forth on the signature page hereto in accordance with Section 2.1 of the Lock-Up Agreement.
Section 1.5 Governing Law. This Joinder shall be governed by and construed in accordance with the law of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof) as to all matters (including Actions related hereto), including matters of validity, construction, effect, performance and remedies.
Section 1.6 Counterparts. This Joinder may be executed in counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or e-mail shall be as effective as delivery of a manually executed counterpart of the Agreement. Minor variations in the form of the signature page, including footers from earlier versions of this Agreement or any such other document, will be disregarded in determining a Party’s intent or the effectiveness of such signature.
IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by the parties as of the date first above written.
| [TRANSFEROR] | ||
| By: | ||
| Name: | ||
| Title: | ||
| [TRANSFEREE] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Address for notices: | ||
Flexible Lockup Agreement O’Brien Bill Chgs. 4-8-22
[Signature Page to Joinder]