May 30, 2017
LETTER OF INTENT
Dear Marc Herman,
This exclusive binding Letter of Intent (“LOI”) sets forth the basic terms under which SocialPlay USA, Inc., a Nevada corporation will engage in a corporate transaction between itself and Friendship Socks Inc., a Canadian corporation registered in British Columbia. (collectively,SPLY, FS shall be sometimes referred to herein as the “Parties” and individually a “Party”). The basic terms of the proposed transaction are as follows:
| 1. | Acquisition Agreement and Right of First Refusal |
No later than June 30, 2017, the Parties shall enter into a definitive Acquisition Agreement for SPLY to acquire a 33% equity interest in FS and a Right of First Refusal to provide additional financing and acquire up to 100% equity interest in FS, as defined herein (“Acquisition Agreement”).
| 2. | Cash Investment |
The parties agree that a cash investment in FS of $150,000 USD will result in a 33% equity acquisition bySPLY.
| • | In order to acquire a 33% equity interest in FS, SPLY |
Shall:
(i) Deliver to FS, $50,000 towards the “Total Cash Investment” (equivalent to 11% equity interest) upon execution of this LOI.
(ii) Upon satisfaction by FS of “Milestone 1” as defined in “Schedule B” attached hereto, deliver to FS an additional $50,000 towards the “Total Cash Investment” (equivalent to 11% equity interest) no later than 30 days from execution of definitive Acquisition Agreement.
(iii) Upon satisfaction by FS of “Milestone 2” as defined in “Schedule C” attached hereto, deliver to FS an additional $50,000 towards the “Total Cash Investment” (equivalent to 11% equity interest) no later than 60 days from execution of definitive Acquisition Agreement.
Upon completion of all payments as set forth above, FS shall immediately issueand/or cause to be issued sufficient shares of its capital in the name of SPLY equal to 33% of its issued and outstanding stock. All obligations under 2.(a) above must be completed prior to commencement of 2.(b) below.
Should the definitive Acquisition Agreement not be entered into by either party than SPLY shall receive 11% equity interest in FS as a result of the initial $50,000 USD Investment. Should the definitive Acquisition Agreement be entered into but Milestone 1 or 2 not be reached then SPLY will have the right to waive these milestones and still provide the “Total Cash Investment” for each milestone and receive the equivalent equity share (11% per milestone) or SPLY and FS can terminate this agreement with no penalty to either party.
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(b)Right of First Refusal: In order to acquire up to 100% equity interest in FS, FS shall:
Grant to SPLY a Right of First Refusal.
FS shall not solicit any equity investment, loan, or other financing without first sending written notice to SPLY with an offer for equity investment, loan, or other financing and then SPLY shall have fifteen (15) days to respond.
If SPLY responds with a written financing offer, FS shall negotiate in good faith with SPLY for a period of an additional fifteen (15) days in order to reach an agreement on terms. If the parties are able to reach an agreement, the financing shall be consummated within thirty (30) days after the agreement is reached. If the parties are unable to reach agreement, or if SPLY declines to offer financing or does not respond in a timely manner, then FS shall be free to solicit financing proposals from third parties.
| 3. | Shareholder Agreement |
Upon entering into the definitive Acquisition Agreement the parties, including all shareholders of FS will enter into a separate Shareholder Agreement which will define the terms and conditions pertaining to the Buy, Sell or Buyout of shares of FS.
| 4. | Material Breach |
Where either Party fails to meet its obligations pursuant to the Acquisition Agreement in any material way, the non-breaching party shall notify the breaching party of such breach (“Notice of Breach”) and the breaching party shall then have 20 days in which to cure the breach (“Cure Period”). Should the breach not be cured then the non-breaching party may terminate this agreement.
| 5. | Conditions to Closing. |
(a) The obligation of FS to consummate the transactions described herein shall be subject to the following conditions precedent. However, FS retain the exclusive right to waive (in writing) any covenant or warranty found in this Section:
(i) The execution and delivery bySPLY, FS of the Acquisition Agreement in accordance with the time frame set forth in Article 1 of this Agreement and such other documents, instruments and agreements as shall be reasonably deemed necessary by mutual agreement of the Parties in order to consummate the transactions contemplated herein in such form as the Parties shall deem appropriate. The Acquisition Agreement shall contain, in addition to the terms set forth herein, customary representations, warranties, covenants, conditions, indemnities, escrows and other standard terms and provisions, as agreed to between the Parties.
(ii) FS shall have conducted and completed to its sole satisfaction a business, legal, tax and financial due diligence review of SPLY which shall be completed by the day immediately prior to Closing.
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(iii) Receipt by SPLY of all necessary regulatory and third party approvals, consents and waivers, including any stockholder and Board of Directors' required with respect to the transaction.
(iv) There shall not be any material adverse change in the financial condition of SPLY from the date hereof through the date of Closing.
(v) Other than as indicated in Article 1, at Closing, none of the assets underlying the Agreement shall be subject to any lien or encumbrance of any character whatsoever or any adverse claims by any third parties.
(b) The obligation of SPLY to consummate the transactions described herein shall be subject to the following conditions precedent. However, SPLY retains the exclusive right to waive (in writing) any covenant or warranty found in this Section:
(i) The execution and delivery of the Acquisition Agreement in accordance with the time frame set forth in Article 1 of this Agreement and such other documents, instruments and agreements as shall reasonably be deemed necessary by the Parties in order to consummate the transactions contemplated hereby in such form as the Parties shall approve. The Acquisition Agreement shall contain, in addition to the terms set forth herein, customary representations, warranties, covenants, conditions, indemnities, escrows and other standard terms and provisions, as agreed to between the Parties.
(ii) Receipt of all necessary regulatory and third party approvals, consents and waivers, including any stockholder and Board of Directors' approvals with respect to the transaction.FS shall have obtained the necessary consents and waivers of stockholders and members of the Board of Directors with respect to the transaction prior to Closing.
(iii) Receipt of all information from FS and SHLDRS (including that regarding the assets underlying the Acquisition Agreement and, if applicable the audited financial information regarding those assets, with the cost of such audit and any related expenses to be paid bySPLY) that SPLY will need to include in the report on Form 8-K to be filed with the US Securities and Exchange Commission.
6. Conditions Subsequent to Closing. Within Four (4) business days of the Acquisition Agreement, SPLY shall complete and file all necessary reports with the Securities and Exchange Commission including, but not limited to, aCurrentReport on Form 8-K disclosing all material terms of the License.
7. Expenses. Except as may be otherwise set out in the Acquisition Agreement, the Parties shall pay each of their respective legal, accounting and any other out-of-pocket expenses incurred in connection with this transaction, whether or not the transaction is consummated. All finder’s fees, if any, shall be the responsibility of the party incurring such fee, but shall in no way change the terms hereof. Neither Party shall be fiscally responsible to the other in the event that the transaction contemplated herein does not occur.
8. Confidentiality. The provisions of the Confidentiality Agreement previously executed by the Parties shall remain in full force and effect.
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9. Publicity; Public Companies. ThePartiesacknowledge thatSPLY is a publicly held company and assuchissubject to certainUnited Statesfederal andstate securities laws concerning the trading of itssecuritiesand all parties agree to complywith allsuchapplicable laws.No Party heretoshall,and eachshallcause theirrespectiveaffiliates not to, issue any press release or otherwise make any publicstatementor respond to any press inquirywith respect to this letter or the transactions contemplated herebywithout the prior approval of the other party,whichapprovalwill not be unreasonablywithheld,except as may be required by law.Notwithstanding, no press release or public announcementshall be made by eitherPartyuntil after Closing and then onlywith written approval of theParties.
10. Preparation of Acquisition Agreement.Uponapproval byFS as evidenced by the return of this Agreement in its fully executed form, our counsel in coordinationwith your counselshallprepare the Acquisition Agreementwhich shall contain certain provisions in accordancewith the terms found herein togetherwith such customary terms and conditions as theParties mutually agree to.
11. Good Standing.At Closing, each of theParties shall be in goodstanding as corporations in their respective jurisdictions of incorporation and neithershall be in violation of anyUnited States federal orstate securities or other local laws governing either public or private companies.
12. No Shop. SPLY, FS agree that from the date of this Letter of Intent until April 14, 2017, neither party nor any ofaffiliates, officers, directors, employees, agents, or advisors thereofshall, directly or indirectly,solicitoffers from, negotiatewith or in any manner encourage or consider any proposal of any other person or entity relating to thesubject matter herein, inwholeor in part.
13. Miscellaneous. This letter and the terms herein are open until April 14, 2017.Unless extended by mutual agreement inwriting,if theParties do not, despite acting in good faith, enter into an Acquisition Agreement by that date,this Lettershall terminate automatically. This Lettershallbe governed by, and construed in accordancewith, the laws of theState ofNevada, without giving effect to the principles of conflicts of laws thereof. This letter may be executed in counterparts, each ofwhich shall be an original, but allsuchcounterpartsshall together constitute one and thesameinstrument.
Pleaseindicate your agreement to the foregoing in thespaceprovided below and return it to the undersignedwithintwo days of the date hereof.
Very truly yours,
SocialPlay USA, Inc.
By:/s/ Robert Rosner
Name: Robert Rosner
Title:President and CEO
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AGREEDTOANDACCEPTED ASOF
THEDATE FIRST ABOVE WRITTEN:
Friendship Socks Inc.
By:/s/ Marc Herman
Name: Marc Herman
Title: CEO andCo-Founder
AGREEDTOAND ACCEPTED ASOF
THEDATE FIRST ABOVE WRITTEN:
By:/s/ Sean Rainey
Name: Sean Rainey
Title: CCO andCo-Founder
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Schedule A
Assets from Friendship Socks
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Schedule B
Milestone 1
WebsiteUXANDUI(updated design, user experience enhanced, product choice options)
Retail Offering (backend developmentandintegration into current system)New Packaging(finalizenew design and samplesapproved)
TrademarkFS (payfor registration, currently on hold)
Begin collaboration discussions (for up-coming Friendship Day) Photoshootandvideo (for web and socialmedia)
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Schedule C
Milestone 2
Newsitegoeslive
Hiresocialmedia/PR person (managesocialmedia, influencer outreach, assist press andmedia outreach)
Retail strategy complete(listof key retail store partners, pitch deck andoutreachplan)New collection(socksfor collaboration designed and samplesproduced)
PPCAdcampaign (Facebook and Adwords PPC campaign, A/Btesting)
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