Item
1.01 Entry into a Material Definitive Agreement.
As
previously reported, on December 3, 2021, Agrify Corporation (the “Company”) entered into a binding letter of intent
(the “LOI”) with PurePressure, LLC, a Colorado
limited liability company (“PurePressure”) and the members of PurePressure (collectively,
the “Members”) regarding a proposed acquisition of PurePressure by the Company.
On
December 31, 2021, pursuant to the terms of the LOI, the Company entered into a Membership Interest Purchase Agreement (the “Purchase
Agreement”) with PurePressure, Benjamin Britton as the Member Representative thereunder, and each of the Members. Concurrently
with the execution of the Purchase Agreement, the Company consummated the acquisition of all the outstanding equity interests of PurePressure,
such that immediately after the consummation of such purchase, PurePressure became a wholly-owned subsidiary of the Company (the “Acquisition”).
Purchase
Consideration
The
aggregate consideration for the Acquisition consisted of: (a) $4.0 million in cash, subject to certain adjustments for working capital,
cash and indebtedness of PurePressure at closing; (b) 329,179 shares of the Company’s common stock (the “Buyer Shares”);
and (c) the Earn-out Consideration (as defined below), to the extent earned.
The
Company withheld 88,878 of the Buyer Shares issuable to certain Members (the “Holdback Buyer Shares”) for the purpose of
securing any post-closing adjustment owed to the Company and any claim for indemnification or payment of damages to which the Company
may be entitled under the Purchase Agreement. The Holdback Buyer Shares shall be released following the twelve (12) month anniversary
of the Closing Date in accordance with and subject to the conditions of the Purchase Agreement.
The
Purchase Agreement includes customary post-closing adjustments, representations and warranties and covenants of the parties. The Members
may become entitled to additional consideration with a value of up to $3.0 million based on the eligible net revenues achieved by the
PurePressure business during the fiscal years ending December 31, 2022 and December 31, 2023, of which 40% will be payable in cash and
the remaining 60% will be payable by issuing shares of the Company’s common stock (collectively, the “Earn-out Consideration”).
Subject
to certain customary limitations, (i) the Members will indemnify the Company and its affiliates, officers, directors and other agents
against certain losses related to, among other things, breaches of the Members’ and PurePressure’s representations and warranties,
indebtedness, transaction expenses, pre-closing taxes and the failure to perform covenants or obligations under the Purchase Agreement,
and (ii) the Company will indemnify the Members and their respective affiliates, officers, directors and other agents against certain
losses related to, among other things, breaches of the Company’s representations and warranties and the failure to perform covenants
or obligations under the Purchase Agreement.
The
Purchase Agreement has been included to provide investors with information regarding its terms and is not intended to provide any financial
or other factual information about the Company or PurePressure. In particular, the representations, warranties and covenants contained
in the Purchase Agreement (i) were made only for purposes of that agreement and as of specific dates, (ii) were made solely
for the benefit of the parties to the Purchase Agreement, (iii) may be subject to limitations agreed upon by the parties, including
being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties to the Purchase Agreement
rather than establishing those matters as facts and (iv) may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Moreover, information concerning the subject matter of the representations, warranties
and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in
the Company’s public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants contained
in the Purchase Agreement as characterizations of the actual state of facts or condition of the Company or PurePressure.
The
foregoing summary of the Purchase Agreement and related transactions does not purport to be complete and is qualified in its entirety
by reference to the complete text of the Purchase Agreement, which is filed as Exhibit 2.1 hereto and which is incorporated by reference
herein.