Exhibit 10.1

 

 

 

 

ASSET PURCHASE AGREEMENT

 

by and among

 

MOBIVITY HOLDINGS CORP.,

 

MOBIVITY, INC.,

 

SMARTRECEIPT, INC.

 

and

 

THE CONTROLLING OWNERS IDENTIFIED HEREIN

 

 

 

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT, dated as of March 12, 2014 (this “ Agreement ”), by and among Mobivity Holdings Corp., a Nevada corporation (“ Parent ”), Mobivity, Inc., a Nevada corporation (“ Buyer ”), SmartReceipt, Inc., a Delaware corporation (" Seller "),  and the individuals and entities listed on the signature pages hereto as “Controlling Owners” (the “ Controlling Owners ”).

 

WITNESSTH:

 

WHEREAS, Seller has heretofore conducted a business which provides a marketing solutions platform and services, including under the names “SmartReceipt” and “Nutricate” (the “ Business ”);

 

WHEREAS, Buyer desires to purchase substantially all of the assets of the Business from Seller, and Seller desires to sell substantially all of the assets of the Business to Buyer, upon the terms and subject to the conditions hereinafter set forth; and

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01   Definitions .

 

(a)   The following terms, as used herein, have the following meanings:

 

" Business Day " means a day (i) other than Saturday or Sunday and (ii) on which commercial banks are open for business in New York, New York.

  “ Closing Balance Sheet ” means a balance sheet of the Business as at the close of business on the Closing Date, prepared in accordance with GAAP.

 

“ Closing Date ” means the date of the Closing.

 

“ Closing Income Statement ” means an income statement of the Business for the twelve-month period ending as of the last day of the month preceding the Closing Date, prepared in accordance with GAAP.

 

" Code " shall mean the United States Internal Revenue Code of 1986, as amended.

 

“ Earn-Out Payment ” means the product of (i) two , multiplied by (ii) Eligible Revenue for the Earn-Out Period.

 

 “ Earn-Out Period ” means the one-year period starting on the Closing Date (if the Closing Date occurs on the first day of a month) or (otherwise) starting on the first day of the first full month following the Closing.

 

“ Eligible Revenue ” means the sum of: (i) 100% of Buyer’s revenue from sales of SR Services to SR Customers, plus (ii) 50% of Buyer’s revenue from sales of Buyer services (other than SR Services) to SR Customers, plus (iii) 50% of Buyer’s revenue from sales of SR Services to customers who are not SR Customers.  Buyer will determine Eligible Revenue in accordance with GAAP and on a basis consistent with Buyer’s financial statements.  Notwithstanding the foregoing, Eligible Revenue shall exclude the recognition of any revenue associated with Seller Deferred Revenue Obligations.

" Equityholder Matters " means any claim by any current or former securityholder of  Seller, or any other Person, asserting, alleging or seeking to assert rights with respect to (i)  ownership or rights to ownership of Seller, (ii) any rights of a stockholder of Seller, including any rights to securities, rights to notice or to vote securities, (iii) any rights under Seller’s organizational documents or applicable law or (iv) any rights under any of the Settlement Agreements.

" GAAP " means United States generally accepted accounting principles applied on a consistent basis.

 

" knowledge " means, with respect to Seller, the actual knowledge of any of Eric Kanowsky or Steve Morrison, or knowledge that any such individual would reasonably be expected to have after reasonable investigation of relevant records and documents and inquiry of such individual's direct reports.

" Legal Requirements " means any federal, state, foreign, local, municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity and any orders, writs, injunctions, awards, judgments and decrees applicable to the Seller or to any of its assets, properties or businesses.

“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset.

 

" made available " means, with respect to any material, that a copy of such material has been posted on or before 9:00 p.m. California time on a date that is three Business Days prior to the date of this Agreement to the electronic data room at dropbox.com or the Fenwick & West Shareroom.

" Material Adverse Effect " means with respect to any entity, any change, fact, circumstance, condition, event or effect that is, or would reasonably be expected to be, materially adverse to the business, operations, assets (whether tangible or intangible), liabilities, condition, capitalization or results of operations of such entity taken as a whole with its subsidiaries, provided, however, that none of the following (individually or in combination) shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect: (i) any adverse effect resulting directly or indirectly from general business or economic conditions (so long as the entity is not affected thereby in a materially disproportionate manner); (ii) any adverse effect resulting directly or indirectly from conditions generally affecting any industry or industry sector in which the entity operates or competes (so long as the entity is not affected thereby in a materially disproportionate manner); (iii) any adverse effect resulting directly or indirectly from the announcement, execution or delivery of the Agreement or the pendency or consummation of the transactions; (iv) acts of war, sabotage or terrorism in the United States or any other country or region in the world; (v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world; or (vi) any changes in applicable Legal Requirements or changes in GAAP or other accounting standards, or the interpretation thereof (so long as the entity is not affected thereby in a materially disproportionate manner).

 

“ Mobivity Note ” means the Secured Promissory Note of Seller issued to Buyer on January 30, 2014.

 

“ Note Obligations ” means all obligations of Seller under (i) the Convertible Secured Promissory Note of Seller, dated October 22, 2013, issued to Jay Ferro, (ii)  Paragraph 5 of the Acknowledge and Release, dated May 23, 2013, between Seller and Nitin Pai and (iii) Section 1(b) of the Settlement Agreement and Release, dated October 11, 2013 between Seller and Molly Chester.

 

“ Parent Share Closing Price ” means the average of the volume-weighted average trading prices of the Parent Shares for the 90 trading days immediately preceding the Closing Date.

 

“ Parent Shares ” means the Common Stock, par value $0.001 per share, of Parent.

 

“ Permitted Lien ” means (a) Liens for taxes not yet due or being contested in good faith, or (b) Liens which do not materially detract from the value of any Acquired Asset as now used, or materially interfere with any present or intended use of any Acquired Asset.

 

“ Person ” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality.

“ Post-Closing Tax Period ” means any Tax period (or portion thereof) ending after the Closing Date.

 

“ Pre-Closing Tax Period ” means any Tax period (or portion thereof) ending on or before the close of business on the Closing Date.

 

“ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation, suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Entity or arbitrator.

 

“ Seller Deferred Revenue Obligations ” means all deferred or unearned revenue obligations reflected in the Closing Balance Sheet.

 

“ Seller TTM Revenue ” means Seller’s revenue for the twelve-month period ending as of the last day of the month preceding the Closing Date, determined in accordance with (a) prior to completion of Buyer’s audit of the financial statements of the Business, Seller’s books of account and financial records for such period (prepared in accordance with GAAP), and (b) following completion of Buyer’s audit of the financial statements of the Business, the audited financial statements of the Business for such period.

“ Settlement Agreements ” means each of (i) the Settlement Agreement and Release, dated October 22, 2013, by and among Seller and Mr. Jay Ferro, (ii) the Settlement Agreement and Release, dated October 11, 2013, by and among Seller and Ms. Molly Chester, (iii) the Acknowledge and Release, dated May 23, 2013, between Seller and Nitin Pai, and (iv) each written, oral or other agreement, contract, understanding, arrangement or legally binding commitment or undertaking of any nature of Seller entered into in connection with any of the matters listed in clauses (i) through (iii).

 

 “ SR Customers ” means any active customer of Seller listed on Schedule 1.01(a)(i) .

 

“ SR Services ” means the marketing services offered by Seller as of the Closing Date.

 

" Taxes " means any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, uses, ad valorem, franchise, capital, paid-up capital, profits, greenmail, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such tax.

 

“ Upfront Cash Amount ” means  (i) $2,362,205 plus (ii) the amount of deposits in respect of real property leases set forth on Schedule 2.01(d) .

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

 

 

ARTICLE II

 

PURCHASE AND SALE

 

Section 2.01   Purchase and Sale .  Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell, transfer, assign and deliver, or cause to be sold, transferred, assigned and delivered, to Buyer at Closing, free and clear of all Liens, other than Permitted Liens, all of the assets, properties and business, other than the Excluded Assets, of every kind and description, wherever located, real, personal or mixed, tangible or intangible, owned, held or used in the conduct of the Business by Seller as the same shall exist on the Closing Date, including all of the assets shown on the Seller Balance Sheet and not disposed of in the ordinary course of business, and all assets of the Business thereafter acquired by Seller (the “ Acquired Assets ”), and including, without limitation, all right, title and interest of Seller in, to and under:

 

(a)   All accounts receivable of Seller;

 

(b)   All personal property and interest therein, including all equipment, furniture, office equipment, communications equipment, computer equipment (including laptops) identified on Seller’s fixed asset schedule attached as Schedule 2.01(b) ;

(c)   All rights under all contracts, agreements, leases, licenses, commitments, sales and purchase orders and other instruments, including without limitation the items listed on Sections 3.11 and 3.15 of the Seller Disclosure Schedule (collectively, the “ Contracts ”), other than the Excluded Contracts;

 

(d)   All prepaid expenses and deposits relating to the operation of the Business, including those identified on Schedule 2.01(d) ;

 

(e)   All rights, claims, credits, causes of action or rights of set-off against third parties relating to the Acquired Assets, including (without limitation) un-liquidated rights under manufacturers’ and vendors’ warranties;

 

(f)   All Technology and Intellectual Property Rights, including but not limited to: (i) the goodwill associated with any trademarks or service; (ii) rights to sue for past, present and future infringements or misappropriation of any Technology or Intellectual Property Rights, including the right to recover damages therefore, and the right to receive royalties, license fees and income from any Technology or Intellectual Property Rights; and (iii) any rights at common law directly arising from any Technology or Intellectual Property Rights and any licenses with respect to any Technology or Intellectual Property Rights, including, without limitation, those listed on Sections 3.15(c) of the Seller Disclosure Schedule;

 

(g)   All social media presence related to the Business, including (without limitation) all associated passwords and other account management information in Seller’s possession;

 

(h)   All transferable licenses, permits or other governmental authorizations affecting, or relating in any way to, the Business, including (without limitation) the items listed on Section 3.12 of the Seller Disclosure Schedule;

 

(i)   All books, records, files and papers, whether in hard copy or computer format, used in the Business, including (without limitation) engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, and any information relating to Tax imposed on the Acquired Assets; and

 

(i)   All goodwill associated with the Business or the Acquired Assets, together with the right to represent to third parties that Buyer is the successor to the Business.

 

Section 2.02   Excluded Assets .  Buyer expressly understands and agrees that the following assets and properties of Seller (the “ Excluded Assets ”) will be excluded from the Acquired Assets:

 

(a)   Any cash and cash equivalents;

 

(b)   Any Contract listed on Schedule 2.02(b) (the “ Excluded Contracts ”);

 

(c)   All minute books and ownership records of Seller; and

 

(d)   Any Acquired Assets sold or otherwise disposed of in the ordinary course of the operation of the Business and not in violation of any provisions of this Agreement during the period from the date hereof until the Closing Date.

 

Section 2.03   Assumption of Liabilities .  Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the time of the Closing to assume only the following liabilities and obligations of Seller (the “ Assumed Liabilities ”):

(a)   Obligations to be performed after the Closing under the Contracts (other than the Excluded Contracts), including specifically any obligation that arises out of or relates to any warranty obligation thereunder, but specifically excluding any liability or obligation that arises out of or relates to any indemnification obligation thereunder or any default, breach, violation or failure to perform or comply with the terms thereof relating to periods prior to, or that occurred on or before, the Closing Date.

 

Section 2.04   Excluded Liabilities .  Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of Seller of whatever nature whether presently in existence or arising hereafter.  All such other liabilities and obligations shall be retained by and remain obligations and liabilities of Seller (all such liabilities and obligations not being assumed being herein referred to as the “ Excluded Liabilities ”), and Seller will pay all such Excluded Liabilities as they become due.  Without limiting the foregoing, none of the following shall be Assumed Liabilities (and each shall be an Excluded Liability) for the purposes of this Agreement:

 

(a)   Any liability or obligation for Tax arising from or with respect to the Acquired Assets or the operations of the Business which is incurred in or attributable to the Pre-Closing Tax Period;

 

(b)   Any liability or obligation with respect to any Equityholder Matter;

 

(c)   Any liability or obligation with respect to the Note Obligations or Scheduled Obligations;

 

(d)   Any liability or obligation for any accounts payable or other accruals arising on or prior to the Closing Date;

 

(e)   Any liability or obligation under the Contracts that arises after the Closing Date but that arises out of or relates to any default, breach, violation or failure to perform or comply with the terms thereof that occurred on or before the Closing Date;

 

(f)   Any liability or obligation under any Excluded Contract whether arising before or after the Closing Date;

 

(g)   Any liability or obligation, including indemnification and warranty obligations, arising out of or related to any products or services, manufactured, distributed or sold in connection with the Business on or prior to the Closing Date;

 

(h)   Any liability or obligation relating to employees of, or independent contractors or consultants to, the Business for all periods ending on or prior to the Closing Date, including, without limitation, any liability or obligation under any Seller Employee Plan, workers’ compensation claims, disability and occupational diseases in each case without regard to whether such injuries, claims, conditions, events and occurrences are known or otherwise manifest on or prior to the Closing Date and any bonuses (including, without limitation, a pro rata portion of any bonus paid by Buyer to any Transferred Employee in respect of any period, a portion of which includes the period on or prior to the Closing Date), vacation pay, or severance or retention obligations to such employees, whether or not accrued on Seller’s books and records; and

 

(i)   Any liability or obligation relating to any Excluded Asset.

Section 2.05   Assignment of Contracts and Rights .  Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Acquired Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach or other contravention thereof to in any way adversely affect the rights of Buyer or Seller thereunder.  Each of Seller and Buyer will use their best efforts (but without any payment of money by Seller or Buyer) to obtain the consent of the other parties to any such Acquired Asset or any claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may request.  If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, each of Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sublicensing, or subleasing to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming Seller’s obligations, any and all rights of Seller against a third party thereto.  Seller will promptly pay to Buyer when received all monies received by Seller under any Acquired Asset or any claim or right or any benefit arising thereunder.  In such event, Seller, and Buyer shall, to the extent the benefits therefrom and obligations thereunder have not been provided by alternative arrangements satisfactory to Buyer and Seller, negotiate in good faith an adjustment in the consideration paid by Buyer for the Acquired Assets.

 

Section 2.06   Purchase Price; Holdback of Parent Shares.

 

(a)   The purchase price for the Acquired Assets (the “ Purchase Price ”) is:

 

(i)   An amount of cash equal to the Upfront Cash Amount (the “ Cash Payment ”);

 

(ii)   A number of Parent Shares equal to (A) Seller TTM Revenue, divided by (B) the Parent Share Closing Price (the “ Stock Payment ”); and

 

(iii)   The Earn-Out Payment as provided in Section 2.08(a).

 

(b)    The Purchase Price will be paid as provided in this Section 2.06 and in Section 2.0 7 , and subject to adjustment as provided in Section 2.08 .

 

(c)   $401,782.50 of the Cash Payment will paid at Closing to satisfy the Note Obligations and the other Seller liabilities set forth on Schedule 2.06(c) (the “ Scheduled Obligations ”).

 

(d)   50% of the number of Parent Shares constituting the Stock Payment (the “ Holdback Shares ”) will be heldback in accordance with Section 2.09 as security for Seller’s obligations under 7.02 .

 

Section 2.07   Closing .  The closing (the “ Closing ”) of the purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Buyer in Chandler, Arizona (or via electronic exchange of closing documentation in PDF or other mutually acceptable format)  as soon as possible, but in no event later than three Business Days, after the satisfaction of the conditions set forth in Article VI, or at such other time or place as Buyer and Seller may agree.  At the Closing,

 

(a)   Buyer shall deliver to Seller the Cash Payment;

 

(b)   Buyer shall deliver to Seller a stock certificate representing 50% of the number of Parent Shares constituting the Stock Payment;

 

(c)   Seller shall repay all amounts due under the Mobivity Note and Buyer shall surrender the Mobivity Note for cancellation;

(d)   Seller and Buyer shall enter into an Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit A ; and

 

(e)   Seller shall deliver to Buyer such deeds, bills of sale, assignment, certificates or title, documents and other instruments of transfer and conveyance as may reasonably be requested by Buyer, each in form and substance satisfactory to Buyer and its legal counsel and executed by Seller.

 

All Parent Shares to be issued hereunder shall be deemed “ restricted securities ” as defined in paragraph (a) of Rule 144 under the Securities Act of 1933, as amended (the “ Securities Act ”).  All Parent Shares to be issued under the terms of this Agreement shall be issued pursuant to an exemption from the registration requirements of the Securities Act, under Section 4(2) of the Securities Act (and the rules and regulations promulgated thereunder).  Certificates representing the Parent Shares to be issued hereunder shall bear a restrictive legend in substantially the following form:

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered for sale, sold, or otherwise disposed of, except in compliance with the registration provisions of such Act or pursuant to an exemption from such registration provisions, the availability of which is to be established to the satisfaction of the Company.

Section 2.08.                       Initial Determination Stock Payment; Post-Closing Adjustment to Stock Payment; Earn-Out Payment .

(a)   Initial Determination of Stock Payment .  The Stock Payment will be made as of the Closing based on (i) an estimate of Seller TTM Revenue mutually agreed upon by Buyer and Seller (“ Estimated Seller TTM Revenue ”) and (ii) a calculation of the Parent Share Closing Price mutually agreed upon by Buyer and Seller.   The calculation of the Stock Payment will be rounded to the nearest whole number of Parent Shares.

(b)            Post-Closing Adjustment to Stock Payment .  Within 10 Business Days following completion of Buyer’s audit of the financial statements of the Business, Buyer will cause the Closing Balance Sheet and the Closing Income Statement to be prepared and will deliver to Seller its calculation of Seller TTM Revenue (the “ Upfront Payment Adjustment Calculation ”).  Subject to Section 2.08(d) , within ten Business Days following Buyer’s delivery of the Upfront Payment Calculation (and based on such calculation):

(i)   Seller TTM Revenue Adjustment.   If the amount of Seller TTM Revenue exceeds Estimated Seller TTM Revenue, then Parent will issue to Seller, as an adjustment to the Purchase Price, a number of Parent Shares equal to (A) the amount of such excess, divided by (B) the Parent Share Closing Price.  If the amount of Seller TTM Revenue is less than Estimated Seller TTM Revenue, then Seller will surrender to Parent, as an adjustment to the Purchase Price, a number of Parent Shares equal to (A) the amount of such shortfall, divided by (B) the Parent Share Closing Price.  In either case, the calculation will be rounded to the nearest whole number of Parent Shares.

(c)            Earn-Out Payment .  Within 60 days following the end of the Earn-Out Period, Buyer will deliver to the Seller a calculation of the Earn-Out Payment and, subject to Section 2.08(b) , as an adjustment to the Purchase Price, Buyer will pay to Seller the Earn-Out Payment. The Earn-Out Payment will be made in the form of a number of Parent Shares equal to (i) the Earn-Out Payment, divided by (ii) the Parent Share Closing Price.

(d)            Dispute of Calculations .    For a period of twenty Business Days following receipt of the calculation of each of the Upfront Payment Adjustment Calculation and the Earn-Out Payment from Buyer pursuant to Sections 2.08(b) and (c), respectively (the “ Review Period ”), Seller shall have the right to review the calculations set forth therein and to deliver to Buyer a notice disputing such calculations together with reasonable supporting documentation (a “ Dispute Notice ”).  If Seller does not deliver a Dispute Notice to Buyer with respect to the Upfront Payment Adjustment Calculation or the calculation of the Earn-Out Payment during the applicable Review Period, the Upfront Payment Adjustment Calculation or the calculation of the Earn-Out Payment delivered by Buyer shall be final, conclusive and binding on Buyer and Seller and the parties shall proceed as set forth in Section 2.08(b) or (c) , respectively.  If Seller does deliver a Dispute Notice to Buyer during the applicable Review Period, Buyer and Seller shall attempt to resolve the matters raised in the Dispute Notice in good faith and, if successful, shall proceed as promptly as possible thereafter as set forth in Section 2.08(b) or (c) using the agreed upon calculation in lieu of that delivered by Buyer.  If any such matters remain unresolved by the date that is twenty Business Days after the date on which the Dispute Notice was delivered to Buyer, Buyer and Seller shall submit the disputed item(s) to a mutually agreeable, nationally recognized accounting firm who shall be independent of the parties and their respective affiliates (the “ Neutral Firm ”).  The Neutral Firm shall promptly review the disputed item(s) and select from the two calculations of such item(s) submitted by Buyer and Seller the calculation thereof that it deems to be the closest to the correct calculation of such disputed item(s), in the aggregate, which selected calculation shall be final, conclusive and binding on Buyer and Seller (the “ Final Calculation ”), and the parties shall proceed as promptly as possible thereafter as set forth in Section 2.08(b) or (c) using the Final Calculation in lieu of that delivered by Buyer.  The party whose calculation is not selected by the Neutral Firm as the Final Calculation shall bear all costs of the Neutral Firm.  The Neutral Firm’s decision shall be based solely on written submissions of Buyer and Seller and their respective representatives and not by independent review.  The Neutral Firm shall not hold any hearings, hear any oral testimony or otherwise seek or require any other evidence.  Subject to the foregoing, each of Buyer and Seller agrees to use its commercially reasonable efforts to cooperate with the Neutral Firm and to cause the Neutral Firm to resolve any dispute no later than 20 Business Days after selection of the Neutral Firm.

 

Section 2.09                        Holdback Shares .

 

(a)  Buyer will hold the Holdback Shares, as security for Seller’s obligations under Section 7.02 , until the first anniversary of the Closing (the “ Holdback Termination Date ”).  Subject to the terms hereof, Seller will have all the rights of a stockholder with respect to the Holdback Shares, including without limitation, the right to vote the Holdback Shares and receive any cash dividends declared thereon.

 

(b)  If at any time on or prior to the Holdback Termination Date, Buyer (i) believes in good faith that any Indemnified Party is entitled to payment or that payment should be made to a third party pursuant to the terms of Section 7.02 , and (ii) desires to make a claim for payment from the Holdback Shares in connection therewith, then Buyer shall give written notice of such claim (a “ Payment Notice ”) to Seller, stating in general terms the events or circumstances which are the basis for and amount (to the extent determined) of such claim.  If Seller objects to such claim, Seller shall give written notice of such objection to Buyer within 30 days after the date of Seller’s receipt of the Payment Notice served either by certified mail, express mail or personal service (the “ Objection Period ”), and shall state the basis for such objection in reasonable detail.  If no objection to Buyer’s claim is made by Seller within the Objection Period, the claim set forth in the Payment Notice shall be deemed approved and accepted by Seller and Buyer will be entitled to reclaim the Holdback Shares in satisfaction of the claim.   Any Holdback Shares distributed to Buyer in satisfaction of a claim under this Section 2.09 will be valued at the volume-weighted average trading prices of the Parent Shares for the 90 trading days immediately preceding the day they are distributed .    If an objection to Buyer’s claim is made by Seller within the Objection Period, Buyer may initiate an arbitration proceeding under Section 9.05 hereof to resolve the claim within 60 days following its receipt of Seller’s written objection.  If Buyer fails to initiate an arbitration proceeding within such 60-day period, it will be deemed to have abandoned the claim and released its rights with respect to the specific subject matter of such claim

(c)  Buyer will hold, distribute and/or reclaim any remaining Holdback Shares (after deduction of any amounts withdrawn and applied by Buyer pursuant to Section 2.09(b) ) in accordance with the following:

(i)   If on the Holdback Termination Date there is any pending indemnification claim(s) asserted by Buyer or Parent under Article VII (a “ Pending Claim ”), including (without limitation) any claim which Seller has objected to and Buyer has not abandoned pursuant to Section 2.09(b) , a number of Holdback Shares reasonably anticipated by Buyer to be necessary to satisfy such claim will be retained by Buyer until such claim is resolved.  On the Holdback Termination Date, the Buyer will distribute the remaining Holdback Shares less the amount reserved for Pending Claims to Seller.

 

(ii)   If on the Holdback Termination Date there is no Pending Claim, Buyer will distribute the remaining Holdback Shares to Seller.

 

(iii)   Following the Holdback Termination Date, for Pending Claims which are adjudicated or determined by arbitration in favor of Buyer or Parent, Buyer will entitled to reclaim the Holdback Shares in satisfaction of the claim.  When no Pending Claims remain following the Holdback Termination Date, Buyer will distribute the remaining Holdback Shares following resolution of the Pending Claims existing on the Holdback Termination Date to Seller.

ARTICLE III                                

 

REPRESENTATIONS AND WARRANTIES OF SELLER AND CONTROLLING OWNERS

 

Seller and each Controlling Owner, jointly and severally, hereby represent and warrant to Buyer that:

 

Section 3.01   Organization .

 

(a)     Seller  is a corporation organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.  Seller is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not in the aggregate have a Material Adverse Effect on the Seller.

 

(b)     Seller does not have (and has never had) any direct or indirect subsidiaries, or own (directly or indirectly) any capital stock or other equity or ownership interests in any other Person or have any direct or indirect equity or ownership interest in any business or other Person.

 

Section 3.02   Authorization .  The execution, delivery and performance by Seller of this Agreement and the consummation by it of the transactions contemplated hereby are within its organizational powers and have been duly authorized by all necessary organizational action of Seller.  This Agreement has been duly and validly executed and delivered by Seller and the Controlling Owners and constitutes a valid and binding agreement of each of them, enforceable against each of them in accordance with its terms.

 

Section 3.03   Governmental Authorization; Consents .

 

(a)   The execution, delivery and performance by Seller and the Controlling Owners of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority (a “ Governmental Entity”) .

 

(b)   Except as set forth on Section 3.03 of the Seller Disclosure Schedule, no consent, approval, waiver or other action by any Person (other than any Governmental Entity referred to in (a) above) under any contract, agreement, indenture, lease, instrument, or other document to which Seller or any Controlling Owner is a party or by which the Seller or any Controlling Owner is bound is required or necessary for the execution, delivery and performance of this Agreement by Seller and the Controlling Owners or the consummation of the transactions contemplated hereby.

Section 3.04   Non-Contravention .  The execution, delivery and performance by Seller and the Controlling Owners of this Agreement do not and will not (a) contravene or conflict with the certificate of incorporation or bylaws of Seller, (b) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Seller or any Controlling Owner, (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Seller or any Controlling Owner or to a loss of any benefit to which Seller or any Controlling Owner is entitled under any provision of any agreement, contract, or other instrument binding upon Seller or any Controlling Owner or any license, franchise, permit or other similar authorization held by Seller or any Controlling Owner or (d) result in the creation or imposition of any Lien on any Acquired Asset.

 

Section 3.05   Sufficiency of and Title to Acquired Assets .

 

(a)   The Acquired Assets constitute, and on the Closing Date will constitute, all or the assets or property used or held for use by Seller or any other Person in the Business.

 

(b)   Upon Closing, Buyer will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Acquired Assets, free and clear of all Liens, except for Permitted Liens, and without incurring any penalty, fee, expense or other adverse consequence, including any increase in rentals, royalties, license or other fees or expenses imposed as a result of, or arising from, the consummation of the transactions contemplated hereby.

 

(c)   No representation or warranty is made in this Section 3.05 with respect to Intellectual Property Rights, which matters are covered by Section 3.15 .

 

Section 3.06   Financial Statements .  The unaudited financial statements of operations for the Business taken as a whole for the fiscal years ended December 31, 2011, December 31, 2012, and December 31, 2013 and the month ended January 31, 2014 (the “ Seller Balance Sheet Date ”) previously delivered to Buyer fairly present, in conformity with GAAP applied on a consistent basis (except as indicated in the notes thereto), the financial position of the Business taken as a whole as of the dates thereof and its results of operations and cash flows for the periods then ended.

 

Section 3.07   Absence of Certain Changes .  Except as set forth in Section 3.07 of the Seller Disclosure Schedule, since January 15, 2014, Seller has conducted the Business in the ordinary course consistent with past practices and has not:

 

(a)           suffered any event or events that have had, or would reasonably be expected to have, a Material Adverse Effect on the Business;

 

(b)           sold, transferred, leased, licensed or otherwise disposed of any Acquired Assets or any rights thereto;

 

(c)           issued any shares of capital stock or other securities or ownership interests, or declared, set aside or paid any dividend or other distribution with respect to any shares of capital stock, or repurchased, redeemed or other acquired any outstanding shares of capital stock or other securities or other ownership interests;

 

 (d)           incurred, assumed or guaranteed any indebtedness for borrowed money with respect to the Business, other than the Mobivity Note;

 

(e)           permitted or allowed any of the Acquired Assets to be subjected to any Lien, other than Liens that will be released at or prior to the Closing;

 

(f)           made any loan, advance or capital contributions to or investment in any Person;

(g)           suffered any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the Business or any Acquired Asset;

 

(h)           allowed any insurance policy covering the Business or the Acquired Assets to lapse or be cancelled or reduced the coverage or increased the deductible under any such insurance policy;

 

(i)           received any notice of termination of any Contract;

 

(j)           transferred or granted any rights under, or entered into any Contract regarding any Technology or Intellectual Property Rights or similar rights (including, without limitation, any settlement regarding the breach or infringement or alleged breach or infringement thereof) or modified any existing rights with respect thereto;

 

(k)           instituted, been made a party to, settled or agreed to settle, any Proceeding or suffered any material adverse determination in any Proceeding;

 

(l)           amended the terms of any Settlement Agreement;

 

(m)           made any transaction or commitment, or entered into any contract or agreement, relating to any Acquired Asset or the Business (including the acquisition or disposition of any assets) or relinquished any material contract or other right, other than transactions and commitments in the ordinary course consistent with past practices and those contemplated by this Agreement;

 

(n)  changed any method of accounting or accounting practice with respect to the Business, except for any such change after the date hereof required by reason of a concurrent change in generally accepted accounting principles;

 

 (o)  (i) granted any severance or termination pay to any employee of the Business, (ii) entered into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any employee of the Business, (iii) increased benefits payable under an existing severance or termination pay policies or employment agreements or (iv) increased compensation, bonus or other benefits payable to employees of the Business; or

 

 (p)           entered into any Contract or made any other commitment to take any of the types of actions described in paragraphs (a) through (o) above.

 

Section 3.08   No Undisclosed Liabilities .  Except as and to the extent set forth in Section 3.08 of the Seller Disclosure Schedule, there are no liabilities of the Business of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which would reasonably be expected to result in such a liability, other than:

 

(a)  Liabilities disclosed or provided for in the unaudited balance sheet of the Business as of December 31, 2013 (the “ Seller Balance Sheet ”) previously delivered to Buyer;

 

(b)  Liabilities incurred in the ordinary course of business consistent with past practice since the Seller Balance Sheet Date, which in the aggregate are not material to the Business;

 

(c)  Liabilities not required under generally accepted accounting principles to be shown on the Seller Balance Sheet for reasons other than the contingent nature thereof or the difficulty of determining the amount thereof;

 

 (d) Liabilities that are expressly set forth in the text  of executory contracts; and

 

(e) Liabilities incurred by Seller in connection with the execution of this Agreement listed on Section 3.08(e) of the Seller Disclosure Schedule.

Section 3.09   Properties .

 

(a)   Seller does not own any real property, nor has Seller ever owned any real property.   Section 3.09(a) of the Seller Disclosure Schedule sets forth a list of all real property currently leased, subleased or licensed by or from Seller or otherwise used or occupied by Seller for the operation of the Business (the " Leased Real Property "), the name of the lessor, licensor, sublessor, master lessor and/or lessee, the date and term of the lease, license, sublease or other occupancy right and each amendment thereto, the size of the premises and the aggregate annual rental payable thereunder.

 

(b)   Seller has made available to Buyer true, correct and complete copies of all leases, lease guaranties, subleases, and agreements to which Seller is a party for the leasing, use or occupancy of, or otherwise granting a right in or relating to the Leased Real Property, including all amendments, terminations and modifications thereof (" Lease Agreements "), and there are no other Lease Agreements for real property affecting the Leased Real Property or to which Seller is bound. All such Lease Agreements are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default, rent past due or event of default (or event which with notice or lapse of time, or both, would constitute a default).  Seller has not received any notice of a default, alleged failure to perform, or any offset or counterclaim with respect to any such Lease Agreement, which has not been fully remedied and withdrawn. The Closing will not affect the enforceability against any Person of any such Lease Agreement or the rights of Buyer to the continued use and possession of the Leased Real Property for the conduct of business as presently conducted.  Seller currently occupies all of the Leased Real Property for the operation of their respective businesses. There are no other parties occupying, or with a right to occupy, the Leased Real Property.

 

(c)   The Leased Real Property is in good operating condition and repair, free from structural, physical and mechanical defects, is maintained in a manner consistent with standards generally followed with respect to similar properties, and is structurally sufficient and otherwise suitable for the conduct of the business as presently conducted. Neither the operation of Seller on the Leased Real Property nor, to Seller's knowledge, such Leased Real Property, including the improvements thereon, violate in any material respect any applicable building code, zoning requirement, ordinance, rule, regulation or statute relating to such property or operations thereon, and any such non-violation is not dependent on so-called non-conforming use exceptions.

 

(d)   Seller has good and marketable title to, or in the case of leased property has valid leasehold interests in, all Acquired Assets (whether real or personal, tangible or intangible) reflected on the Seller Balance Sheet or acquired after the Seller Balance Sheet Date, except for properties and assets sold since the Seller Balance Sheet Date in the ordinary course of business consistent with past practices or as contemplated by this Agreement.  No Acquired Asset is subject to any Lien, except:

 

(i)  Liens disclosed on the Seller Balance Sheet;

 

(ii)  Liens for taxes not yet due or being contested in good faith (and for which adequate accruals or reserves have been established on the Seller Balance Sheet); or

 

(iii)  Liens which do not materially detract from the value of such property or assets as now used.

 

(e)           The equipment owned or leased by Seller (i) is adequate for the conduct of the Business as currently conducted and as currently contemplated by Seller to be conducted, and (ii) is in good operating condition, regularly and properly maintained, subject to normal wear and tear.

 

Section 3.10   Litigation .   Section 3.10 of the Seller Disclosure Schedule lists all Proceedings currently or at any time within the last twenty-four months pending or, to the knowledge of Seller or any Controlling Owner, threatened against the Seller, the Business or involving the Acquired Assets.  None of the matters set forth on Section 3.10 of the Seller Disclosure Schedule has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Business.  None of the matters set forth on Section 3.10 of the Seller Disclosure Schedule would affect the legality, validity or enforceability of this Agreement or the consummation of the transactions contemplated hereby.   Except as set forth on Section 3.10 of the Seller Disclosure Schedule, neither Seller nor any Controlling Owner has any knowledge of any facts or circumstances existing which are reasonably likely to lead to the instigation of any other Proceeding against or affecting the Seller, the Business or the Acquired Assets.

Section 3.11   Material Contracts .

 

(a)  Except for agreements, contracts, plans, leases, arrangements or commitments set forth in Section 3.11 of the Seller Disclosure Schedule, with respect to the Business, Seller is not a party to or subject to:

 

(i)           Any lease providing for annual rentals of $1,000 or more;

 

(ii)  Any contract for the purchase of materials, supplies, goods, services, equipment or other assets providing for annual payments of $1,000 or more;

 

(iii)  Any sales, distribution or other similar agreement providing for the sale of materials, supplies, goods, services, equipment or other assets;

 

(iv)   Any partnership, joint venture or other similar contract or arrangement;

 

(v)  Any contract relating to indebtedness for borrowed money or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by any asset), except contracts relating to indebtedness incurred in the ordinary course of business in an amount not exceeding $1,000;

 

(vi)  Any license agreement, franchise agreement or agreement in respect of similar rights granted to or held by Seller;

 

 (vii)  Any agency, dealer, reseller, sales representative, affiliate or similar agreement;

 

(viii)  Any agreement, contract or commitment that imposes a restriction on Seller: (A) to compete with any other Person; (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner with any other Person; or (C) to develop or distribute any technology;

 

(ix)     Any agreement, contract or commitment: (A) granting exclusive rights to license, market, sell or deliver any of the products or services of Seller; or (B) otherwise contemplating an exclusive relationship between Seller and any other Person;

 

(x)      Any agreement, contract or commitment which is or relates to an agreement with or for the benefit of any affiliate of Seller; or

 

(xi)  Any other contract or commitment not made in the ordinary course of business that is material to the Business.

 

 (b)     Seller has provided or otherwise made available to Buyer complete and accurate copies of all standard form agreements used by the Seller that relate to the Acquired Assets, including all customer agreements, development agreements, distributor or reseller agreements, employee agreements containing intellectual property assignments or licenses or confidentiality provisions, consulting or independent contractor agreements containing intellectual property assignments or licenses or confidentiality provisions, and confidentiality or nondisclosure agreements. Section 3.11(b) of the Seller Disclosure Schedule sets forth a complete and accurate list of all Contracts entered into by the Seller that include deviations from such standard form agreements.

 

(c)   Seller has provided to Buyer complete and accurate copies of all Contracts identified in Section ‎3.11 of the Seller Disclosure Schedule, including all amendments or modifications thereto.  There is no Contract (or amendment or modification thereto) that is not in written form.  Each agreement, contract, plan, lease, arrangement and commitment required to be disclosed on Section 3.11 of the Seller Disclosure Schedule is a valid and binding agreement of Seller and is in full force and effect, and neither Seller nor any other party thereto is in default in any material respect under the terms of any such agreement, contract, plan, lease, arrangement or commitment, nor to the knowledge of Seller, has any event or circumstance occurred that, with notice or lapse of time or both, would constitute any event of default thereunder; subject to the effect of (A) applicable bankruptcy, insolvency, reorganization, moratorium or other similar Legal Requirements now or hereafter in effect relating to rights of creditors generally and (B) Legal Requirements governing specific performance, injunctive relief and other equitable remedies.  Except as set forth on Section 3.11(c) of the Seller Disclosure Schedule, Seller has performed all obligations required to be performed by it under each Contract prior to the Closing.

(d)           Except as set forth on Section 3.11(d) of the Seller Disclosure Schedule, (i) the consummation of the transactions contemplated hereby will not afford any other party the right to terminate, modify, or exercise any right to increased or accelerated performance under, any Contract and (ii) none of the Contracts (A) contains a provision preventing, prohibiting or requiring any consent or notice in connection with the transfer or assignment of such Contract to Buyer or (B) contains a “change of control” or similar provision triggered by the consummation of the transactions contemplated hereby.

 

Section 3.12   License and Permits .    Section 3.12 of the Seller Disclosure Schedule correctly describes each license, franchise, permit or other similar authorization affecting, or relating in any way to, the Business, together with the name of the Governmental Entity issuing such license or permit (the “ Permits ”).  Except as set forth on Section 3.12 of the Seller Disclosure Schedule, such Permits are valid and in full force and effect and are transferable by Seller, and none of the Permits will be terminated or impaired or become terminable as a result of the transactions contemplated hereby.  Upon consummation of such transactions, Buyer will have all right, title and interest to all such Permits.

 

Section 3.13   Insurance . Section 3.13 of the Seller Disclosure Schedule sets forth a list of all insurance policies and fidelity bonds covering the Acquired Assets, the business and operations of the Business and its employees.  There is no claim  pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds.  All premiums payable under all such policies and bonds have been paid and Seller is otherwise in full compliance with the terms and conditions of all such policies and bonds.  Such policies of insurance and bonds are of the type and in amounts customarily carried by Persons conducting businesses similar to the Business.  Seller does not know of any threatened termination of, or premium increase with respect to, any of such policies or bonds.

 

Section 3.14   Compliance with Laws .  Seller is not in violation of, has violated, or to Seller’s knowledge, is under investigation with respect to or has been threatened to be charged with or given notice of any violation of, any Legal Requirement applicable to the Acquired Assets or the conduct of the Business.

 

Section 3.15   Intellectual Property .

 

(a)   As used in this Section 3.15 or elsewhere in this Agreement, the following terms have the meanings indicated below:

 

(i) " Behavioral Information " means data collected by any means (including, without limitation, from a point of sale terminal, computer, Web browser, mobile telephone, or other device or application), where such data is or may be used to identify or contact an individual or device or application, to predict or infer the preferences, interests, or other characteristics of the device or application or of a user of such device or application, or to target advertisements or other content to a device or application, or to a user of such device or application.

(ii) " Customer Data " means all data and content (x) uploaded or otherwise provided by or on behalf of the Seller's customers to, or stored by Seller's customers on, Seller's products and services; or (y) collected by Seller's products and services; including all Behavioral Information.

 

(iii) " Seller Intellectual Property Agreements " means the Inbound License Agreements and the Outbound License Agreements. For clarity, "Seller Intellectual Property Agreements" excludes Ordinary Course In-Licenses and Ordinary Course Out-Licenses (each as defined below).

 

(iv) " Seller Owned Intellectual Property " means any and all Intellectual Property Rights and Technology that are owned or purported to be owned by Seller.

 

(v) " Seller Products " means all products and services developed, produced, marketed, licensed, sold, distributed or performed by or on behalf of Seller prior to the Closing, and all products and services currently under development by Seller.

 

(vi) " Seller Source Code " means, collectively, any software source code or database specifications or designs, or any proprietary information, build scripts, test scripts, documentation, instructions or algorithms contained in or relating to any software included in the Seller Owned Intellectual Property or the Seller Products.

 

 (vii) " Intellectual Property Rights " means any and all rights in, arising out of, or associated with any of the following, throughout the world: (A) patents, including utility models, industrial designs and design patents, and applications therefor (and any patents that issue as a result of those patent applications), and including all divisionals, continuations, continuations-in-part, continuing prosecution applications, substitutions, reissues, re-examinations, renewals, provisionals and extensions thereof, and any counterparts worldwide claiming priority therefrom, and all rights in and to any of the foregoing (" Patents "), (B) trade and industrial secrets, confidential or proprietary information and any know how (" Trade Secrets "), (C) trade names, logos, trademarks, service marks, service names, trade dress, company names, collective membership marks, certification marks, slogans, 800 numbers, social media pages, hash tags and other similar forms indicia of origin, whether or not registerable as a trademark in any given country, together with registrations and applications therefor, and the goodwill associated with any of the foregoing (" Trademarks "), (D) Internet domain names and URLs, (E) copyrights, and any other similar rights of authors or in works of authorship (" Copyrights "), (F) all rights in data collections and databases and documentation related thereto, (G) all moral and economic rights of authors and inventors, however denominated, throughout the world, (H) applications for, registrations of, and divisions, continuations, continuations-in-part, reissuances, renewals, extensions, restorations and reversions of the foregoing (as applicable)  and (I) all other similar or equivalent intellectual property or proprietary rights now known or hereafter recognized anywhere in the world, including the right to enforce and recover damages for the infringement or misappropriation of any of the foregoing.

 

(vii) " Open Source Materials " means software or other material that is distributed as "free software," "open source software" or under similar licensing or distribution terms (including but not limited to the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL), Open Source Initiative, and the Apache License) that (a) could require or could condition the use or distribution of such software or other material, or portion thereof, on (1) the disclosure, licensing, or distribution of any source code for any portion of such software, or (2) the granting to licensees of the right to make derivative works or other modifications to such software or other material or portions thereof, or (b) could otherwise impose any limitation, restriction, or condition on the right or ability of Seller to use, sell, offer for sale, license, distribute or charge for any Seller Product.

 

(ix) " Personally Identifiable Information " means any information or data that alone or in combination with other information collected, held, or otherwise managed by the Seller can be used to specifically identify an individual, along with any other information or data associated directly with such identifying information.

 

(x) " Private Information " means Behavioral Information and Personally Identifiable Information.

 

(xi) " Registered IP " means Intellectual Property Rights that have been registered, filed or issued under the authority of, with or by any Governmental Entity, or other public or quasi-public legal authority, including the United States Patent and Trademark Office, the U.S. Copyright Office and their equivalents worldwide.

 

(xii) " Technology " means any or all of the following and any tangible embodiments thereof: (i) works of authorship, including computer programs, whether in source code or in executable code form, application programming interfaces, software architecture, and any associated documentation, (ii) inventions (whether or not patentable), discoveries and improvements, and any associated lab notebooks or other indicia or records of invention, (iii) proprietary and confidential information, Trade Secrets, (iv) databases, data compilations and collections and technical data and performance data, (v) logos, trade names, trade dress, trademarks and service marks, (vi) domain names, web addresses and sites, (vii) methods and processes, (viii) devices, prototypes, data bases, designs and schematics, including for any Seller Products, and (ix) any other tangible embodiments of Intellectual Property Rights.

 

(xiv) " Third Party Intellectual Property " means any and all Intellectual Property Rights and Technology owned by a third party.

 

 (b) Title to Seller Owned Intellectual Property . All Seller Owned Intellectual Property is owned exclusively by the Seller free and clear of all Liens, other than Permitted Liens. Seller has the exclusive right to bring a claim or suit against a third party for infringement or misappropriation of the Seller Owned Intellectual Property. Seller has not transferred ownership of, or agreed to transfer ownership of, or permitted any person to, retain, any exclusive rights, or joint ownership of, any Intellectual Property Rights that are or were Seller Owned Intellectual Property to any third party or permitted any rights of Seller that are or were material Seller Owned Intellectual Property to enter the public domain. To the knowledge of Seller, there has not been and there is no unauthorized use, unauthorized disclosure, infringement or misappropriation of any Seller Owned Intellectual Property by any third party.

 (c) Seller Registered IP . Section 3.15(c) of the Seller Disclosure Schedule lists a true and complete list of all Registered IP owned or purported to be owned by, filed in the name of, or licensed exclusively to, Seller (" Seller Registered IP "), indicating for each item the registration or application number and the applicable jurisdiction. Each item of Seller Registered IP is and at all times has been in compliance with all Legal Requirements (including payment of filing, examination and maintenance fees and proofs of use), is valid, subsisting and enforceable, and there are no facts or circumstances known to Seller that would render any Seller Registered IP invalid or unenforceable. No application for a Patent or a material Copyright, mask work, or Trademark registration or any other type of material Seller Registered IP filed by or on behalf of Seller at any time since January 1, 2010 has been abandoned, allowed to lapse, or rejected. Seller and its patent counsel have complied with their duty of candor and disclosure and have made no material misrepresentations in the filings submitted to the applicable Governmental Entities with respect to all Patents included in the Seller Registered IP. To the knowledge of the Seller, Seller has not engaged in Patent or Copyright misuse or any fraud or inequitable conduct in connection with any Seller Registered IP. To the knowledge of Seller, no Trademark owned, used, or applied for by Seller conflicts or interferes with any Trademark owned, used, and applied for by any other Person. To the knowledge of Seller, no event or circumstance (including a failure to exercise adequate quality controls and an assignment in gross without accompanying goodwill) has occurred or exists that has resulted in, or would reasonably be expected to result in, the abandonment of any material Trademark owned, used, or applied for by Seller. All necessary maintenance and renewal fees currently due in connection with Seller Registered IP have been made, and all necessary documents, recordations and certifications in connection with such Seller Registered IP have been filed, with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purpose of prosecuting and maintaining such Seller Registered IP. Except as set forth in Section 3.15(c) of the Seller Disclosure Schedule, there are no actions that are required to be taken by the Seller within 180 days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any documents, applications or certificates, for the purposes of perfecting, maintaining, or renewing any Seller Register IP.

 

(d) Employees. All rights in, to and under all Intellectual Property Rights and Technology created by Seller's employees or founders for or on behalf of Seller, if any (i) prior to the inception of Seller or (ii) prior to their commencement of employment with seller have been duly and validly assigned to Seller and Seller has no reason to believe that any such Person is unwilling to provide Seller or Buyer with such cooperation as may reasonably be required to complete and prosecute all appropriate U.S. and foreign patent and copyright filings related thereto.

 

 (e) Invention Assignment and Confidentiality Agreement . In each case in which Seller has engaged any consultant, advisor, employee or independent contractor to independently or jointly conceive, reduce to practice, create or develop any Intellectual Property Rights or Technology for or on behalf of Seller (each an " Author "), Seller has obtained written and enforceable proprietary information and invention disclosure and Intellectual Property Rights assignments from the Author in the form of Seller's standard form of employee proprietary information agreement containing any assignment or license of Intellectual Property Rights (the " Employee Proprietary Information Agreement ") or Seller's standard form of professional services, outsourced development, consulting, or independent contractor agreements containing any assignment or license of Intellectual Property Rights (the " Consultant Proprietary Information Agreement "), as applicable, copies of which are attached to Section 3.15(f)(i) and Section 3.15(f)(ii) , respectively, of the Seller Disclosure Schedule. No Author has retained any ownership rights in any Intellectual Property Rights or Technology developed by such Author for seller and Seller has obtained from such Authors a waiver of all waivable non-assignable rights, including moral rights.

Seller has made available to Buyer copies of all such forms currently and historically used by Seller.   Section 3.15(f)(i) of the Seller Disclosure Schedule accurately identifies as of the date of this Agreement each Employee Proprietary Information Agreement and Consultant Proprietary Information Agreement containing any assignment or license of Intellectual Property Rights that deviates in any material respect from the corresponding standard form agreement made available to Buyer.

 

(f) No Violation . No current or former employee, consultant, advisor or independent contractor of Seller: (i) is in violation of any material term or covenant of any Contract relating to employment, invention disclosure, invention assignment, non-disclosure or non-competition or any other Contract with any other party by virtue of such employee's, consultant's, advisor's or independent contractor's being employed by, or performing services for, Seller or using Trade Secrets or proprietary information of others without permission; or (ii) has developed any Technology for Seller that is subject to any agreement under which such employee, consultant, advisor or independent contractor has assigned or otherwise granted to any third party any rights (including Intellectual Property Rights) in or to such Technology.

 

(g) Confidential Information . Seller has taken reasonable steps to protect and preserve the confidentiality of all confidential or non-public information of Seller or provided by any third party to Seller (" Confidential Information "). All current and former Employees and any other third party having access to Confidential Information have executed and delivered to Seller a written legally binding agreement sufficient to protect such Confidential Information. Seller has implemented and maintains reasonable and appropriate disaster recovery and security plans, procedures and facilities and has taken other reasonable steps consistent with (or exceeding) industry practices of companies offering similar services to safeguard the Confidential Information, Private Information and Customer Data, and information technology systems utilized in the operation of the business of Seller, from unauthorized or illegal access and use. There has been no breach of security or unauthorized access by third parties to such information technology systems utilized in the operation of the business of Seller or the Confidential Information, Private Information or Customer Data. Seller has at all times complied with the Payment Card Industry Data Security Standard and other requirements of each credit card issuer and network or other payment system for which Seller processes transactions or receives or stores cardholder or member information.

 

(h) Non-Infringement . Seller has not brought any action, suit or proceeding against any third party for infringement or misappropriation of any Intellectual Property Rights. The Seller Products, and the operation of the Business, including the design, development, manufacture, coding, use, sale, provision, offer to sell and distribution of any Seller Products, has not and is not infringing, misappropriating or violating and will not infringe, misappropriate or violate when conducted in substantially the same manner by Buyer following the Closing, the Intellectual Property Rights of any third party, has not and does not violate any right of any person (including any right to privacy or publicity), or has not and does not constitute unfair competition or trade practices under the Legal Requirements of any jurisdiction. No claim or action has been brought or asserted against Seller by, and Seller has not received notice or any other overt threats, including indemnification claims, from any third party (nor does Seller have knowledge of any reasonable basis therefor), (i) challenging the Intellectual Property Rights of Seller, (ii) inviting Seller to license such third party's Intellectual Property Rights, or (iii) claiming that any Seller Product or the operation of the Business, infringes or misappropriates the Intellectual Property Rights of any third party, violates the rights of any third party (including any right to privacy or publicity), or constitutes unfair competition or trade practices under the Legal Requirements of any jurisdiction (nor does Seller have knowledge of any reasonable basis therefor). There are no forbearances to sue, consents, settlement agreements, judgments, orders or similar obligations, other than the Seller Intellectual Property Agreements set forth on Section 3.15(h) of the Seller Disclosure Schedule, that do or may: (x) restrict the rights of Seller to use, transfer, license or enforce any of its Intellectual Property Rights, (y) restrict the conduct of the business of, including any payments by or conditions on, Seller in order to accommodate a third party's Intellectual Property Rights, or (z) grant any third party any right with respect to any Seller Owned Intellectual Property, other than non-disclosure agreements, evaluation licenses and non-exclusive end-user licenses or service agreements granted in the ordinary course of business consistent with past practice.

(i) Licenses; Agreements . Section 3.15(i)(i) of the Seller Disclosure Schedule sets forth a complete and accurate list of all Contracts under which Seller grants to a third party any rights under or with respect to any Seller Owned Intellectual Property or Seller Product (each an " Outbound License Agreement "), other than non-disclosure agreements, evaluation licenses and non-exclusive end-user licenses or service agreements granted by Seller to Seller's customers in the ordinary course of business (collectively, " Ordinary Course Out-Licenses "). Except for Outbound License Agreements set forth in Section 3.15(i)(i) of the Seller Disclosure Schedule and Ordinary Course Out-Licenses, Seller has not granted any options, licenses or agreements of any kind relating to any Seller Owned Intellectual Property or Seller Products, including any covenant or other provision that in any way limits or restricts the ability of Seller to use, assert, enforce, or otherwise exploit any Seller Owned Intellectual Property or Seller Products anywhere in the world. Section 3.15(i)(ii) of the Seller Disclosure Schedule sets forth a complete and accurate list of all Contracts under which a third party grants to Seller any rights under or with respect to any Intellectual Property Rights included in or used in (i) the development of Seller Products, or (ii) the operation of the Business (each, an " Inbound License Agreement "), other than licenses for commercially available "off-the-shelf" software licensed to Seller in object code form (" Shrink-Wrap Licenses "), licenses of Open Source Materials, non-disclosure agreements, evaluation licenses and standard licenses granted to Seller that are contained in Seller’s Ordinary Course Out-Licenses in the ordinary course of business (collectively, " Ordinary Course In-Licenses ").

(j)         Seller Intellectual Property Agreements . All Seller Intellectual Property Agreements are in full force and effect. With respect to the Seller Intellectual Property Agreements:

(i) Seller is not (and will not be as a result of the execution and delivery or effectiveness of this Agreement or the performance of Seller's obligations under this Agreement), and, to the knowledge of Seller, all other parties are not, in breach of any Seller Intellectual Property Agreement and the consummation of the transactions contemplated by this Agreement will not result in the modification, cancellation, termination, suspension of, or acceleration of any payments with respect to any Seller Intellectual Property Agreements, or give any counterparty to any Seller Intellectual Property Agreement the right to do any of the foregoing;

(ii) At the Closing, Buyer will be permitted to exercise all of Seller's rights under the Seller Intellectual Property Agreements to the same extent seller would have been able to had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which Seller would otherwise be required to pay;

(iii) There are no disputes involving Seller or any contractors, consultants, employees, founders, officers or directors of Seller regarding the scope of any Seller Intellectual Property Agreements, or performance under any Seller Intellectual Property Agreements including with respect to any payments to be made or received by Seller thereunder;

(iv) No Seller Intellectual Property Agreement requires Seller to return or refund any amounts paid to it, or grant any credit to any third party, or pay any liquidated damages or penalties in the event of any breach of any warranty or any failure of Seller to perform under such Seller Intellectual Property Agreement; and

(v) No third party that has licensed Intellectual Property Rights to Seller has retained ownership of, or license rights under, any Intellectual Property Rights in or to improvements or derivative works made by Seller in such Third Party Intellectual Property.

(k) No Conflict . Neither this Agreement, the transactions contemplated by this Agreement, nor the assignment to Buyer any Contracts to which Seller is a party, will result in, by the terms of such Contracts: (i) Buyer or any of its affiliates granting to any third party any right to or with respect to any Intellectual Property Rights owned by, or licensed to Buyer or any of its affiliates, or (ii) Buyer or any of its affiliates, being bound by or subject to, any exclusivity obligations, non-compete or other restriction on the operation or scope of their respective businesses.

 

(l) Software; Source Code . Seller has not disclosed, delivered, licensed or made available to any Person or agreed or obligated itself to disclose, deliver, license or make available to any Person, or permitted the disclosure or delivery to any escrow agent or other Person of, any Seller Source Code, other than disclosures to employees and consultants involved in the development of Seller Products under binding written agreements that prohibit use or disclosure except in the performance of services for Seller. No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, result in the disclosure, delivery or license by Seller of any Seller Source Code, other than disclosures to employees and consultants involved in the development of Seller Products under binding written agreements that prohibit use or disclosure except in the performance of services for Seller. Without limiting the foregoing, neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will result in a release from escrow or other delivery to a third party of any Seller Source Code. The software used by Seller in the provision of any Seller Product: (i) to the knowledge of Seller, has sufficiently documented source code enabling a reasonably skilled software developer to understand, modify, compile and otherwise utilize the related technology; and (ii) does not contain any disabling mechanisms or protection features which are designed to disrupt, disable, harm or otherwise impede in any manner the operation of, or provide unauthorized access to, a computer system or network or other device on which Seller Product software is stored or installed or damage or destroy any data or file without the user's consent. Seller has implemented procedures consistent with standard industry practices to ensure that each Seller Product and any software included in the Seller Owned Intellectual Property are free from viruses, disabling or other malicious codes. The Seller Products and the software included in the Seller Owned Intellectual Property do not contain any errors or bugs that adversely affect, or may reasonably be expected to adversely affect, the value, functionality or fitness for the intended purpose of such Seller Products or software included in the Seller Owned Intellectual Property. None of the software used in the provision of any Seller Product fails to comply with any applicable warranty or other contractual commitment relating to the use, functionality or performance of such Seller Product or any product or system containing or used in conjunction with such Seller Product.

 

(m) Open Source Software .    Section 3.15(m)(i) of the Seller Disclosure Schedule lists any licenses for Open Source Materials pursuant to which any Seller Products are made available by Seller to any Person.   Section 3.15(m)(ii) of the Seller Disclosure Schedule lists all Open Source Materials included in, combined with, or used in the delivery of, any Seller Product or other Seller Owned Intellectual Property, as the case may be, and identifies each relevant license for such Open Source Materials and describes the manner in which such Open Source Materials were used (such description shall include whether (and, if so, how) the Open Source Materials were modified and/or distributed by Seller). With respect to Open Source Materials that are or have been included in, combined with, or used by Seller in connection with any Seller Product, Seller has been and is in compliance with the terms and conditions of all applicable licenses for the Open Source Materials, including attribution and copyright notice requirements. Except as set forth in Section 3.15(m)(iii) of the Seller Disclosure Schedule, there are no Open Source Materials included in, or distributed with, any Seller Products or other Seller Owned Intellectual Property, which subject such Seller Products or other Seller Owned Intellectual Property to the terms of the license agreement to which such Open Source Materials are subject, including in such a way that creates, or purports to create obligations for Seller with respect thereto or grants, or purport to grants, to any third party, any rights or immunities thereunder (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be (A) disclosed or distributed in source code form, (B) be licensed for the purpose of making derivative works, or (C) be redistributable at no charge).

 

 (n) Sufficiency . Seller owns or otherwise has the right to use all Intellectual Property Rights and Technology used in or necessary for the conduct of the Business as currently conducted or as currently proposed by Seller to be conducted, including the design, development, manufacture, coding, license, sale, provision, maintenance and support, and use, of all Seller Products currently under development or in production. The Seller Owned Intellectual Property, together with the Third Party Intellectual Property licensed pursuant to the Inbound License Agreements, Shrink-Wrap Licenses and other Ordinary Course In-Licenses, constitutes all of the Intellectual Property Rights and Technology used in or necessary for the conduct of the Business as currently conducted or as proposed by Seller to be conducted.

 

(p) Effect of Transaction . Neither the execution, delivery, or performance of this Agreement nor the consummation of any of the transactions or agreements contemplated by this Agreement will, with or without notice or the lapse of time, by operation of any Contracts to which Seller is a party, result in, or give any other Person the right or option to cause or declare, (i) a loss of, or Lien on, any Seller Owned Intellectual Property; (ii) a breach of, termination of, or acceleration or modification of any right or obligation under any Seller Intellectual Property Agreements; (iii) the grant, assignment, or transfer to any other Person of any license or other right or interest under, to, or in any Seller Owned Intellectual Property; or (iv) a consent right that could prevent the transfer of, or diminution of rights to use, any Customer Data or any Personally Identifiable Information.

 (q) Privacy and Data Security . Section 3.15(q) of the Seller Disclosure Schedule identifies and describes each distinct electronic or other database containing (in whole or in part) Private Information and Customer Data maintained by or for Seller at any time, the types of Private Information and Customer Data in each such database, the means by which the Private Information and Customer Data was collected, and the security policies that have been adopted and maintained with respect to each such database. Seller has established privacy policies which are in conformance with reputable industry practice and all applicable Legal Requirements. At all times since inception, Seller has provided accurate notice of its privacy practices on all of its websites (and through client-side and web interface products) and these notices have not contained any material omissions of Seller's privacy practices and have not been misleading, deceptive, or in violation of applicable Legal Requirements. Seller has complied with and is in compliance with all applicable Legal Requirements, all rules, policies, and requirements of self-regulatory organizations, and its internal and external privacy policies, and with any contractual obligations and consumer-facing statements on its Web site and in any marketing or promotional materials relating to its use, collection, retention, storage, disclosure, transfer, disposal, and other processing of any Private Information and Customer Data, and the execution, delivery and performance of this Agreement will not result in a breach or violation of any of the foregoing. Seller has obtained all consents necessary from providers of Customer Data and Personally Identifiable Information (a) to collect and use such Customer Data and Personally Identifiable Information in the conduct of the Business as currently conducted and as proposed by Seller to be conducted and (b) to transfer such Customer Data and Personally Identifiable Information to Seller. Seller has not received, and to the knowledge of Seller, there has been no, complaint to any regulatory or other governmental body or official, foreign or domestic, or any audit, proceeding, investigation (formal or informal), or claim against, Seller or any of its customers (in the case of customers, to the extent relating to the Seller Products) by any private party or any regulatory or other governmental body or official, foreign or domestic, regarding the collection, use, retention, storage, transfer, disposal, disclosure or other processing of Private Information or Customer Data.

(r) Domain Names and Social Media Presence . Section 3.15(r) of the Seller Disclosure Schedule identifies and describes each Internet domain names and URL and each distinct social media presence maintained by or for Seller at any time, and the passwords and other account management information with respect to each such Internet domain names, URLs and social media presence.

Section 3.16   Employees .

 

(a)   Section 3.16(a) of the Seller Disclosure Schedule contains a complete and accurate list of the current employees of Seller as of the date hereof and shows with respect to each such employee (i) the employee's name, position held, base salary or hourly wage rate, as applicable, including each employee's designation as either exempt or non-exempt from the overtime requirements of the Fair Labor Standards Act incentive and bonus arrangements to which Seller is a party, whether legally binding or not, (ii) the date of hire, (iii) vacation eligibility for the current calendar year (including accrued vacation from prior years), (iv) leave status (including type of leave, expected return date for non-disability related leaves and expiration dates for disability leaves), (v) visa status, (vi)  accrued sick days for current calendar year, (vii) relevant contractual prior notice period required in the event of termination, (viii) eligibility to Seller car or travel expenses, and (ix) any severance or termination payment (in cash or otherwise) to which any employee could be entitled. To the knowledge of Seller, no employee listed on Section 3.16(a) of the Seller Disclosure Schedule intends to terminate his or her employment for any reason.  Except as set forth in Section 3.16(a) of the Seller Disclosure Schedule, at the Closing, all salaries, wages, vacation pay, bonuses, commissions and other compensation due from Seller will have been paid.

(b)   Section 3.16(b) of the Seller Disclosure Schedule contains a true, correct and complete list of (i) all current independent contractors, and Persons that have or have had a consulting or advisory relationship with providing services to Seller, (ii) the location at which such independent contractors, are providing services and (iii) the rate of compensation payable to such independent contractors. All independent contractors, consultants and advisors to Seller can be terminated with less than 90 days' notice and without notice or liability on the part of Seller.

 

(c)   Section 3.16(c) of the Seller Disclosure Schedule contains a complete and accurate list of each employment, consulting, compensation, incentive or deferred compensation, severance, relocation, retention, transaction, change in control, termination, retirement, pension, supplemental retirement, deferred compensation, excess benefit, profit-sharing, bonus, incentive, performance award, stock option, restricted stock, deferred stock, phantom stock or other equity or equity-linked, savings, life, vacation, paid-time-off, cafeteria, insurance, flex spending, tuition, medical, health, welfare, disability, death, fringe benefit or other employee compensation or benefit plan, program, policy, practice, commitment, agreement, arrangement or contract, including, in each case, each "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) (whether or not subject to ERISA) which is maintained, contributed to, participated in, sponsored by or required to be contributed to by Seller or with respect to which Seller has or may have any liability or obligation, whether actual or contingent (collectively, the " Seller Employee Plans ").

 

(d)   Seller has made available to Buyer true, correct and complete copies, as applicable, of (i) each Seller Employee Plan including all amendments thereto and all related trust documents (and descriptions of the material terms of any such plan that is not in writing), (ii) the three most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required to be filed in connection with each Seller Employee Plan, (iii) if the Seller Employee Plan is funded, the most recent annual and periodic accounting of such Seller Employee Plan assets, (iv) the most recent summary plan description together with the summary(ies) of material modifications thereto, if any, (v) all material written agreements and contracts relating to each Seller Employee Plan, including administrative service agreements and group insurance contracts, (vi) all correspondence to or from any Governmental Entity relating to any Seller Employee Plan other than routine correspondence in the normal course of operations of such Seller Employee Plan, (vii) all forms of COBRA notices, (viii) policies pertaining to fiduciary liability insurance covering the fiduciaries for each Seller Employee Plan, (ix) all discrimination tests for each Seller Employee Plan for the three most recent plan years, and (x) the most recent Internal Revenue Service (or any other applicable Taxing authority) determination or opinion letter issued with respect to each Seller Employee Plan, if applicable.

 

(e)   Seller has performed in all material respects all obligations required to be performed by them under, is not in default or violation of, and, as of the date hereof, Seller does not have any knowledge of any material default or material violation by any other party to, any Seller Employee Plan, and each Seller Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all applicable Legal Requirements.

 

(f)   The execution of this Agreement and the consummation of the transactions contemplated herein will not (either alone or upon the occurrence of any additional or subsequent events) result in or entitle any Person to any payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in compensation or benefits or obligation to fund benefits.

 

(g)   No Seller Employee Plan is, and Seller has never maintained, established, sponsored, participated in, or contributed to, a pension plan subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. The obligations of all Seller Employee Plans that provide health, welfare or similar insurance are fully insured by bona fide third-party insurers. No Seller Employee Plan is maintained through a human resources and benefits outsourcing entity, professional employer organization, or other similar vendor or provider.

(h)   Seller is in compliance in all material respects with all applicable Legal Requirements, judgments or arbitration awards of any court, arbitrator or any Governmental Entity, extension orders and binding customs respecting labor and employment, including Legal Requirements relating to employment practices, terms and conditions of employment, discrimination, disability, fair labor standards, workers compensation, wrongful discharge, immigration, occupational safety and health, family and medical leave, wages and hours (including overtime wages), worker classification, equal opportunity, pay equity, meal and rest periods, and employee terminations, and in each case, with respect to any current or former employee, consultant, independent contractor, advisor or director of Seller (each, an " Employee "): (i) has withheld and reported all amounts required by Legal Requirement or by agreement to be withheld and reported with respect to wages, salaries and other payments to Employees, (ii) is not liable for any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing, and (iii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the ordinary course of business and consistent with past practice). There are no actions, suits, claims or administrative matters pending, reasonably anticipated or, to the knowledge of Seller, threatened against Seller or any of its Employees relating to any Employee. There are no pending, reasonably anticipated or, to the knowledge of Seller, threatened claims or actions against Seller or any Seller trustee under any worker's compensation policy or long term disability policy. The services provided by each of the Employees are terminable at the will of Seller, and any such termination would result in no liability to Seller. The Seller has no liability with respect to any misclassification of (x) any Person or Employee as an independent contractor rather than as an employee; (y) any Employee leased from another employer; or (z) any Employee currently or formerly classified as exempt from overtime wages.

 

(i)   Seller is not or ever has been a party to any collective bargaining agreements, and there are no labor unions or other organizations representing, purporting to represent or attempting to represent, any employee of Seller.  Seller has not experienced any strikes, labor disputes, concerted refusal to work overtime, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of Seller. Seller has not engaged in any unfair labor practices within the meaning of the National Labor Relations Act.

 

(j)   In the three years prior to the date hereof, Seller has not taken any action which would constitute a "plant closing" or "mass layoff" within the meaning of the Worker Administration and Retraining Notification Act (" WARN ") or similar state or local law, issued any notification of a plant closing or mass layoff required by WARN or similar state or local law, or incurred any liability or obligation under WARN or any similar state or local law that remains unsatisfied. No terminations prior to the Closing would trigger any notice or other obligations under WARN or any similar state or local law.

 

Section 3.17   Environmental Compliance . Seller is not in violation of any applicable Legal Requirement relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.

 

Section 3.18   Tax Matters .  Except as set forth in Section 3.18 of the Seller Disclosure Schedule:

 

(a)   All Tax returns required to be filed by or on behalf of Seller have been timely and properly filed and are true, accurate and complete in all material respects.

 

(b)   Seller has timely paid all Taxes, and all interest and penalties due thereon and payable by them for the Pre-Closing Tax Period which will have been required to be paid on or prior to the Closing Date, the non-payment of which would result in a Lien on any Acquired Asset, would otherwise adversely affect the Business or would result in Buyer becoming liable or responsible therefore.

 

(c)   Seller has established, in accordance with generally accepted accounting principles applied on a basis consistent with that of preceding periods, adequate reserves for the payment of, and will timely pay all Tax liabilities, assessments, interest and penalties which arise from or with respect to the Acquired Assets or the operation of the Business and are incurred in or attributable to the Pre-Closing Tax Period, the non-payment of which would result in a Lien on any Acquired Asset, would otherwise adversely affect the Business or would result in Buyer becoming liable or responsible therefore.

Section 3.19      Customers .    Section 3.19 of the Seller Disclosure Schedule lists all active customers of the Business and, for each such customer, (a) lists all agreements or other arrangements between Seller and the customers, (b) summarizes all material terms and conditions of the agreements or other arrangements,(c) list any deferred or unearned revenue or customer deposits associated with the agreements or other arrangements and (d) indicates the manner in which such customer makes remittances to Seller (e.g., by credit card or by check).  Seller has not received any written, oral or other notice (including by email, text message or otherwise) that any customer of the Business expects or intends to cease doing business with Seller, reduce the amount of business such customer does with Seller or modify its relationship with Seller in a manner adverse to Seller.   The Seller Products conform and comply with all applicable contractual commitments, warranties and customer specifications.  Seller has not received any warranty claim or other complaint from any customer.  Neither Seller nor any Controlling Owner has any knowledge of any facts or circumstances existing which are reasonably likely to lead to any warranty claim or other complaint from any customer.

 

Section 3.20   Books and Records .   The records and documents of Seller accurately reflect in all material respects the information relating to the Business, the location of the Acquired Assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Business.

 

Section 3.21   Finders’ Fees .  There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission from Buyer or Parent or any of their respective affiliates upon consummation of the transactions contemplated by this Agreement.

 

Section 3.22    Absence of Certain Relationships .    None of (a) Seller, (b) any Controlling Owner, (c) any officer of Seller, or (d) any member of the immediate family of the Persons listed in (a) through (c) of this sentence, has any financial or employment interest in any subcontractor, supplier, or customer of the Business (other than holdings in publicly held companies of less than 2% of the outstanding capital stock of any such publicly held company).

 

Section 3.23   No Questionable Payments .  Neither Seller nor any director, officer, agent, employee, or other person associated with, or acting on behalf of, Seller, nor any shareholder of Seller  has, directly or indirectly:  used any corporate funds for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to political activity; made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.

 

Section 3.24   Completeness of Disclosure .  No representation or warranty by Seller or the Controlling Owners in this Agreement contains or, and at the Closing Date will contain, an untrue statement of material fact or omits or, at the Closing Date, will omit to state a material fact required to be stated therein or necessary to make the statements made not misleading.

 

Section 3.25    Investment Representations and Covenants .

 

(a)           Seller is acquiring the Parent Shares for investment for its own account and not with a view to distribution or resale thereof, and it will not sell or otherwise transfer the Parent Shares except in accordance with the provisions of the Securities Act and the rules and regulations promulgated under the Securities Act by the Securities and Exchange Commission (the “ Commission ”) and all applicable provisions of state securities laws and regulations.  Seller further acknowledges that it understands the foregoing to mean that it will not sell or otherwise transfer any Parent Shares unless such securities are registered under the Securities Act and any other applicable federal or state securities laws, or it obtains an opinion of counsel satisfactory to Parent (both as to the issuer of the opinion and the form and substance thereof) that the Parent Shares may be transferred in reliance on an applicable exemption from the registration requirements of such laws.

(b)           Seller understands that acquisition of the Parent Shares is a speculative investment involving a high degree of risk of the loss, and it is qualified by knowledge and experience to evaluate investments of this type.  It further acknowledges that it has carefully considered the potential risks relating to an investment in the Parent Shares.

 

(c)           Seller is able to bear the economic risk of losing its entire investment in the Parent Shares.

 

(d)           Seller understands and acknowledges that the Parent Shares have not been registered under the Securities Act, or the securities laws of any state and, as a result thereof, are subject to substantial restrictions on transfer. It further acknowledges that the certificate or certificates representing the Parent Shares shall bear a legend in substantially the form set forth in Section 2.07 hereof.  

 

(e)           Seller has made an independent examination and investigation of an investment in the Parent Shares and Parent and has depended on the advice of its legal and financial advisors and agrees that neither Parent nor Buyer will be responsible in anyway whatsoever for Seller’s decision to invest in the Parent Shares and Parent.  Seller has been afforded access to all material information (including, without limitation, Parent’s Form 10-K for the fiscal year ended December 31, 2012 filed with the Commission on March 21, 2013, Parent’s Form 10-Q for the fiscal quarter ended September 30, 2013 filed with the Commission on November 14, 2013 and all other reports, schedules, forms, statements and other documents filed by Parent with the Commission)  that it has requested relevant to its decision to acquire the Parent Shares and to ask questions of Parent’s management.  Seller further acknowledges that, except as set forth herein, neither Parent nor Buyer nor anyone acting on behalf of Parent or Buyer has made any representations or warranties (written or oral) to Seller or any Controlling Owner (or any person acting on their behalf) which have induced, persuaded, or stimulated it to acquire the Parent Shares, including (without limitation) as to the future price or value of the Parent Shares.

 

(e)           Seller is an “accredited investor” within the meaning of Rule 501 under the Securities Act.  Either alone, or together with its investment advisor(s), Seller has the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment in the Parent Shares, and Seller is and will be able to bear the economic risk of the investment in such Parent Shares.

 

 (f)           Seller understands and agrees not to engage in any hedging transactions involving any of the Parent Shares unless such transactions are in compliance with the provisions of the Securities Act and in each case only in accordance with applicable state securities laws.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF

 

BUYER AND PARENT

 

Buyer and Parent hereby represent and warrant to Seller that:

 

Section 4.01   Organization .  Each of Parent and Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not in the aggregate have a Material Adverse Effect on Parent and its subsidiaries, taken as a whole.

 

Section 4.02   Corporate Authorization .  The execution, delivery and performance by each of Parent and Buyer of this Agreement and the consummation by each of Parent and Buyer of the transactions contemplated hereby are within their respective corporate powers and will have been duly authorized by all necessary corporate action of each of Parent and Buyer.  This Agreement has been duly and validly executed and delivered by each of Parent and Buyer and constitutes a valid and binding agreement of each of Parent and Buyer, enforceable against them in accordance with its terms.

Section 4.03   Governmental Authorization; Consents .

 

(a)   The execution, delivery and performance by Parent and Buyer of this Agreement require no action by or in respect of, or filing with, any Governmental Entity.

 

(b)   No consent, approval, waiver or other action by an Person (other than any Governmental Entity referred to in (a) above) under any contract, agreement, indenture, lease, instrument, or other document to which Parent or Buyer is a party or by which it is bound is required or necessary for the execution, delivery and performance of this Agreement by Parent or Buyer or the consummation of the transactions contemplated hereby.

 

Section 4.04   Non-Contravention .  The execution, delivery and performance by Parent and Buyer of this Agreement do not and will not (i) contravene or conflict with the articles of incorporation or bylaws of Parent or Buyer, or (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Parent or Buyer.

 

Section 4.05   Litigation .  There is no action, suit, investigation, proceeding, review pending against, or to the knowledge of Parent and Buyer threatened against or affecting, Parent or Buyer before any court or arbitrator or any Governmental Entity which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated hereby.

 

Section 4.06   Validity of Parent Shares to be Issued .  The Parent Shares to be issued pursuant to the terms of this Agreement are validly authorized and, when such Parent Shares have been duly delivered pursuant to the terms of this Agreement, will not have been issued in violation of any preemptive or similar right of stockholder. When the Parent Shares have been duly delivered pursuant to the terms of this Agreement, such Parent Shares will be validly issued, fully paid, and nonassessable.

 

ARTICLE V

 

COVENANTS

 

Section 5.01   Covenants of Seller and the Controlling Owners .  Seller and each Controlling Owner agree that:

 

(a)   No Inconsistent Actions .  During the period from the date of this Agreement and continuing until the Closing Date, Seller will not (i) take or agree or commit to take any action that would make any representation and warranty of Seller inaccurate in any respect at, or as of any time prior to, the Closing Date, or (ii) omit or agree or commit to omit to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time.

 

(b)   Access to Information .  Upon reasonable notice and subject to restrictions contained in confidentiality agreements to which such party is subject (from which such party shall use reasonable efforts to be released), Seller shall afford to the officers, employees, accountants, counsel and other representatives of Buyer, access, during normal business hours during the period prior to the Closing, to Seller’s  properties, books, contracts, commitments and records to the extent relating to the Acquired Assets and, during such period, Seller shall furnish promptly to the other all information concerning the Acquired Assets as Buyer may reasonably request.  Unless otherwise required by law or court order, Buyer will hold any such information which is nonpublic in confidence until such time as such information otherwise becomes publicly available through no wrongful act of Buyer, and in the event of termination of this Agreement for any reason Buyer shall promptly return all nonpublic documents obtained from Seller, and any copies or summaries made of such documents, to Seller.

 

(c)   Noncompetition .

(i)           Each of Seller and each Controlling Owner that is an officer of Seller (the “ Restricted Party ”) agrees that for a period of one year following the Closing Date, neither Seller nor any Restricted Party nor any of their respective affiliates will (x) engage, either directly or indirectly, as a principal or for his or her own account or solely or jointly with others, or as an equity interest holder in or lender to, in any business that competes with the Business as it exists on the Closing Date anywhere in the world; (y) directly or indirectly solicit or induce any Person that was a customer or supplier or active prospective customer or supplier of the Business as of the Closing to terminate its business relationship with Buyer or to patronize any business directly in competition with the Business anywhere in the world; or (z) employ or solicit, or receive or accept the performance of services by, any employee currently employed by the Business, other than for the activities specifically identified in Schedule 5.01(c) .

 

 (ii)           Each of Seller and each Restricted Party acknowledges and agrees that (a) Seller is selling the goodwill related to the Business to Buyer in the transactions contemplated by this Agreement, (b) the relationships that the Business has with its customers, and suppliers are significant relationships necessary for Buyer to continue to conduct the Business, (c) the Business has an international scope, and (d) Buyer has a reasonable, necessary and legitimate business interest in protecting the aforesaid assets and relationships, and that the covenants set forth in this Section 5.01(c) are reasonable in scope, duration and geographic area, and are necessary in order to protect these legitimate business interests.  Each of Seller and each Restricted Party also acknowledges and agrees that the covenants it or he or she makes herein will not prevent it or he or she from practicing its or his or her profession for clients in any industry other than those covered by the Business or as permitted herein, and that its or his or her skills and expertise are transferable to serve clients operating in other industries.  Further, each of Seller and each Restricted Party has been advised by the Buyer that the covenants and agreements set forth in this Section 5.01(c) are a material reason Buyer has agreed to consummate the transactions contemplated hereby.

 

(iii)  If any provision contained in this Section 5.01(c) shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Section, but this Section shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  It is the intention of the parties that if any of the restrictions or covenants contained herein is held to cover a geographic area or to be for a length of time which is not permitted by applicable law, or in any way construed too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, a court of competent jurisdiction shall construe and interpret or reform this Section to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under applicable law.  Each of Seller and each Restricted Party acknowledges that Buyer would be irreparably harmed by any breach of this Section and that there would be no adequate remedy at law or in damages to compensate Buyer for any such breach.  Seller and the Restricted Party agree that Buyer shall be entitled to injunctive relief requiring specific performance by Seller and the Restricted Parties of this Section, and each of Seller and each Restricted Party consents to entry thereof.

 

(iv)  Notwithstanding the foregoing, (i) each Restricted Party may own, directly or indirectly, solely as an investment, up to one percent (1%) of any class of “publicly traded securities” (securities that are traded on a national securities exchange) of any business that is competitive or substantially similar to the Business of Seller, (ii) each Restricted Party may work for a division, entity or subgroup of any of such companies that engages in the Business of Seller so long as such division, entity or subgroup does not engage or plan to engage in the Business of Seller and (iii) the placement of general advertisements that may be targeted to a particular geographic or technical area but that are not specifically targeted toward employees currently employed by the Business or Buyer or its successors or assigns, shall not be deemed to be a breach of this Section 5.01(c) .

 

(d)            Audit Cooperation .   Seller will use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably requested by Parent or Buyer to assist Parent and Buyer in their completion of their audit of the financial statements of the Business, which is expected to be completed within 75 days following the Closing.   Without limiting the foregoing, Seller will (i) provide to Parent and Buyer a complete set of financial statements with all entries necessary to close the books and present the statements in accordance with U.S. generally accepted accounting principles having been posted along with all schedules necessary to support the balances in the statements, (ii) fulfill the financial statement auditor request list which will be provided by Buyer and

(iii) make available to Parent and Buyer a qualified accounting professional to respond to auditor inquiries and requests for source documents through the duration of the audit.

 

(e)            Third Party Consents .   Seller will use commercially reasonable efforts to promptly obtain such written consents and authorizations of third parties, give notices to third parties and take such other actions as may be necessary or appropriate in order to effect the transactions contemplated by this Agreement, including all required third party consents (as set forth on Section 3.03 of the Seller Disclosure Schedule).  Seller will (i) consult with Buyer beforehand regarding the process for seeking such consents and providing such notices, (ii) provide Buyer with a reasonable opportunity to review and comment in advance on the forms of such consent requests and notices, and (iii) incorporate any reasonable comments thereto made by Buyer.

 

(f)            Note and   Scheduled Obligations .   Seller will use commercially reasonable efforts to promptly obtain from each creditor of a Scheduled Obligation and Note Obligation an executed release agreement (in form and substance satisfactory to Buyer in its sole and absolute discretion) providing, among other things, for: (i) a release of any and all Liens of such creditor in respect of the Acquired Assets, and (ii) a full and unconditional release of all obligations of Seller to such creditor.  Seller will take all actions requested by Buyer (including, without limitation, enforcing Seller’s rights under each of Section 10.2 of the Security Agreement, dated  November 4, 2013, between Seller and Molly Chester, Section 10.2 of the Security Agreement, dated October 22, 2013, between Seller and Jay Ferro and the Intellectual Property Security Agreement, dated October 22, 2013, between Seller and Jay Ferro) to cause (as promptly as possible following the Closing) the termination of all UCC Financing Statements or other filings evidencing Liens in respect of any Note Obligation or Scheduled Obligation.

 

(g)            Change of Corporate Name .   Within 30 days following the Closing, Seller will change its corporate name to a name not using the “SmartReceipt” or “Nutricate” names or any similar names.

 

Section 5.02   Covenants of Buyer .  Buyer agrees that:

 

(a)   No Inconsistent Actions .  During the period from the date of this Agreement and continuing until the Closing Date, Parent and Buyer will not (i) take or agree or commit to take any action that would make any representation and warranty of Parent or Buyer inaccurate in any respect at, or as of any time prior to, the Closing Date or (ii) omit or agree or commit to omit to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time.

 

(b)   Earn-Out Payment .  Parent and Buyer shall use commercially reasonable efforts (taking into account all relevant factors, including those relevant to Parent’s and Buyer’s business taken as a whole) to support the continued commercial availability of the Seller’s Products during the Earn-Out Period.  The provisions of this Section 5.02(b) are solely for the benefit of Seller.  No provision of this Section 5.02(b) will create any rights in favor of any Controlling Owner, any stockholder of Seller or any other Person, other than Seller.

 

(c)   Rule 144 .  Parent and Buyer shall use commercially reasonable efforts to assist Seller and the Controlling Owners with the removal of any legends required under Rule 144 under the Securities Act, including with respect to any opinions required thereby, provided that Parent’s and Buyer’s obligations hereunder are subject to the reasonable determination of Parent and Parent’s counsel that any such legend removal complies with the Securities Act.

 

(d)   Assistance .  Parent and Buyer shall use commercially reasonable efforts to assist Seller with respect to the following support obligations under Section 14 of the Software License Agreement by and between Seller and Silver Greens, LLC  dated as of October 22, 2013 (the “ Silver Greens License ”):  (i) if Subscriber (as defined in the Silver Greens License), exercises its right to receive a copy of the source code for the  Software (as defined in the Silver Greens License), then Buyer will make available to Seller, a copy of the source code for the Software as the same may exist as of the Closing solely for purpose of permitting Seller to comply with its obligations under Section 14 of the Silver Greens License and (ii) Buyer will provide to Seller 20 person-hours of services to assist Subscriber with making the source code functional.   Seller agrees to enforce (as requested by Buyer) all license limitations set forth in Section 14 of the Silver Greens License in respect of Subscriber’s use of the source code for the Software.

(e)   Access to Records .  Parent and Buyer shall provide Seller and its representatives, if any, at the reasonable request of Seller (and upon execution of Buyer’s standard form of non-disclosure agreement if not previously executed), with reasonable access (including electronic access, to the extent available) during normal business hours to the books, records, files and papers, whether in hard copy or computer format, used in the Business prior to the Closing (or any additional period reasonably necessary for Seller to prepare its final Tax returns).  Seller will reimburse Parent and Buyer for any out-of-pocket expenses incurred by either of them in connection with providing such access.

 

Section 5.03   Covenants of All Parties .  Each party agrees that:

 

(a)   Best Efforts .  Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.  The parties each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.

 

(b)   Certain Filings .  The parties will cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Entity is require or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the transactions contemplated by this Agreement and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

 

(c)   Confidentiality; Public Announcements .

 

(i)   The parties hereto acknowledge that Parent and Seller have previously executed a Non-Disclosure Agreement, dated November 20, 2013 (the “ NDA ”) which shall continue in full force and effect in accordance with its terms, and the parties hereby agree that the information obtained pursuant to the negotiation and execution of this Agreement or the effectuation of the transactions contemplated hereby, shall be governed by the terms of the NDA.  Each Controlling Owner hereby agrees to be bound by the terms and conditions of the NDA to the same extent as though the Controlling Owner were a party thereto.

 

(ii)   Seller and the Controlling Owners understand that Parent is a publicly traded corporation, and that the disclosure of information concerning Parent and its business affairs and financial condition is strictly regulated by the Commission and other legal and administrative bodies.  Accordingly, Seller and the Controlling Owners hereby agree (i) that Parent may make or disseminate any public statement, press release or other disclosure concerning this Agreement, any schedule or exhibit attached hereto, or the transactions and relationships contemplated hereby and thereby  as it deems necessary to comply with applicable law or regulation (including, without limitation, the filing of this Agreement and its exhibits and schedules) and (ii) to take reasonable measures not to make or disseminate any public statement, press release or other disclosure concerning this Agreement, any schedule or exhibit attached hereto, or the transactions and relationships contemplated hereby and thereby, without the prior written consent of Parent (which consent may be given or withheld in its sole discretion).

 

(d)   Notices .  Each of the parties shall give prompt notice to the other party of: (i) any notice of, or other communication relating to, a default or event which, with notice or the lapse of time or both, would become a default, received by it or any of its subsidiaries subsequent to the date of this Agreement and prior to the Closing, under any agreement, indenture or instrument material to the financial condition, properties, businesses or results of operations of it and its subsidiaries, taken as a whole, to which it or any of its subsidiaries is a party or is subject; and (ii) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, which consent, if required, would breach the representations contained in Articles III and IV , provided, that Seller’s unintentional failure to give notice under this Section 5.03(d) shall not be deemed to be a breach of covenant under this Section 5.03(d) , but instead shall constitute only a breach or failure of the underlying representation or covenant, as the case may be.

(e)   Tax Cooperation; Allocation of Taxes .

 

(i)   Seller and Buyer agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Acquired Assets and the Business as is reasonably necessary for the filing of all Tax returns, and making of any election related to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax return.  Seller and Buyer shall cooperate with each other in the conduct of any audit or other proceeding related to Taxes involving the Business and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section 5.03(e) .

 

(ii)   All real property, personal property and similar ad valorem obligations levied with respect to the Acquired Assets for a taxable period which includes (but does not end on) the Closing Date shall be apportioned between Seller and Buyer as of the Closing Date based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period included in the Post-Closing Tax Period.  Seller shall be liable for the proportionate amount of such taxes that is attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount of such taxes that is attributable to the Post-Closing Tax Period.  Within 90 days after the Closing, Seller and Buyer shall present a statement to the other setting forth the amount of reimbursement to which each is entitled under this Section 5.03(e) together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within 30 days after receipt of such statement by certified mail, express mail or personal service.  Thereafter, Seller shall notify Buyer upon receipt of any bill for real or personal property taxes relating to the Acquired Assets, part or all of which are attributable to the Post-Closing Period, and shall promptly deliver such bill to Buyer who shall pay the same to the appropriate taxing authority, provided that if such bill covers the Pre-Tax Closing Period, Seller shall also remit prior to the due date of assessment to Buyer payment for the proportionate amount of such bill that is attributable to the Pre-Closing Tax Period.  In the event that either Seller or Buyer shall thereafter make a payment for which it is entitled to reimbursement under this Section 5.03(e) , the other party shall make such reimbursement promptly, but in no event later than 30 days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement.  Any payment required under this Section and not made within 30 days after receipt of the statement by certified mail, express mail or personal service shall bear interest at a rate of 10% per annum.

 

(iii)   Any transfer, documentary, sales, use or other Taxes assessed upon or with respect to the transfer of the Acquired Assets to Buyer and any recording or filing fees with respect thereto shall be the responsibility of Seller.

 

(f)    Employee Matters .

 

(i)   On the Closing Date, Buyer will offer employment to those other employees of the Business as it may determine in its sole discretion; provided that Buyer may terminate at any time after the Closing Date the employment of any employee who accepts such offer.  Any such offers will be at such salary or wage and benefit levels and on such other terms and conditions as Buyer shall in its sole discretion deem appropriate.  The employees who accept and commence employment with Buyer are hereinafter collectively referred to as the “ Transferred Employees ”.  Seller  will not take, and will cause each of its affiliates not to take, any action which would impede, hinder, interfere or otherwise compete with Buyer’s effort to hire any Transferred Employees.  Buyer shall not assume responsibility for any Transferred Employee until such employee commences employment with Buyer.

 

(ii)   Seller shall retain all obligations and liabilities under the Seller Employee Plans in respect of each employee or former employee (including any beneficiary thereof) who is not a Transferred Employee.  Seller shall retain all liabilities and obligations in respect of benefits accrued as of the Closing Date by Transferred Employees under the Seller Employee Plans, and neither Buyer nor any affiliate shall have any liability with respect thereto. Except as expressly set forth herein, no assets of any Seller Benefit Plan shall be transferred to Buyer or any of its affiliates or to any plan of Buyer or any of its affiliates.

(iii)   With respect to the Transferred Employees (including any beneficiary or dependent thereof), Seller shall retain (A) all liabilities and obligations arising under any group life, accident, medical, dental or disability plan or similar arrangement (whether or not insured) to the extent that such liability or obligation relates to contributions or premiums accrued (whether or not payable), or to claims incurred (whether or not reported), on or prior to the Closing Date, (B) all liabilities and obligations arising under any worker’s compensation arrangement to the extent such liability or obligation relates to the period prior to the Closing Date, including liability for any retroactive workman’s compensation premiums attributable to such period and (C) all other liabilities and obligations arising under the Seller Employee Plans  to the extent any such liability or obligation relates to the period prior to the Closing Date, including without limitation, accruals through the Closing Date under any bonus plan or arrangement, any vacation plans, arrangements and policies.   Seller shall reimburse Buyer for a pro rata portion of any bonus paid by Buyer to any Transferred Employee in respect of any period, a portion of which includes the period on or prior to the Closing Date.

 

(iv)   No provision of this Section 5.03(f) shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Seller or of any of its subsidiaries in respect of continued employment (or resumed employment) with either Buyer or the Business or any of their affiliates and no provision of this Section 5.03(f) shall create any such rights in any such Person in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement which may be established by Buyer or any of its affiliates.  No provision of this Agreement shall constitute a limitation on the rights to amend, modify or terminate after the Closing Date any such plans or arrangements of Buyer or any of its affiliates.

 

(g)   Post-Closing Remittances and Pro-rations.

 

 

(i)  If on or after the Closing Date, Seller receives a payment from any Person that, pursuant to the terms hereof, should have been paid to Buyer, Seller agrees to hold in trust and remit such payment to Buyer entitled thereto within two Business Days of such receipt.

 

(ii)  Except as otherwise expressly provided herein, all ordinary course expenses related to the Acquired Assets and transferred to Buyer hereunder, in each case, for the period prior to the Closing Date, will be for the account of Seller and for the period on and after the Closing Date shall be for the account of Buyer. If a party actually makes any payments that are, in whole or in part, designated as payments for the period allocated to the other party under this Section 5.03(g) , such other party shall promptly (and in any case within five Business Days following receipt of request for payment) reimburse such amounts to the party so making such payments.  For purposes of calculating pro-rations, Buyer shall be deemed to own the Acquired Assets, and, therefore be responsible for the expense thereof, as of 12:01 a.m. local time on the day after the Closing Date. All pro-rations shall be made on the basis of the actual number of days of the month that shall have elapsed as of the Closing Date.

 

ARTICLE VI

 

CONDITIONS

 

Section 6.01   Conditions to Each Party's Obligations .  The obligation of each party to consummate the Closing is subject to the satisfaction of the following conditions:

 

(a)   All authorizations, consents, orders or approvals of, or declarations or filings with, or expirations or terminations of waiting periods imposed by, any Governmental Entity, and all required third party consents (as set forth on Section 6.01 of the Seller Disclosure Schedule), shall have been filed, occurred or been obtained.

 

(b)   No statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits the consummation of the Closing and shall be in effect.

Section 6.02   Conditions to Obligations of Parent and Buyer .  The obligations of Parent and Buyer to consummate the Closing is subject to the satisfaction of the following further conditions:

 

(a)   The representations and warranties of Seller and the Controlling Owners set forth in this Agreement shall be true and correct in all material respects (other than those representations and warranties which are qualified as to materiality, which shall be true and correct) as of the date of this Agreement, and shall also be true in all material respects (other than those representations and warranties which are qualified as to materiality, which shall be true and correct) (except for such changes as are contemplated by the terms of this Agreement and such changes as would be required to be made in the exhibits to this Agreement if such schedules were to speak as of the Closing Date) on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date.

 

(b)   Each of Seller and each Controlling Owner shall have performed in all material respects all obligations required to be performed by it or him under this Agreement at or prior to the Closing Date.

 

(c)   Buyer shall have received a certificate signed by the Chief Executive Officer(s) of Seller confirming Sections 6.02(a) and (b) .

 

(d)   Buyer shall have received (i) resolutions duly adopted by the members of Seller approving the execution and delivery of this Agreement and all other necessary or proper organizational action to enable Seller to comply with the terms of this Agreement, and (ii) all other documents it may reasonably request relating to the existence of Seller and the authority of Seller for this Agreement, all in form and substance reasonable satisfactory to Buyer.

 

Section 6.03   Conditions to Obligation of Seller .  The obligation of Seller to consummate the Closing is subject to the following further conditions:

 

(a)   The representations and warranties of Parent and Buyer set forth in this Agreement shall be true and correct in all material respects (other than those representations and warranties which are qualified as to materiality, which shall be true and correct) as of the date of this Agreement, and shall also be true in all material respects (other than those representations and warranties which are qualified as to materiality, which shall be true and correct) (except for such changes as are contemplated by the terms of this Agreement and such changes as would be required to be made in the exhibits to this Agreement if such schedules were to speak as of the Closing Date) on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date.

 

(b)   Parent and Buyer shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date.

 

(c)   Seller shall have received a certificate signed by the Chief Executive Officer of each of Parent and Buyer confirming Section 6.03(a) and (b) .

 

(d)   Seller shall have received (i) resolutions duly adopted by the Boards of Directors of Parent and Buyer approving the execution and delivery of this Agreement and all other necessary or proper corporate action to enable Buyer to comply with the terms of this Agreement, and (ii) all other documents it may reasonably request relating to the existence of Parent and Buyer and the authority of Parent and Buyer for this Agreement, all in form and substance reasonable satisfactory to Seller.

 

ARTICLE VII

 

SURVIVAL; INDEMNIFICATION

 

Section 7.01   Survival .  The representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the first anniversary of the Closing Date; provided, however, that the representations and warranties contained in Sections 3.01 – 3.05, 3.15, 3.16 and 3.18 (the “ Fundamental Representations ”) shall survive the Closing and shall remain in full force and effect until the second anniversary (or, in the case of Section 3.18, fourth anniversary) of the Closing Date. None of the covenants or other agreements contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms.  Notwithstanding the foregoing, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under Section 7.02 shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

 

Section 7.02   Indemnification .   Seller and each Controlling Owner (the “ Indemnifying Parties ”) shall indemnify Parent and Buyer and their respective officers, directors, agents and employees (the “ Indemnified Parties ”) against and agrees to hold them harmless from any and all damage, loss, diminution in value, liability and expense (including without limitation costs of investigation and defense and reasonable fees and expenses of lawyers, experts and other professionals) (“ Damages ”) incurred or suffered by any Indemnified Party, directly or indirectly (whether or not due to a Third Party Claim), arising out of, resulting from or in connection with: (a) any inaccuracy in or breach of any of the representations or warranties of Seller or Controlling Owners contained in this Agreement; (b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller or any Controlling Owner pursuant to this Agreement; (c) the failure of Seller to perform any Excluded Liability or any obligation or liability of the Business relating to the Excluded Assets; or (d) any Equityholder Matter.

 

Section 7.03   Certain Limitations .   The indemnification provided for in Section 7.02 shall be subject to the following limitations:

 

(a)   The Indemnifying Parties shall not be liable to the Indemnified Parties for indemnification under Section 7.02(a) unless the aggregate amount of all Damages in respect of indemnification under Section 7.02(a) (without giving effect to any materiality, Material Adverse Effect or similar qualification limiting the scope of any representation or warranty that is the subject of an indemnification claim) exceeds $100,000, in which event the Indemnifying Parties shall be required to pay or be liable for the full amount  of Damages. The limitations of this Section 7.03(a) will not apply (i) to any liability to the Indemnified Parties for indemnification under Section 7.02(a) in respect of any Fundamental Representation or (ii) in the case of fraud, intentional misrepresentation or wilful misconduct.

 

(b)   The aggregate amount of all Damages for which the Indemnifying Parties shall be liable pursuant to (i) Section 7.02(a) (other than in respect of the Fundamental Representations) shall not exceed the Holdback Shares heldback in accordance with Section 2.09 , (ii) Section 7.02(a) (in respect of any of the Fundamental Representations, other than the representations and warranties contained in Sections 3.01, 3.02 or 3.04(a) ) and Sections 7.02(b) - (c) shall not exceed 50% of the sum of the Cash Payment, the Stock Payment and the Earn-Out Payment, and (iii)   Section 7.02(a) (in respect of the representations and warranties contained in Sections 3.01, 3.02 and 3.04(a) ) and Section 7.02(d) shall not exceed the Purchase Price.  The limitations of this Section 7.03(b) will not apply in the case of fraud, intentional misrepresentation or wilful misconduct.

 

(c)   Each Controlling Owner’s liability under this Article VII will be limited to be no more than the product of (i) the Damages for which an Indemnified Party is entitled to indemnification under Section 7.02 , multiplied by (ii) the ratio of such Controlling Owner’s ownership interest in Seller to the aggregate ownership interests of all Controlling Owners in Seller (calculated immediately prior to the Closing); provided that if any claim for indemnification under Section 7.02(a) in respect of a breach of the representations and warranties contained in Section 3.15 is first asserted after the 12 month anniversary of the Closing Date, then (with respect to such claim) the amount in clause (i) shall be limited to 85% of the Damages for which the Indemnified Party is entitled to indemnification.  The limitations of this Section 7.03(c) will not apply, as to any Controlling Owner, in the case of fraud, intentional misrepresentation or wilful misconduct by such Controlling Owner.

(d)   The Indemnified Parties first source of recovery for Damages shall be recourse against the Holdback Shares, but if the Holdback Shares are insufficient to satisfy any portion of Damages for which an indemnification claim has been made under Section 7.03(b)(ii)-(iii) , the Indemnified Parties shall be entitled to recover such portion of such Damages directly from the Indemnifying Parties (provided, that, prior to any distribution of the Purchase Price to the stockholders of Seller, the first source of recovery shall be against Seller and then the other Indemnifying Parties).  The limitations of this Section 7.03(d) will not apply in the case of fraud, intentional misrepresentation or wilful misconduct.

 

(e)   The amount of any Damages shall be net of any amounts actually recovered by the Indemnified Parties under existing insurance policies or contractual indemnification or contribution provisions  with respect to such Damages (net of any costs to recover such amounts and any increased premiums resulting therefrom) , provided , however , that (i) the existence of a claim by an Indemnified Party for monies from an insurer or against a third party in respect of any Damages shall neither restrict the ability of an Indemnified Party to bring a claim under Section 7.02 in respect of such Damages nor delay any payment pursuant to the indemnification provisions contained herein and (ii)   no Indemnified Party shall have any obligation to purchase or maintain any insurance or other third party coverage, or to affirmatively pursue the collection of any insurance or other third party proceeds, regardless of whether such Indemnified Party has suffered or incurred any Damages for which such Indemnified Party has insurance coverage or indemnification or other rights.    In the event the Indemnified Parties first recover against the Holdback Shares or the Indemnifying Parties   for any particular Damages and thereafter recover for the same Damages pursuant to any existing insurance policies and/or contractual indemnification or contribution provisions, then the amount recovered pursuant to such existing insurance policies and/or contractual indemnification or contribution provisions (up to the amount first recovered by the Indemnified Parties) shall be paid to the Indemnifying Parties by Parent or Buyer; provided that to the extent that the Indemnified Parties first recovered Parent Shares from the Indemnifying Parties as compensation for such Damages, Parent and Buyer shall be entitled to make such payment in the form of Parent Shares valued at the same price as such Parent Shares were valued when recovered by the Indemnified Parties from the Indemnifying Parties .

 

(f)   No Indemnified Party shall be entitled to double recovery for any adjustments to consideration provided for hereunder or for any Damages even though such Damages may have resulted from the breach of more than one of the representations, warranties, agreements and covenants in this Agreement; provided , however , that the foregoing limitation shall not prevent an Indemnified Party from recovering all Damages to which it is entitled hereunder arising out of the same set of facts and circumstances notwithstanding the fact that (i) an adjustment to the consideration provided for hereunder is also proposed to be made (or was previously made) based on any such facts and circumstances or (ii) an indemnification claim for such Damages is based upon more than one representation, warranty, agreement or covenant.

 

(g)   No party hereto will be liable to the other parties hereto for any (i) punitive damages, except to the extent such punitive damages are awarded to a third party pursuant to a Third Party Claim  or (ii) consequential, indirect or special damages (except to the extent any of the aforementioned damages described in this clause (ii) (1) are awarded to a third party in connection with a Third Party Claim and (2) were reasonably foreseeable under an objective standard as a direct result of the breach at issue) .  The limitations of this Section 7.03(g) will not apply in the case of fraud, intentional misrepresentation or wilful misconduct.

 

(h)   Any claim for indemnification under this Article VII , and any offer to compromise or settle such claim, must be made on a pro rata basis to all Indemnifying Parties (as set forth in Section 7.03(c) ), except as set forth in Section 7.03(i) .  

 

(i)   Neither Seller nor any Indemnifying Party shall have any liability for Damages in respect of a claim of a breach of a representation, warranty, agreement or covenant of another Controlling Owner’s representations, warranties, agreements or covenants that relate solely to such Controlling Owner and not Seller or the Business .

(j)   Parent and Buyer hereby acknowledge that other than the representations and warranties made by the Seller and the Controlling Owners in this Agreement, the Seller Disclosure Schedule or the certificate required to be delivered pursuant to Section 6.02(c) , none of the Seller, the Controlling Owners or their affiliates, or any of their representatives make or have made, and Parent and Buyer are not relying and have not relied on, any representation or warranty, express or implied, at law or in equity, with respect to the Seller, the Controlling Owners or the subject matter of this Agreement.   The limitations of this Section 7.03(j) will not apply in the case of fraud, intentional misrepresentation or wilful misconduct.

 

(k)   Notwithstanding anything to the contrary herein, in the event that any claim for Damages which are accrued but not yet incurred, paid or sustained or which are anticipated to be incurred, paid or sustained in the future is resolved in favor of an Indemnified Party pursuant to this Article VII , no amounts shall actually be payable by the Indemnifying Parties to the Indemnified Parties until after such Damages are actually incurred, paid or sustained; provided , however , that this shall not limit the right of the Indemnified Parties to bring any claim for Damages which are accrued but not yet incurred, paid or sustained or which are anticipated to be incurred, paid or sustained in the future.

Section 7.04   Procedures .

 

(a)   Notice of Third Party Claims. In the event of the assertion or commencement by any Person of any action, suit, claim or other legal proceeding claim or with respect to which any Indemnifying Party may become obligated to hold harmless, indemnify, compensate or reimburse any Indemnified Party pursuant to Section 7.02 (a “ Third Party Claim ”), the Indemnified Party shall give Seller prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Parties of their indemnification obligations, except and only to the extent that such failure materially prejudices the defense of such Third Party Claim.

 

(b)   Defense of Third Party Claims.   An Indemnified Party shall have the right, at its election, to proceed with the defense of such Third Party Claim on its own, with counsel reasonably satisfactory to Seller.  If an Indemnified Party so proceeds with the defense of any such Third Party Claim: (i) subject to the other provisions of this Section 7 , all reasonable and documented out-of-pocket expenses relating to the defense of such Third Party Claim, to the extent indemnifiable hereunder, shall be borne and paid exclusively by the Indemnifying Parties, (ii) Seller shall have the right to participate in (but not control) the defense of such Third Party Claim at its own expense, and (iii) the Indemnifying Parties shall cooperate with the Indemnified Parties in all reasonable respects in connection with the defense of such Third Party Claim, including making available records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.  If an Indemnified Party does not elect to proceed with the defense of any such Third Party Claim, then Seller may proceed with the defense of such Third Party Claim with counsel reasonably satisfactory to Buyer; provided, however, that Seller may not settle, adjust or compromise any such Third Party Claim without the prior written consent of Buyer (which consent may not be unreasonably withheld or delayed).

 

(c)   Settlement of Third Party Claims. The Indemnified Parties shall have the right to settle, adjust or compromise any Third Party Claim; provided, however, that if an Indemnified Party settles, adjusts or compromises any such Third Party Claim without the consent of Seller, such settlement, adjustment or compromise shall not be determinative of whether the Indemnified Party is entitled to indemnification hereunder (or the amount of Damages incurred by the Indemnified Party) in connection with such Third Party Claim.

Section 7.05   Right to Withhold and Offset.   Notwithstanding anything to the contrary in this Agreement, Parent and Buyer may withhold the aggregate amounts of any indemnification claims then pending or unresolved against Seller pursuant to Section 7.02 (including, without limitation, the amount of any Damages or reasonably anticipated Damages for which Parent or Buyer would be entitled to be indemnified for pursuant to Section 7.02 ) against amounts otherwise payable to Seller hereunder (including, without, limitation, any Earn-Out Payment) as security for the Seller’s obligations under this Article VII .  If any claim for indemnification pursuant to Section 7.02 is resolved, in whole or in part, in favor of Parent or Buyer, then the amount determined to be due Parent or Buyer may be off-set by Buyer against amounts otherwise payable to Seller hereunder.  Any portion of an amount previously withheld by Buyer in respect of any claim that is determined not to be payable to Parent or Buyer shall forthwith be paid to the Seller. The right of set-off described in this Section 7.05 shall not preclude Parent or Buyer from pursuing any other remedy under this Agreement or seeking injunctive relief or specific performance to enforce specifically the terms of this Agreement to the extent permitted by applicable law.

 

Section 7.06   Exclusive Remedies . Subject to Sections 5.01(c) and 9.06 and except in the case of fraud, intentional misrepresentation or wilful misconduct, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VII .  Nothing in this Section 7.06 shall limit a party’s right to seek and obtain any equitable relief to which such party shall be entitled pursuant to Section 5.01(c) or 9.06 .

 

ARTICLE VIII

 

TERMINATION AND AMENDMENT

 

Section 8.01   Termination .  This Agreement may be terminated at any time prior to the Closing Date:

 

(a)	by mutual consent of Buyer and Seller;

 

(b)	by either Buyer or Seller if the Closing shall not have been consummated before March 31, 2014 (unless the failure to consummate the Closing by such date shall be due to the action or failure to act of the party seeking to terminate this Agreement); or

 

(c)	by either Buyer or Seller if (i) the conditions to such party's obligations shall have become impossible to satisfy or (ii) any permanent injunction or other order of a court or other competent authority preventing the consummation of the Closing shall have become final and non-appealable.

 

Section 8.02   Effect of Termination .  In the event of the termination and abandonment of this Agreement pursuant to Section 8.01 hereof, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its affiliates, directors, officers or stockholders, other than the provisions of Section 5.03(c) .  Nothing contained in this Section 8.02 shall relieve any party from liability for any breach of this Agreement.

 

Section 8.03   Amendment .  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

 

Section 8.04   Extension; Waiver .  At any time prior to the Closing Date, the parties hereto may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party.

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01   Notices .  Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent by electronic mail or other electronic transmission, upon delivery; and (c) if sent by overnight delivery via a national courier service, the third Business Day after being sent, in each case to the address set forth beneath the name of such party below (or to such other address as such party shall have specified in a written notice given to the other parties hereto):

 

(a)   if to Parent or Buyer, to:

 

Mobivity Holdings Corp.

58 W. Buffalo Street, Suite 200

Chandler, AZ  85225

Attn: Dennis Becker, CEO

and

 

(b)   if to Seller or the Controlling Owners, to

 

SmartReceipt, Inc.

55 Castilian Drive

Santa Barbara, CA 89134

Attn: Eric Kanowsky, CEO

Section 9.02   Descriptive Headings .  The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

Section 9.03   Counterparts .  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.

 

Section 9.04   Entire Agreement; Assignment .  This Agreement (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof (other than any confidentiality agreement between the parties; any provisions of such agreements which are inconsistent with the transactions contemplated by this Agreement being waived hereby) and (b) shall not be assigned by operation of law or otherwise, provided that Buyer may assign its rights and obligations to any other wholly owned subsidiary of Parent or Buyer, but no such assignment shall relieve Buyer of its obligations hereunder if such assignee does not perform such obligations.

 

Section 9.05   Governing Law; Jurisdiction .

 

(a)   This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to agreements among the residents of such state made and to be performed entirely within such state (without giving effect to principles of conflicts of laws).

 

(b)   Any dispute, controversy or claim, whether based on contract, tort, statute, fraud, misrepresentation or any other legal theory (a “ Dispute ”) between the Buyer or Parent, on the one hand, and Seller or the Controlling Owners, on the other hand, arising out of or relating to this Agreement, any obligations hereunder or the relationship of the parties under this Agreement shall be settled by binding arbitration conducted in Chandler, Arizona in accordance with the then current arbitration rules of JAMS as modified by the following provisions of this Agreement:

(i)   If the amount in dispute exceeds $500,000, three neutral arbitrators shall be selected by the parties from the JAMS panel list, one of whom shall be chosen by the Seller, one of whom shall be chosen by the Buyer and the third to be chosen by the two arbitrators chosen by the Seller and the Buyer; provided , that if the two arbitrators chosen by the Seller and the Buyer are unable to reach agreement with respect to the third arbitrator, the third shall be chosen in accordance with the appointment rules of JAMS.  If the amount in dispute is less than $500,000, selection of one neutral arbitrator by the parties shall be from JAMS panel list and shall be chosen by the Seller and the Buyer together; provided , that if the Seller and the Buyer are unable to reach agreement with respect to the arbitrator, the arbitrator shall be chosen in accordance with appointment rules of JAMS.  The arbitrators shall be experienced in complex business matters and mergers and acquisitions transactions.

 

(ii)   The arbitration process shall be conducted on an expedited basis by the regional office of JAMS located in Phoenix, Arizona.  Proceedings in arbitration shall begin no later than 45 days after the filing of the Dispute with JAMS and shall be scheduled to conclude no later than 180 days after the filing of the Dispute (including delivery of the written judgment under clause (vi) below).  All hearings, unless otherwise agreed to by the parties, shall be held in Chandler, Arizona.

 

(iii)   The Seller and the Buyer may obtain and take discovery, including requests for production, interrogatories, requests for admissions and depositions, as provided by the Federal Rules of Civil Procedure; provided that the arbitrator(s) may, in his, her or their discretion, set parameters on the timing and/or completion of this discovery and may order additional pre-hearing exchange of information, including, without limitation, exchange of summaries of testimony or exchange of statements of positions.

 

(iv)   The arbitration proceedings and all testimony, filings, documents and information relating to or presented during the arbitration proceedings shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose.

 

(v)   The award of the arbitrator(s) shall be made in a written opinion containing a concise reasoned analysis of the basis upon which the award was made.

 

(vi)   A judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

 

(vii)   The parties to any arbitration shall share equally the fees and costs of JAMS and the arbitrator(s).  The prevailing party or parties shall be entitled to recover from the adverse parties his, her or its actual reasonable attorneys’ fees and costs incurred in connection with the arbitration and the enforcement thereof.

 

(viii)   Any party may apply to a court having jurisdiction to:  (A) enforce this agreement to arbitrate; (B) seek provisional injunctive relief so as to maintain the status quo until the arbitration award is rendered or the controversy is otherwise resolved; (C) avoid the expiration of any applicable limitations period; (D) preserve a superior position with respect to other creditors; or (E) challenge or vacate any final judgment, award or decision of the arbitrator(s) that does not comport with the express provisions of Section 9.05(b)(ix) .

 

(ix)   The arbitrator(s) are only authorized to, and only have the consent of the parties to, interpret and apply the terms and conditions of this Agreement in accordance with the governing law.  The arbitrator(s) are not authorized to, and shall not, order any remedy not permitted by this Agreement and shall not change any term or condition of this Agreement, deprive either party of any remedy expressly provided hereunder or provide any right or remedy that has not been expressly provided hereunder.  In the event that the arbitrator(s) exceed their authority under this Agreement and violate this provision, either party may petition a court of competent jurisdiction to vacate the arbitration award on the grounds that the arbitrator(s) exceeded their authority.

(x)   The Federal Arbitration Act, 9 U.S.C. Sections 1 through 14 (as amended and including any successor provision), except as modified hereby, shall govern the interpretation and enforcement of this Section 9.05(b) .

 

Notwithstanding the foregoing, the parties shall continue performing their respective obligations under this Agreement while the Dispute is being resolved unless and until such obligations are terminated or expire in accordance with the provisions hereof.

 

Section 9.06   Specific Performance .  The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

 

Section 9.07   No Waiver Relating to Claims for Fraud, Intentional Misrepresentation or Willful Misconduct .  The liability of any Person under Article 7 will be in addition to, and not exclusive of, any other liability that such Person may have at law or in equity based on such Person’s fraud, intentional misrepresentation or willful misconduct.  Notwithstanding anything to the contrary contained in this Agreement, none of the provisions set forth in this Agreement, including the provisions set forth in Article 7 , shall be deemed a waiver by any party to this Agreement of any right or remedy which such party may have at law or in equity based on any other Person’s fraud, intentional misrepresentation or willful misconduct, nor will any such provisions limit, or be deemed to limit: (a) the amounts of recovery sought or awarded in any such claim; (b) the time period during which any such claim may be brought; or (c) the recourse which any such party may seek against another Person with respect to such a claim.

 

Section 9.08   Expenses .  Whether or not the Closing is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

 

Section 9.09   Bulk Sales Laws .  Buyer and Seller each hereby waive compliance by Seller with the “bulk sales”, “bulk transfer” or similar laws of any state.  Seller and each of the Controlling Owners agrees to indemnify and hold Buyer harmless against any and all claims, losses, damages, liabilities, costs and expenses incurred by Buyer or any of its affiliates as a result of any failure to comply with any such “bulk sales”, “bulk transfer” or similar laws.

 

Section 9.10   Parties in Interest .  This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or persons any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first written above.

 

MOBIVITY HOLDINGS CORP.

 

By: 

Name:  Dennis Becker

Title:  Chief Executive Officer

 

MOBIVITY, INC.

 

By: 

Name:  Dennis Becker

Title:  Chief Executive Officer

 

SMARTRECEIPT, INC.

 

By: 

Name:

Title:  Chief Executive Officer

 

 

 

[Signature Page to Asset Purchase Agreement]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first written above.

 

 

CONTROLLING OWNERS:

 

___________________________

Dave Chambers

THE CHAMBERS 2001 LIVING TRUST DATED JULY 18, 2001

 

By: 

Name:

Title:

 

___________________________

Michael C. Howe

ERIC R. KANOWSKY LIVING TRUST UAD 8/19/99

By: 

Name:

Title:

 

PINE GROVE MANAGEMENT, LLC

 

By: 

Name:

Title:

 ARTHUR J. RICE III 1999 LIVING TRUST

 

By: 

Name:

Title:

 

[Signature Page to Asset Purchase Agreement]

Exhibit 10.2

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is dated as of the 4 th day of March, 2014, by and between MOBIVITY HOLDINGS CORP. , a Nevada corporation (the “ Company ”), and each individual or entity named on the Schedule of Buyers attached hereto (each such individual or entity, individually, a “ Buyer ” and all of such individuals or entities, collectively, the “ Buyers ”).

 

RECITALS

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and Rule 506(b) promulgated thereunder, the Company desires to issue and sell to each Buyer, and each Buyer, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

 

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

 

The foregoing recitals are true and correct and, together with the Schedules and Exhibits referred to hereafter, are hereby incorporated into this Agreement by this reference.

 

ARTICLE II

DEFINITIONS

 

For purposes of this Agreement, except as otherwise expressly provided or otherwise defined elsewhere in this Agreement, or unless the context otherwise requires, the capitalized terms in this Agreement shall have the meanings assigned to them in this Article as follows:

 

2.1   “ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

2.2   “ Assets ” means all of the properties and assets of the Company or of its wholly owned subsidiary, Mobivity, Inc. (“ Operating Sub ”), whether real, personal or mixed, tangible or intangible, wherever located, whether now owned or hereafter acquired.

 

2.3   “ Claims ” means any Proceedings, Judgments, Obligations, threats, losses, damages, deficiencies, settlements, assessments, charges, costs and expenses of any nature or kind.

 

2.4   “ Common Stock ” means the Company’s common stock, $0.001 par value per share.

 

2.5   “ Consent ” means any consent, approval, order or authorization of, or any declaration, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which is necessary in order to take a specified action or actions, in a specified manner and/or to achieve a specific result.

2.6   “ Contract ” means any written or oral contract, agreement, order or commitment of any nature whatsoever, including, any sales order, purchase order, lease, sublease, license agreement, services agreement, loan agreement, mortgage, security agreement, guarantee, management contract, employment agreement, consulting agreement, partnership agreement, shareholders agreement, buy-sell agreement, option, warrant, debenture, subscription, call or put.

 

2.7   “ Encumbrance ” means any lien, security interest, pledge, mortgage, easement, leasehold, assessment, tax, covenant, restriction, reservation, conditional sale, prior assignment, or any other encumbrance, claim, burden or charge of any nature whatsoever.

 

2.8   “ Environmental Requirements ” means all Laws and requirements relating to human, health, safety or protection of the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, or Hazardous Materials in the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or otherwise relating to the treatment, storage, disposal, transport or handling of any Hazardous Materials.

 

2.9   “ Escrow Agent ” shall mean Wilmington Trust Company, National Association.

 

2.10   “ Escrow Agreement ” shall mean that certain Escrow Agreement entered into between the Company and the Escrow Agent in the form attached hereto as Exhibit A .

 

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

 

2.12   “ GAAP ” means generally accepted accounting principles, methods and practices set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board, the SEC or of such other Person as may be approved by a significant segment of the U.S. accounting profession, in each case as of the date or period at issue, and as applied in the U.S. to U.S. companies.

 

2.13   “ Governmental Authority ” means any foreign, federal, state or local government, or any political subdivision thereof, or any court, agency or other body, organization, group, stock market or exchange exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government.

 

2.14   “ Hazardous Materials ” means: (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCB’s); (ii) any chemicals, materials, substances or wastes which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar import, under any Law; and (iii) any other chemical, material, substance, or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Authority.

 

2.15   “ Judgment ” means any order, writ, injunction, fine, citation, award, decree, or any other judgment of any nature whatsoever of any Governmental Authority.

 

2.16   “ Law ” means any provision of any law, statute, ordinance, code, constitution, charter, treaty, rule or regulation of any Governmental Authority.

 

2.17   “ Leases ” means all leases for real or personal property.

2.18   “ Material Adverse Effect ” means with respect to the event, item or question at issue, that such event, item or question would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement or any of the Transaction Documents; (ii) a material adverse effect on the results of operations, Assets, business or condition (financial or otherwise) or prospects of the Company or any of its subsidiaries, either individually or taken as a whole; (iii) a material adverse effect on the Company’s or its subsidiaries’ ability to perform, on a timely basis, its or their respective Obligations under this Agreement or any Transaction Documents; or (iv) a material adverse effect on the Buyer’s ability to sell or dispose of any of the Shares, whether on the Principal Trading Market, or otherwise, in accordance with applicable securities Laws.

 

2.19   “ Material Contract ” shall mean any Contract to which the Company or Operating Sub is a party or by which the Company or Operating Sub, or any of their Assets, are bound and which: (i) involves aggregate payments of Twenty-Five Thousand Dollars ($25,000) or more to or from the Company or Operating Sub, as the applicable, following the date of this Agreement; (ii) involves delivery, purchase, licensing or provision, by or to the Company or Operating Sub, as applicable, following the date of this Agreement, of any goods, services, assets or other items having a value (or potential value) over the term of such Contract of Twenty-Five Thousand Dollars ($25,000) or more or is otherwise material to the conduct of the Company’s or Operating Sub’s business as now conducted and as contemplated to be conducted in the future; (iii) involves a Lease; (iv) imposes any guaranty, surety or indemnification Obligations on the Company or Operating Sub; or (v) prohibits the Company or Operating Sub from engaging in any business or competing anywhere in the world.

 

2.20   “ Obligation ” means any debt, liability or obligation of any nature whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown or obligations under executory Contracts.

 

2.21   “ Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity, quality and frequency).

 

2.22   “ Permit ” means any license, permit, approval, waiver, order, authorization, right or privilege of any nature whatsoever, granted, issued, approved or allowed by any Governmental Authority.

 

2.23   “ Person ” means any individual, sole proprietorship, joint venture, partnership, company, corporation, association, cooperation, trust, estate, Governmental Authority, or any other entity of any nature whatsoever.

 

2.24   “ Placement Agent ” means Emerging Growth Equities, Ltd.

 

2.25   “ Principal Trading Market ” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Markets, including the Bulletin Board and Pink Sheets, the NYSE Euronext or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

 

2.26   “ Proceeding ” means any demand, claim, suit, action, litigation, investigation, audit, study, arbitration, administrative hearing, or any other proceeding of any nature whatsoever.

 

2.27   “ Real Property ” means any real estate, land, building, structure, improvement, fixture or other real property of any nature whatsoever, including, but not limited to, fee and leasehold interests.

 

2.28   “ Registration Rights Agreement ” means the Registration Rights Agreement, dated the date hereof, among the Company and the Buyers, in the form of Exhibit B attached hereto.

 

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

 

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

 

2.31   “ Shares ” means up to Five Million Four Hundred Fifty-Four Thousand Five Hundred Forty-Five (5,454,545) shares of Common Stock issued or issuable to the Buyers pursuant to this Agreement.

 

2.32   “ SmartReceipt ” means SmartReceipt, Inc., a Delaware corporation.

 

2.33   “ SmartReceipt Acquisition ” means the acquisition of substantially all of the assets of SmartReceipt by the Company, or any wholly-owned subsidiary of the Company, substantially in accordance with the terms set forth in the Disclosure Schedules (as such term is defined in Article VI).

 

2.34   “ Tax ” means (i) any foreign, federal, state or local income, profits, gross receipts, franchise, sales, use, occupancy, general property, real property, personal property, intangible property, transfer, fuel, excise, accumulated earnings, personal holding company, unemployment compensation, social security, withholding taxes, payroll taxes, or any other tax of any nature whatsoever, (ii) any foreign, federal, state or local organization fee, qualification fee, annual report fee, filing fee, occupation fee, assessment, rent, or any other fee or charge of any nature whatsoever, or (iii) any deficiency, interest or penalty imposed with respect to any of the foregoing.

 

2.35   “ Tax Return ” means any tax return, filing, declaration, information statement or other form or document required to be filed in connection with or with respect to any Tax.

 

2.36   “ Transaction Documents ” means this Agreement and the Registration Rights Agreement executed in connection with the transactions contemplated hereunder.

 

ARTICLE III

INTERPRETATION

In this Agreement, unless the express context otherwise requires: (i) the words “herein,” “hereof” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) references to the words “Article” or “Section” refer to the respective Articles and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer to the respective Exhibits and Schedules annexed hereto; (iii) references to a “party” mean a party to this Agreement and include references to such party’s permitted successors and permitted assigns; (iv) references to a “third party” mean a Person not a party to this Agreement; (v) the terms “dollars” and “$” means U.S. dollars; (vi) wherever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”

 

ARTICLE IV

PURCHASE AND SALE

        4.1   Sale and Issuance of Shares .  Subject to the terms and conditions of this Agreement, each Buyer agrees, severally and not jointly, to purchase, and the Company agrees to sell and issue to each Buyer, the number of Shares set forth in the column designated “Number of Common Shares” opposite such Investor’s name on the Schedule of Buyers, which in the aggregate shall equal up to Six Million Dollars ($6,000,000) of Shares, at a cash purchase price of $1.10 per share (the “ Purchase Price ”).  The Company’s agreement with each Buyer is a separate agreement, and the sale and issuance of the Shares to each Buyer is a separate sale and issuance.

 

4.2   Closing .

 

(a)   The purchase, sale and issuance of the Shares shall take place at one or more closings (each of which is referred to in this Agreement as a “ Closing ” and the date of each is referred to in this Agreement as a “ Closing Date ”).  The initial Closing (the “ Initial Closing ”) shall have a minimum total Purchase Price of not less than Two Million Dollars ($2,000,000) (the “ Minimum Purchase Proceeds ”).  The Initial Closing shall take place at the offices of Greenberg Traurig, LLP, 3161 Michelson Drive, Suite 1000, Irvine, California 92612, or such other location as the parties shall mutually agree, no later than the second business day following the satisfaction or waiver of the conditions provided in Articles VIII and IX of this Agreement (“ Initial Closing Date ”).

(b)   If less than all of the Shares are sold and issued at the Initial Closing, then, subject to the terms and conditions of this Agreement, the Company may sell and issue at one or more subsequent closings (each, a “ Subsequent Closing ”), within 90 days after the Initial Closing, up to the balance of the unissued Shares to such persons or entities as may be approved by the Company in its sole discretion.  Any such sale and issuance in a Subsequent Closing shall be on the same terms and conditions as those contained herein, and such persons or entities shall, upon execution and delivery of the relevant signature pages, become parties to, and be bound by, this Agreement and the other Transaction Documents, without the need for an amendment to any of the Transaction Documents except to add such person’s or entity’s name to the appropriate exhibit to such Transaction Documents, and shall have the rights and obligations hereunder and thereunder, in each case as of the date of the applicable Subsequent Closing.  Each Subsequent Closing shall take place at such date, time and place as shall be approved by the Company in its sole discretion.

 

4.3   Form of Payment; Delivery .  Each Buyer shall deliver to the Escrow Agent the “Purchase Price” opposite such Buyer’s name on the Schedule of Buyers in the form of wire transfers of immediately available U.S. funds. In accordance with the terms of the Escrow Agreement, the Purchase Price collected by Escrow Agent shall only be disbursed by the Escrow Agent to the Company upon Escrow Agent’s receipt of the Minimum Purchase Proceeds and the close of the SmartReceipt Acquisition.  Upon receipt of the Minimum Purchase Proceeds, the close of the SmartReceipt Acquisition and notification to the Escrow Agent by the Company of the satisfaction or waiver of the other conditions to Closing set forth in Articles VIII and IX of this Agreement, the Escrow Agent shall disburse the Purchase Price collected by the Escrow Agent, minus the fees to be paid directly from the proceeds of such as set forth in the Escrow Agreement or as instructed by the Company. If the Initial Closing does not occur by March 14, 2014, any proceeds received by the Escrow Agent shall be returned to the Buyers without interest or deduction and this Agreement shall be terminated.

 

4.4   Escrow Agreement. By signing this Agreement, each of the Buyers and the Company agrees to all of the terms and conditions of the Escrow Agreement, and acknowledges that no portion of the Purchase Price shall be released by the Escrow Agent unless and until the Escrow Agent receive the Minimum Purchase Proceeds and the terms of the release of such funds under the Escrow Agreement are otherwise satisfied.

 

ARTICLE V

BUYERS’ REPRESENTATIONS AND WARRANTIES

 

Each Buyer represents and warrants to the Company, that:

 

5.1   Investment Purpose . Each Buyer is acquiring the Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, each Buyer reserves the right to dispose of the Shares at any time in accordance with or pursuant to an effective registration statement covering such Shares or an available exemption under the Securities Act.  The Buyer acknowledges that a legend will be placed on the certificates representing the Shares in the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT.  SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL TO THE ISSUER.

 

5.2   Accredited Investor Status .  Each Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D, as promulgated under the Securities Act.

5.3   Reliance on Exemptions .  Each Buyer understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities Laws and that the Company is relying in part upon the truth and accuracy of, and each Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of each Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of each Buyer to acquire the Shares.

 

5.4   Information . Each Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company, SmartReceipt and other information each Buyer deemed material to making an informed investment decision regarding its purchase of the Shares, which have been requested by each Buyer.  Buyer acknowledges that it has received and reviewed (i) a copy of  the Company’s Prospectus dated August 29, 2013, which was filed with the SEC on September 11, 2013, and all reports subsequently filed by the Company and (ii) the SmartReceipt Executive Summary dated February 28, 2014.  Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries, nor any other due diligence investigations conducted by any Buyer or its advisors, if any, or its representatives, shall modify, amend or affect each Buyer’s right to rely on the Company’s and Operating Sub’s representations and warranties contained in Article VI below.  Each Buyer understands that its investment in the Shares involves a high degree of risk.  Each Buyer is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Buyer to obtain information from the Company in order to evaluate the merits and risks of this investment.  Each Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.

 

5.5   No Governmental Review . Each Buyer understands that no United States federal or state Governmental Authority has passed on or made any recommendation or endorsement of the Shares, or the fairness or suitability of the investment in the Shares, nor have such Governmental Authorities passed upon or endorsed the merits of the offering of the Shares.

 

5.6   Authorization, Enforcement . This Agreement has been duly and validly authorized, executed and delivered on behalf of each Buyer and is a valid and binding agreement of each Buyer, enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

5.7   General Solicitation .  The Buyer is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.  The Buyer represents that it has a relationship preceding its decision to purchase the Shares with the Company or the Placement Agent.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth and disclosed in the Company’s disclosure schedules (“ Disclosure Schedules ”) attached to this Agreement and made a part hereof, the Company and Operating Sub each hereby makes the following representations and warranties to the Buyer:

 

6.1   Subsidiaries .  Except for a one hundred percent (100%) ownership in Operating Sub, the Company has no subsidiaries and the Company does not own, directly or indirectly, any outstanding voting securities of or other interests in, or have any control over, any other Person.  With respect to Operating Sub, all representations and warranties in this Article VI and elsewhere in this Agreement shall be deemed repeated and re-made from and by Operating Sub, as if such representations and warranties were independently made by Operating Sub, in this Agreement (but modified as necessary in order to give effect to the intent of the parties that such representation and warranty is being made by the Operating Sub, rather than the Company, as applicable).  In addition, each representation and warranty contained in this Article VI or otherwise set forth in this Agreement shall be deemed to mean and be construed to include the Company and each of its subsidiaries, as applicable, regardless of whether each of such representations and warranties in Article VI specifically refers to the Company’s subsidiaries or not.

6.2   Organization .  The Company and its subsidiaries are corporations, duly organized, validly existing and in good standing under the Laws of the jurisdiction in which they are incorporated.  The Company has the full corporate power and authority and all necessary certificates, licenses, approvals and Permits to: (i) enter into and execute this Agreement and the Transaction Documents and to perform all of its Obligations hereunder and thereunder; and (ii) own and operate its Assets and properties and to conduct and carry on its business as and to the extent now conducted.  The Company is duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the character of its business or the ownership or use and operation of its Assets or properties requires such qualification, except to the extent that failure to so qualify will not result in a Material Adverse Effect.

 

6.3   Authority and Approval of Agreement; Binding Effect .  The execution and delivery by Company of this Agreement and the Transaction Documents, and the performance by Company of all of its Obligations hereunder and thereunder, including the issuance of the Shares, have been duly and validly authorized and approved by Company and its board of directors pursuant to all applicable Laws and no other corporate action or Consent on the part of Company, its board of directors, stockholders or any other Person is necessary or required by the Company to execute this Agreement and the Transaction Documents, consummate the transactions contemplated herein and therein, perform all of Company’s Obligations hereunder and thereunder, or to issue the Shares.  This Agreement and each of the Transaction Documents have been duly and validly executed by Company (and the officer executing this Agreement and all such other Transaction Documents is duly authorized to act and execute same on behalf of Company) and constitute the valid and legally binding agreements of Company, enforceable against Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

6.4   Capitalization .  Immediately prior to the Initial Closing, the authorized capital stock of the Company will consist of 50,000,000 shares of Common Stock, of which 16,319,878 shares of Common Stock are issued and outstanding.  All of such outstanding shares have been validly issued and are fully paid and nonassessable.  The Common Stock is currently quoted on the OTCQB Market under the trading symbol “MFON”.  The Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the Company has maintained all requirements on its part for the continuation of such quotation.  Except as set forth on Schedule 6.4 , no shares of Common Stock are subject to preemptive rights or any other similar rights or any Encumbrances suffered or permitted by the Company.  Except as set forth on Schedule 6.4 , as of the date hereof: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or Contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries; (collectively, “ Derivative Securities ”); (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other Contracts or instruments evidencing indebtedness of the Company or any of its subsidiaries, or by which the Company or any of its subsidiaries is or may become bound; (iii) there are no outstanding registration statements with respect to the Company or any of its securities; (iv) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to this Agreement); (v) there are no financing statements securing obligations filed in connection with the Company or any of its Assets; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein; and (vii) there are no outstanding securities or instruments of the Company which contain any redemption or similar provisions, and there are no Contracts by which the Company is or may become bound to redeem a security of the Company.  Except as set forth on Schedule 6.4 , there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.   Schedule 6.4 sets forth a detailed calculation of the total number of shares of Common Stock outstanding as of the date hereof assuming (i) the issuance of 5,454,545 Shares pursuant to this Agreement; (ii) the issuance of shares of Company stock to SmartReceipt or its shareholders at the closing of the SmartReceipt Acquisition, (iii) the exercise in full of all outstanding Derivative Securities taking into account all applicable anti-dilution or similar adjustments or rights, including without limitation those resulting from the issuance of Shares pursuant to this Agreement; and (iv) the exercise of all Derivative Securities authorized for issuance, but not yet issued, under any plan of the Company.

6.5   No Conflicts; Consents and Approvals .  The execution, delivery  and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance of any of the Shares, will not: (i) constitute a violation of or conflict with any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, or gives to any other Person any rights of termination, amendment, acceleration or cancellation of, any provision of any Contract to which Company is a party or by which any of its Assets or properties may be bound; (iii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, any Judgment; (iv) constitute a violation of, or conflict with, any Law (including United States federal and state securities Laws and the rules and regulations of any market or exchange on which the Common Stock is quoted); or (v) result in the loss or adverse modification of, or the imposition of any fine, penalty or other Encumbrance with respect to, any Permit granted or issued to, or otherwise held by or for the use of, Company or any of Company’s Assets.  The Company is not in violation of its articles of incorporation, bylaws or other organizational or governing documents and the Company is not in default or breach (and no event has occurred which with notice or lapse of time or both could put the Company in default or breach) under, and the Company has not taken any action or failed to take any action that would give to any other Person any rights of termination, amendment, acceleration or cancellation of, any Contract to which the Company is a party or by which any property or Assets of the Company are bound or affected.  Except as specifically contemplated by this Agreement, the Company is not required to obtain any Consent of, from, or with any Governmental Authority, or any other Person, in order for it to execute, deliver or perform any of its Obligations under this Agreement or the Transaction Documents in accordance with the terms hereof or thereof, or to issue and sell the Shares in accordance with the terms hereof.  All Consents which the Company is required to obtain pursuant to the immediately preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not aware of any facts or circumstances which might give rise to any of the foregoing.

 

6.6   Issuance of Shares . The Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and non-assessable, and free from all Encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States federal and state securities Laws.  Assuming the accuracy of the representations and warranties of the Buyers set forth in Article V above, the offer and sale by the Company of the Shares is exempt from: (i) the registration and prospectus delivery requirements of the Securities Act; and (ii) the registration and/or qualification provisions of all applicable state and provincial securities and “blue sky” laws.

 

6.7   SEC Documents; Financial Statements . The Common Stock is registered pursuant to Section 12 of the Exchange Act and the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Exchange Act (all of the foregoing filed within the two (2) years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “ SEC Documents ”). The Company is current with its filing obligations under the Exchange Act and all SEC Documents have been filed on a timely basis or the Company has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.  The Company represents and warrants that true and complete copies of the SEC Documents are available on the SEC’s website ( www.sec.gov ) at no charge to Buyers, and Buyers acknowledge that each of them may retrieve all SEC Documents from such website and each Buyer’s access to such SEC Documents through such website shall constitute delivery of the SEC Documents to Buyers; provided, however, that if any Buyer is unable to obtain any of such SEC Documents from such website at no charge, as result of such website not being available or any other reason beyond any Buyer’s control, then upon request from such Buyer, the Company shall deliver to such Buyer true and complete copies of such SEC Documents.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state 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.  None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable Law (except as such statements have been amended or updated in subsequent filings prior the date hereof, which amendments or updates are also part of the SEC Documents).

As of their respective dates, the financial statements of the Company included in the SEC Documents (“ Financial Statements ”) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. All of the Financial Statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except: (i) as may be otherwise indicated in such Financial Statements or the notes thereto; or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements), and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  To the knowledge of the Company and its officers, no other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

 

6.8   Absence of Certain Changes .  Since the date the last of the SEC Documents was filed with the SEC, none of the following have occurred:

 

(a)   There has been no event or circumstance of any nature whatsoever that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; or

 

(b)   Any transaction, event, action, development, payment, or any other matter of any nature whatsoever entered into by the Company other than in the Ordinary Course of Business.

 

6.9   Absence of Litigation or Adverse Matters . That: (i) there is no Proceeding before or by any Governmental Authority or any other Person, pending, or the best of Company’s knowledge, threatened or contemplated by, against or affecting the Company, its business or Assets; (ii) there is no outstanding Judgments against or affecting the Company, its business or Assets; (iii) the Company is not in breach or violation of any Contract; and (iv) the Company has not received any material complaint from any customer, supplier, vendor or employee.

 

6.10   Liabilities and Indebtedness of the Company .  The Company does not have any Obligations of any nature whatsoever, except: (i) as disclosed in the Financial Statements; or (ii) Obligations incurred in the Ordinary Course of Business since the date of the last Financial Statements filed by the Company with the SEC which do not or would not, individually or in the aggregate, exceed Ten Thousand Dollars ($10,000) or otherwise have a Material Adverse Effect.

 

6.11   Title to Assets .  The Company has good and marketable title to, or a valid leasehold interest in, all of its Assets which are material to the business and operations of the Company as presently conducted, free and clear of all Encumbrances or restrictions on the transfer or use of same.  Except as would not have a Material Adverse Effect, the Company’s Assets are in good operating condition and repair, ordinary wear and tear excepted, and are free of any latent or patent defects which might impair their usefulness, and are suitable for the purposes for which they are currently used and for the purposes for which they are proposed to be used.

 

6.12   Real Estate .

 

(a)   Real Property Ownership .  The Company does not own any Real Property.

 

(b)   Real Property Leases .  Except for the Leases described in the SEC Documents (the “ Company Leases ”), the Company does not lease any other Real Property.  With respect to each of the Company Leases: (i) the Company has been in peaceful possession of the property leased thereunder and neither the Company nor the landlord is in default thereunder; (ii) no waiver, indulgence or postponement of any of the Obligations thereunder has been granted by the Company or landlord thereunder; and (iii) there exists no event, occurrence, condition or act known to the Company which, upon notice or lapse of time or both, would be or could become a default thereunder or which could result in the termination of the Company Leases, or any of them, or have a Material Adverse Effect on the business of the Company, its Assets or its operations or financial results.  The Company has not violated nor breached any provision of any such Company Leases, and all Obligations required to be performed by the Company under any of such Company Leases have been fully, timely and properly performed.

If requested by any of the Buyers, the Company has delivered to such Buyers true, correct and complete copies of all Company Leases, including all modifications and amendments thereto, whether in writing or otherwise.  The Company has not received any written or oral notice to the effect that any of the Company Leases will not be renewed at the termination of the term of such Company Leases, or that any of such Company Leases will be renewed only at higher rents.

 

6.13   Material Contracts .  A list of the Material Contracts is attached as Schedule 6.13 .  An accurate, current and complete copy of each of the Material Contracts has been furnished to Buyers and/or is readily available as part of the SEC Documents, and each of the Material Contracts constitutes the entire agreement of the respective parties thereto relating to the subject matter thereof.  There are no outstanding offers, bids, proposals or quotations made by Company which, if accepted, would create a Material Contract with Company.  Each of the Material Contracts is in full force and effect and is a valid and binding Obligation of the parties thereto in accordance with the terms and conditions thereof.  To the knowledge of the Company and its officers, all Obligations required to be performed under the terms of each of the Material Contracts by any party thereto have been fully performed by all parties thereto, and no party to any Material Contracts is in default with respect to any term or condition thereof, nor has any event occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration or modification of any Obligation of any party thereto or the creation of any Encumbrance upon any of the Assets of the Company.  Further, the Company has received no notice, nor does the Company have any knowledge, of any pending or contemplated termination of any of the Material Contracts and, no such termination is proposed or has been threatened, whether in writing or orally.

 

6.14   Compliance with Laws .  The Company is and at all times has been in material compliance with all Laws.  The Company has not received any notice that it is in violation of, has violated, or is under investigation with respect to, or has been threatened to be charged with, any violation of any Law.

 

6.15   Intellectual Property .  The Company owns or possesses adequate and legally enforceable  rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and all other intellectual property rights necessary to conduct its business as now conducted. The Company does not have any knowledge of any infringement by the Company of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other intellectual property rights of others, and, to the knowledge of the Company, there is no Claim being made or brought against, or to the Company’s knowledge, being threatened against, the Company regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other intellectual property infringement; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.

 

6.16   Labor and Employment Matters .  The Company is not involved in any labor dispute or, to the knowledge of the Company, is any such dispute threatened. To the knowledge of the Company and its officers, none of the Company’s employees is a member of a union and the Company believes that its relations with its employees are good.  To the knowledge of the Company and its officers, the Company has complied in all material respects with all Laws relating to employment matters, civil rights and equal employment opportunities.

 

6.17   Employee Benefit Plans .  Except as set forth in Schedule 6.17 , the Company does not have and has not ever maintained, and has no Obligations with respect to any employee benefit plans or arrangements, including employee pension benefit plans, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans, stock option plans, bonus plans, stock purchase plans, hospitalization, disability and other insurance plans, severance or termination pay plans and policies, whether or not described in Section 3(3) of ERISA, in which employees, their spouses or dependents of the Company participate (collectively, the “ Employee Benefit Plans ”).  To the Company’s knowledge, all Employee Benefit Plans meet the minimum funding standards of Section 302 of ERISA, where applicable, and each such Employee Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified.  No withdrawal liability has been incurred under any such Employee Benefit Plans and no “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), has occurred with respect to any such Employee Benefit Plans, unless approved by the appropriate Governmental Authority.  To the Company’s knowledge, the Company has promptly paid and discharged all Obligations arising under ERISA of a character which if unpaid or unperformed might result in the imposition of an Encumbrance against any of its Assets or otherwise have a Material Adverse Effect.

6.18   Tax Matters .  The Company has made and timely filed all Tax Returns required by any jurisdiction to which it is subject, and each such Tax Return has been prepared in compliance with all applicable Laws, and all such Tax Returns are true and accurate in all respects.  Except and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported Taxes, the Company has timely paid all Taxes shown or determined to be due on such Tax Returns, except those being contested in good faith, and the Company has set aside on its books provision reasonably adequate for the payment of all Taxes for periods subsequent to the periods to which such Tax Returns apply. There are no unpaid Taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company has withheld and paid all Taxes to the appropriate Governmental Authority required to have been withheld and paid in connection with amounts paid or owing to any Person.  There is no Proceeding or Claim for refund now in progress, pending or threatened against or with respect to the Company regarding Taxes.

 

6.19   Insurance .  The Company is covered by valid, outstanding and enforceable policies of insurance which were issued to it by reputable insurers of recognized financial responsibility, covering its properties, Assets and businesses against losses and risks normally insured against by other corporations or entities in the same or similar lines of businesses as the Company is engaged and in coverage amounts which are prudent and typically and reasonably carried by such other corporations or entities (the “ Insurance Policies ”).  Such Insurance Policies are in full force and effect, and all premiums due thereon have been paid.  None of the Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement.  The Company has complied with the provisions of such Insurance Policies.  The Company has not been refused any insurance coverage sought or applied for and the Company does not have any reason to believe that it will not be able to renew its existing Insurance Policies as and when such Insurance Policies expire or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company.

 

6.20   Permits .  The Company possesses all Permits necessary to conduct its business, and the Company has not received any notice of, or is otherwise involved in any Proceedings relating to, the revocation or modification of any such Permits.  All such Permits are valid and in full force and effect and the Company is in material compliance with the respective requirements of all such Permits.

 

6.21   Business Location .  The Company has no office or place of business other than as identified on Schedule 6.21 and the Company’s principal places of business and chief executive offices are indicated on Schedule 6.21 .  All books and records of the Company and other material Assets of the Company are held or located at the principal offices of the Company indicated on Schedule 6.21 .

 

6.22   Environmental Laws .  The Company is and has at all times been in compliance with any and all applicable Environmental Requirements, and there are no pending Claims against the Company relating to any Environmental Requirements, nor to the best knowledge of the Company, is there any basis for any such Claims.

 

6.23   Illegal Payments .  Neither the Company, nor any director, officer, agent, employee or other Person acting on behalf of the Company has, in the course of his actions for, or on behalf of, the Company: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

6.24   Related Party Transactions .  Except for arm’s length transactions pursuant to which the Company makes payments in the Ordinary Course of Business upon terms no less favorable than the Company could obtain from third parties, none of the officers, directors or employees of the Company, nor any stockholders who own, legally or beneficially, five percent (5%) or more of the issued and outstanding shares of any class of the Company’s capital stock (each a “ Material Shareholder ”), is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any officer, director or such employee or Material Shareholder or, to the best knowledge of the Company, any other Person in which any officer, director, or any such employee or Material Shareholder has a substantial or material interest in or of which any officer, director or employee of the Company or Material Shareholder is an officer, director, trustee or partner.  There are no Claims or disputes of any nature or kind between the Company and any officer, director or employee of the Company or any Material Shareholder, or between any of them, relating to the Company and its business.

 

6.25   Internal Accounting Controls .  Except as set forth in the SEC Documents, the Company and each of its subsidiaries maintain a system of internal accounting controls sufficient 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.

 

6.26   Acknowledgment Regarding Buyers’ Purchase of the Shares . The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Buyer’s purchase of the Shares. The Company further represents to each Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

 

6.27   Listing and Maintenance Requirements . The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to the best of its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the SEC is contemplating terminating such registration.

 

6.28   Brokerage Fees .  The Placement Agent is acting as a placement agent on behalf of the Company in connection with the transactions contemplated hereby.  The Company shall be responsible for the payment of any fees, financial advisory fees, or brokers’ commissions owing to Placement Agent relating to or arising out of the transactions contemplated hereby.  Except for the Placement Agent, there is no Person acting on behalf of the Company who is entitled to or has any claim for any financial advisory, brokerage or finder’s fee or commission in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

6.29   Full Disclosure . All the representations and warranties made by Company herein or in the Disclosure Schedules hereto, and all of the statements, documents or other information pertaining to the transaction contemplated herein made or given by Company, its agents or representatives, are complete and accurate, and do not omit any information required to make the statements and information provided, in light of the transaction contemplated herein and in light of the circumstances under which they were made, not misleading, accurate and meaningful.

ARTICLE VII

COVENANTS

 

7.1   Best Efforts . Each party shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Articles VIII and IX of this Agreement.

 

7.2   Form D . If required by applicable Law, the Company agrees to file a Form D with respect to the Shares as required under Regulation D of the Securities Act and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Shares, or obtain an exemption for the Shares for sale to each of the Buyers at Closing pursuant to this Agreement under applicable securities or “Blue Sky” Laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.

 

7.3   Affirmative Covenants .

 

(a)   Reporting Status; Listing .  So long as any Buyer owns, legally or beneficially any of the Shares, the Company shall: (i) file in a timely manner all reports required to be filed under the Securities Act, the Exchange Act or any securities Laws and regulations thereof applicable to the Company of any state of the United States, or by the rules and regulations of the Principal Trading Market, and, to provide a copy thereof to the Buyer promptly after such filing upon the Buyer’s request; (ii) not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination; (iii) if required by the rules and regulations of the Principal Trading Market, promptly secure the listing of any of the Shares consisting of Common Stock upon the Principal Trading Market (subject to official notice of issuance) and, take all reasonable action under its control to maintain the continued listing, quotation and trading of its Common Stock on the Principal Trading Market, and the Company shall comply in all respects with the Company’s reporting, filing and other Obligations under the bylaws or rules of the Principal Trading Market, the Financial Industry Regulatory Authority, Inc. and such other Governmental Authorities, as applicable.  The Company shall promptly provide to Buyers copies of any notices it receives from the SEC or any Principal Trading Market, to the extent that any such notices could in anyway have or be reasonably expected to have a Material Adverse Effect.

 

(b)   Rule 144 .  With a view to making available to each Buyer the benefits of Rule 144 under the Securities Act (“ Rule 144 ”), or any similar rule or regulation of the SEC that may at any time permit Buyers to sell any of the Shares to the public without registration, the Company represents and warrants that: (i) the Company is, and has been for a period of at least ninety (90) days immediately preceding the date hereof, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) months preceding the Closing Date (or for such shorter period that the Company was required to file such reports); (iii) the Company is not an issuer defined as a “Shell Company” (as hereinafter defined); and (iv) if the Company has, at any time, been an issuer defined as a Shell Company, the Company has: (A) not been an issuer defined as a Shell Company for at least six (6) months prior to the Closing Date; and (B) has satisfied the requirements of Rule 144(i) (including, without limitation, the proper filing of “Form 10 information” at least six (6) months prior to the Closing Date).  For the purposes hereof, the term “ Shell Company ” shall mean an issuer that meets the description set forth under Rule 144(i)(1)(i).  In addition, so long as any Buyer owns, legally or beneficially, any of the Shares, the Company shall, at its sole expense:

 

(i)   Make, keep and ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144, is publicly available;

 

(ii)   furnish to each Buyer, promptly upon reasonable request: (A) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act; and (b) such other information as may be reasonably requested by each Buyer to permit each Buyer to sell any of the Shares pursuant to Rule 144 without limitation or restriction; and

(iii)   promptly at the request of each Buyer, give the Company’s transfer agent instructions to the effect that, upon the transfer agent’s receipt from any Buyer of a certificate (a “ Rule 144 Certificate ”) certifying that such Buyer’s holding period (as determined in accordance with the provisions of Rule 144) for any portion of the Shares which such Buyer proposes to sell (the “ Securities Being Sold ”) is not less than six (6) months, and receipt by the transfer agent of the “Rule 144 Opinion” (as hereinafter defined) from the Company or its counsel (or from such Buyer and its counsel as permitted below), the transfer agent is to effect the transfer of the Shares Being Sold and issue to such Buyer or transferee(s) thereof one or more stock certificates representing the transferred Securities Being Sold without any restrictive legend and without recording any restrictions on the transferability of such shares on the transfer agent’s books and records.  In this regard, upon each Buyer’s request, the Company shall have an affirmative obligation to cause its counsel to promptly issue to the transfer agent a legal opinion providing that, based on the Rule 144 Certificate, the Shares Being Sold were or may be sold, as applicable, pursuant to the provisions of Rule 144, even in the absence of an effective registration statement (the “ Rule 144 Opinion ”).  If the transfer agent requires any additional documentation in connection with any proposed transfer by any Buyer of any Securities Being Sold, the Company shall promptly deliver or cause to be delivered to the transfer agent or to any other Person, all such additional documentation as may be necessary to effectuate the transfer of the Shares Being Sold and the issuance of an unlegended certificate to any transferee thereof, all at the Company’s expense.

 

(c)   Matters With Respect to Securities and Transfer Agent .

 

(i)   Removal of Restrictive Legends .  In the event that any Buyer has any shares of the Company’s Common Stock bearing any restrictive legends, and such Buyer, through its counsel or other representatives, submits to the Company’s transfer agent (“ Transfer Agent ”) any such shares for the removal of the restrictive legends thereon, whether in connection with a sale of such shares pursuant to any exemption to the registration requirements under the Securities Act, or otherwise, and the Company and or its counsel refuses or fails for any reason (except to the extent that such refusal or failure is based solely on applicable Law that would prevent the removal of such restrictive legends) to render an opinion of counsel or any other documents or certificates required for the removal of the restrictive legends, then the Company hereby agrees and acknowledges that such Buyer is hereby irrevocably and expressly authorized to have counsel to such Buyer render any and all opinions and other certificates or instruments which may be required for purposes of removing such restrictive legends, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, issue any such shares without restrictive legends as instructed by such Buyer, and surrender to a common carrier for overnight delivery to the address as specified by such Buyer, certificates, registered in the name of such Buyer or its designees, representing the shares of Common Stock to which such Buyer is entitled, without any restrictive legends and otherwise freely transferable on the books and records of the Company.

 

(ii)   Authorized Agent of the Company .  The Company hereby irrevocably appoints each Buyer and each Buyer’s counsel and its representatives, each as the Company’s duly authorized agent and attorney-in-fact for the Company for the purposes of authorizing and instructing the Transfer Agent to process issuances, transfers and legend removals upon instructions from each Buyer, or any counsel or representatives of each Buyer, consistent with this Section 7.3(c). The authorization and power of attorney granted hereby is coupled with an interest and is irrevocable so long as any Buyer owns or has the right to receive, any shares of the Company’s Common Stock hereunder.  In this regard, the Company hereby confirms to the Transfer Agent and each Buyer that it can NOT and will NOT give instructions, including stop orders or otherwise, inconsistent with the terms of this Section 7.3(c) with regard to the matters contemplated herein, and that each Buyer shall have the absolute right to provide a copy of this Agreement to the Transfer Agent as evidence of the Company’s irrevocable authority for each Buyer and Transfer Agent to process issuances, transfers and legend removals upon instructions from each Buyer, or any counsel or representatives of each Buyer, in each case as specifically contemplated in this Section 7.3(c), without any further instructions, orders or confirmations from the Company.  In addition, if requested by any Buyer, the Company agrees to use its best good faith efforts to get an agreement executed by the Transfer Agent, reasonably acceptable to each Buyer, pursuant to which the Transfer Agent agrees and confirms that it will act in accordance with the terms of this Section 7.3(c).

 

(iii)   Injunction and Specific Performance .  The Company specifically acknowledges and agrees that in the event of a breach or threatened breach by the Company of any provision of this Section 7.3(c), each Buyer will be irreparably damaged and that damages at law would be an inadequate remedy if this Agreement were not specifically enforced.  Therefore, in the event of a breach or threatened breach of any provision of this Section 7.3(c) by the Company, each Buyer shall be entitled to obtain, in addition to all other rights or remedies such Buyer may have, at law or in equity, an injunction restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree for specific performance of the provisions of this Section 7.3(c).

 

7.4   Use of Proceeds .  The Company shall use the net proceeds from the sale of the Shares for general corporate purposes, including general and administrative expenses, and for the repayment of any outstanding Indebtedness of the Company or any of its Subsidiaries.

 

7.5   Fees and Expenses .  The Company agrees to pay to each Buyer (or any designee or agent of the Buyers), upon demand, or to otherwise be responsible for the payment of, any and all costs, fees, charges and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for any Buyer, and of any experts and agents, which any Buyer may incur or which may otherwise be due and payable in connection with: (i) any documentary stamp taxes, intangibles taxes, recording fees, filing fees, or other similar taxes, fees or charges imposed by or due to any Governmental Authority in connection with this Agreement or any other Transaction Documents; (ii) the exercise or enforcement of any of the rights of any Buyer under this Agreement or the Transaction Documents; or (iii) the failure by the Company to perform or observe any of the provisions of this Agreement or any of the Transaction Documents.  The provisions of this Subsection shall survive the termination of this Agreement.

 

7.6   Public Disclosure of Buyers .  The Company shall not publicly disclose the name of any Buyer, or include the name of any Buyer in any filing with the SEC or any regulatory agency or Principal Trading Market, without the prior written consent of such Buyer except: (a) as required by federal securities law in connection with any registration statement contemplated by the Registration Rights Agreement or (b) to the extent such disclosure is required by Law or Principal Trading Market regulations, in which case the Company shall provide Buyers with prior written notice of such disclosure permitted under this clause (b).

 

ARTICLE VIII

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL

 

The obligation of the Company hereunder to issue and sell the Shares to the Buyers at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

8.1   Buyers shall have executed the Transaction Documents that require Buyers’ execution, and delivered them to the Company.

 

8.2   Each of the Buyers shall have paid the portion of the Purchase Price applicable to such Buyer to the Company.

 

8.3   The representations and warranties of the Buyers shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyers shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyers at or prior to the applicable Closing Date.

 

8.4   The Company shall have obtained all governmental, regulatory or third party consents and approvals necessary for the sale of the Shares.

8.5   No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

 

8.6   Since the date of execution of this Agreement, no event or series of events shall have occurred that resulted, or could reasonably be expected to result, in a Material Adverse Effect.

 

8.7   Trading in the Common Stock shall not have been suspended by the U.S. Securities and Commission or any Principal Trading Market (except for any suspensions of trading of not more than one trading day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement.

 

8.8   The Escrow Agent shall have received the Minimum Purchase Proceeds.

 

8.9   The Company shall have consummated the SmartReceipt Acquisition prior to or concurrent with the Initial Closing.

 

ARTICLE IX

CONDITIONS PRECEDENT TO THE BUYERS’ OBLIGATIONS TO PURCHASE

 

The obligation of the Buyers hereunder to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions (in addition to any other conditions precedent elsewhere in this Agreement), provided that these conditions are for the Buyers’ sole benefit and may be waived by the Buyers at any time in their sole discretion:

 

9.1   The Company shall have executed and delivered the Transaction Documents and delivered the same to the Buyers.

 

9.2   The Company shall have delivered to each Buyer a certificate registered in such Buyer’s name representing the number of Shares that such Buyer is purchasing.

 

9.3   The representations and warranties of the Company and of Operating Sub shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article VI above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company and Operating Sub shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company and Operating Sub at or prior to the Closing Date.

 

9.4   The Buyers shall have received an opinion of counsel to the Company, as of the Initial Closing Date, in a form satisfactory to the Buyers and their counsel.

 

9.5   The Company and Operating Sub shall have each executed and delivered to Buyers a closing certificate in substance and form required by Buyers, which closing certificate shall include and attach as exhibits: (i) a true copy of a certificate of good standing evidencing the formation and good standing of the Company and Operating Sub, as applicable, from the secretary of state (or comparable office) from the jurisdiction in which they are each incorporated, as of a date within ten (10) days of the Initial Closing Date; (ii) the Company’s and Operating Sub’s Articles of Incorporation; (iii) the Company’s and Operating Sub’s Bylaws; and (iv) copies of the resolutions of the board of directors of the Company and Operating Sub, consistent with Section 6.3, as adopted by the Company’s and Operating Sub’s board of directors in a form reasonably acceptable to Buyers.

9.6   No event shall have occurred which could reasonably be expected to have a Material Adverse Effect.

 

9.7   The Escrow Agent shall have received the Minimum Purchase Proceeds.

 

9.8   The Company shall have consummated the SmartReceipt Acquisition prior to or concurrent with the Initial Closing.

 

ARTICLE X

INDEMNIFICATION

 

10.1   Company’s Obligation to Indemnify .  In consideration of the Buyers’ execution and delivery of this Agreement and acquiring the Shares hereunder, and in addition to all of the Company’s and Operating Sub’s other obligations under this Agreement, the Company and Operating Sub, jointly and severally, hereby agree to defend and indemnify each Buyer and each Buyer’s Affiliates and subsidiaries, and their respective directors, officers, employees, agents and representatives, and the successors and assigns of each of them (collectively, the “ Buyer Indemnified Parties ”) and the Company and Operating Sub do hereby agree to hold the Buyer Indemnified Parties harmless, from and against any and all Claims made, brought or asserted against the Buyer Indemnified Parties, or any one of them, and the Company and Operating Sub hereby agree to pay or reimburse the Buyer Indemnified Parties for any and all Claims payable by any of the Buyer Indemnified Parties to any Person, including reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and interest thereon from the time such amounts are due at the highest non-usurious rate of interest permitted by applicable Law, through all negotiations, mediations, arbitrations, trial and appellate levels, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by the Company or Operating Sub in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; (ii) any breach of any covenant, agreement or Obligation of the Company or Operating Sub contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (iii) any Claims brought or made against the Buyer Indemnified Parties, or any one of them, by any Person and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement, the Transaction Documents or any other instrument, document or agreement executed pursuant hereto or thereto, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Shares, or the status of the Buyers of any of the Shares, as a buyer and holder of such Shares in the Company. To the extent that the foregoing undertaking by the Company and Operating Sub may be unenforceable for any reason, the Company and Operating Sub shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law.  The Company will not be liable to any Buyer under this indemnity: (i) for any settlement by a Buyer in connection with any Claim effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; or (ii) to the extent, but only to the extent, that a Claim is attributable to any Buyer’s breach of any of the representations, warranties, covenants or agreements made by such Buyer in this Agreement or in the other Transaction Documents.

ARTICLE XI

MATTERS RELATING TO THE BUYERS

 

11.1   Independent Nature of Buyers’ Obligations and Rights .  The obligations of each Buyer under this Agreement and the Transaction Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any one or more of the Transaction Documents.  The decision of each Buyer to purchase the Shares pursuant to the Transaction Documents has been made by each such Buyer independently of any other Buyer and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of its subsidiaries, if any, which may have been made or given by any other Buyer or any of their respective officers, directors, principals, employees, agents, counsel or representatives (collectively, including the Buyer in question, the “ Buyer Representatives ”).  No Buyer Representative shall have any liability to any other Buyer or the Company relating to or arising from any such information, materials, statements or opinions, if any.  Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with making its investment hereunder and that no Buyer will be acting as agent of such other Buyer in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents.  Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any Proceeding for such purpose.  The Company and each of the Buyers acknowledge that, for reasons of administrative convenience the Company has elected to provide each of the Buyers with the same Transaction Documents for the purpose of closing a transaction with multiple Buyers and not because it was required or requested to do so by any Buyer.  In furtherance of the foregoing, and not in limitation thereof, the Company and the Buyers acknowledge that nothing contained in this Agreement or in any Transaction Document, and no action taken by any Buyer pursuant thereto, shall be deemed to constitute any two or more Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.

 

11.2   Equal Treatment of Buyers .  No consideration shall be offered or paid to any Buyer to amend or consent to a waiver or modification of any provision of any of the Transaction Documents, unless the same consideration is also offered to all of the other Buyers parties to the Transaction Documents.

 

 

unless the address is changed by the party by like notice given to the other parties.  Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York time, on a business day.  Any notice hand delivered after 5:00 p.m., New York time, shall be deemed delivered on the following business day.  Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

 

12.2   Entire Agreement .  This Agreement, including the Exhibits and Schedules attached hereto and the documents delivered pursuant hereto, including the Transaction Documents, set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior and contemporaneous agreements, understandings, inducements or conditions, expressed or implied, oral or written, except as contained herein and in the Transaction Documents.

 

12.3   Successors and Assigns .  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by the Company without the prior written consent of each Buyer.  Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

12.4   Binding Effect .  This Agreement shall be binding upon the parties hereto, their respective successors and permitted assigns.

 

12.5   Amendment .  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties shall unanimously agree in writing to such amendment, modification or change.

 

12.6   No Waiver .  No waiver of any provision of this Agreement shall be effective, unless it is in writing and signed by the party against whom it is asserted, and any such written waiver shall only be applicable to the specific instance to which it relates and shall not be deemed to be a continuing or future waiver.

 

12.7   Gender and Use of Singular and Plural .  All pronouns shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the party or parties or their personal representatives, successors and assigns may require.

 

12.8   Execution .  This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Agreement, and same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

 

12.9   Headings .  The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of the Agreement.

12.10   Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereby irrevocably waives any right it may have, and agrees not to request, a jury trial for the adjudication of any dispute hereunder or in connection with or arising out of this Agreement or any transaction contemplated hereby.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

12.11   Further Assurances .  The parties hereto will execute and deliver such further instruments and do such further acts and things as may be reasonably required to carry out the intent and purposes of this Agreement.

 

12.12   Survival .  The representations and warranties contained herein shall survive the Closing and the delivery of the Shares.  Each Buyer shall be responsible only for its own representations, warranties and covenants hereunder.

 

12.13   Time is of the Essence . The parties hereby agree that time is of the essence with respect to performance of each of the parties’ Obligations under this Agreement.  The parties agree that in the event that any date on which performance is to occur falls on a Saturday, Sunday or state or national holiday, then the time for such performance shall be extended until the next business day thereafter occurring.

 

12.14   Joint Preparation .  The preparation of this Agreement has been a joint effort of the parties and the resulting documents shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.

 

12.15   Severability .  If any one of the provisions contained in this Agreement, for any reason, shall be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall remain in full force and effect and be construed as if the invalid, illegal or unenforceable provision had never been contained herein.

 

12.16   No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

12.17   WAIVER OF JURY TRIAL . THE BUYERS AND THE COMPANY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BUYERS AND THE COMPANY ARE ADVERSE PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BUYERS TO PURCHASE THE NEW NOTES.

12.18   Compliance with Federal Law .  The Company shall: (i) ensure that no Person who owns a controlling interest in or otherwise controls the Company is or shall at any time be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“ OFAC ”), the Department of the Treasury, included in any Executive Orders or in any other similar lists of any Governmental Authority; (ii) not use or permit the use of the proceeds of the purchase of the Shares to violate any of the foreign asset control regulations of OFAC or any enabling statute, Executive Order relating thereto or any other requirements or restrictions imposed by any Governmental Authority; and (iii) comply with all applicable Lender Secrecy Act (“ BSA ”) laws and regulations, as amended.

 

[SIGNATURES ON THE FOLLOWING PAGE]

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year set forth above.

COMPANY:

MOBIVITY HOLDINGS CORP., a Nevada corporation

By:                                                                

Name:  Dennis Becker

Title:  Chief Executive Officer

Date:  March 4, 2014

OPERATING SUB:

MOBIVITY, INC., a Nevada corporation

By:                                                                

Name:  Dennis Becker

Title:  Chief Executive Officer

Date:  March 4, 2014

BUYERS:

                                                                See Signature pages for each Buyer attached

 

Number of Shares to be Purchased: _________________

 

[EXECUTED SIGNATURE PAGES OF THE INVESTORS OMITTED]

 

EXHIBIT “A”

 

FORM OF ESCROW AGREEMENT

 
 

 

 

EXHIBIT “B”

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 
 

 

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as of this 4 th day of March, 2014 by and among Mobivity Holdings Corp., a Nevada corporation (the “Company”), and the investors identified on the signature pages hereto (each, including its successors and assigns, an “Investor,” and collectively, the “Investors”).

 

R E C I T A L S

 

WHEREAS, the Company will sell up to $6,000,000 of the Company’s Common Stock to certain of the Investors pursuant to that certain Securities Purchase Agreement (the “Purchase Agreement”) dated as of even date herewith by and among the Company and the Investors.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

 

The parties hereby agree as follows:

 

1.   Certain Definitions

 

.  As used in this Agreement, the following terms shall have the following meanings:

 

“Business Day” means any day other than a Saturday, Sunday or a day which is a Federal legal holiday in the U.S.

 

“Common Stock” means the Company’s common stock, par value $0.001 per share, and any securities into which such shares may hereinafter be reclassified.

 

“Prospectus” means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.

 

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.

 

“Registrable Securities” means (i) the Shares and (ii) any other securities issued or issuable with respect to or in exchange for Registrable Securities, whether by merger, charter amendment or otherwise; provided, that, a security shall cease to be a Registrable Security upon sale pursuant to a Registration Statement or Rule 144 under the 1933 Act.

 

“Registration Statement” means any registration statement of the Company filed under the 1933 Act (including a post-effective amendment to a previously filed registration statement) that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

 

“Required Investors” means the Investors holding a majority of the Registrable Securities.

 

“SEC” means the U.S. Securities and Exchange Commission.

“Shares” means the shares of Common Stock issued pursuant to the Purchase Agreement.

 

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

 

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

 

2.   Registration .

 

(a)   Registration Statements .

 

(i)   Promptly following the final closing date of the transactions contemplated by the Purchase Agreement (the “Closing Date”) but no later than May 15, 2014 (the “Filing Deadline”), the Company shall prepare and file with the SEC one Registration Statement on Form S-1 (or, if Form S-1 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities), or a post-effective amendment to a previously filed registration statement on Form S-1, covering the resale of the Registrable Securities.  Subject to any SEC comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit A ; provided, however, that no Investor shall be named as an “underwriter” in the Registration Statement without the Investor’s prior written consent.  Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities.  The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors and their counsel prior to its filing or other submission.  If a Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing Deadline, the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the Filing Deadline for which no Registration Statement is filed with respect to the Registrable Securities.  Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief.  Such payments shall be made to each Investor in cash no later than three (3) Business Days after the end of each 30-day period.

 

(ii)   S-3 Qualification .  As soon as reasonably practicable following the date upon which the Company becomes eligible to use a registration statement on Form S-3 to register the Registrable Securities for resale (the “Qualification Date”), the Company shall file a registration statement on Form S-3 covering the Registrable Securities (or a post-effective amendment on Form S-3 to the registration statement on Form S-1) (a “Shelf Registration Statement”) and shall use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective as promptly as practicable thereafter.

 

(b)   Expenses .  The Company will pay all expenses associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, reasonable fees and expenses of one counsel to the Investors and the Investors’ reasonable expenses in connection with the registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.

(c)   Effectiveness .

 

(i)   The Company shall use commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable.  The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.  If (A) a Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to the earlier of (i) five (5) Business Days after the SEC shall have informed the Company that no review of the Registration Statement will be made or that the SEC has no further comments on the Registration Statement or (ii) August 15, 2014, or (B) during the initial six month period following the date of this Agreement, a Registration Statement has been declared effective by the SEC but sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding any Allowed Delay (as defined below) or the inability of any Investor to sell the Registrable Securities covered thereby due to market conditions,  then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective (the “Blackout Period”).  Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief.  The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of each 30-day period following the commencement of the Blackout Period until the termination of the Blackout Period.  Such payments shall be made to each Investor in cash.

 

(ii)   Notwithstanding anything herein to the contrary, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an 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, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify each Investor in writing of the commencement of and the reasons for an Allowed Delay, but shall not (without the prior written consent of an Investor) disclose to such Investor any material non-public information giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.

 

(d)   Rule 415; Cutback   If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement (alone or together with previously or subsequently registered shares of Common Stock) is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Investor to be named as an “underwriter”, the Company shall use its best efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Investors is an “underwriter”.  The Investors shall have the right to participate or have their counsel participate in any meetings or discussions with the SEC regarding the SEC’s position (unless in the reasonable opinion of the Company or its counsel, such participation will be to the detriment to the Company in that it may cause undue delays in the registration process or for other reasons) and to comment or have their counsel comment on any written submission made to the SEC with respect thereto.  No such written submission shall be made to the SEC to which the Investors’ counsel reasonably objects.  In the event that, despite the Company’s best efforts and compliance with the terms of this Section 2(d), the SEC refuses to alter its position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”); provided, however, that the Company shall not agree to name any Investor as an “underwriter” in such Registration Statement without the prior written consent of such Investor.  Any cut-back imposed on the Investors pursuant to this Section 2(d) shall be allocated among the Investors (and the holders of any previously or subsequently registered shares of Common Stock whose shares are subject to the Rule 415 position taken by the SEC) on a pro rata basis, unless the SEC Restrictions otherwise require or provide or the Investors otherwise agree.

No liquidated damages shall accrue as to any Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date” of such Cut Back Shares).  From and after the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 2 (including the liquidated damages provisions) shall again be applicable to such Cut Back Shares; provided, however, that (i) the Filing Deadline and/or the Qualification Deadline, as applicable, for the Registration Statement including such Cut Back Shares shall be ten (10) Business Days after such Restriction Termination Date, and (ii) the date by which the Company is required to obtain effectiveness with respect to such Cut Back Shares under Section 2(c) shall be the 90 th day immediately after the Restriction Termination Date.

 

3.   Company Obligations

 

.  The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

 

(a)   use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction pursuant to Rule 144 (the “Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has expired;

 

(b)   prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

 

(c)   provide copies to and permit counsel designated by the Investors to review each Registration Statement and all amendments and supplements thereto no fewer than seven (7) days prior to their filing with the SEC and not file any document to which such counsel reasonably objects;

 

(d)   furnish to the Investors and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by the related Registration Statement;

 

(e)   use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

 

(f)   prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investors and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement ;  provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;

 

(g)   use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

 

(h)   immediately notify the Investors, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an 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 in light of the circumstances then existing; and

 

(i)   otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter).

 

(j)   With a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to:  (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration; and (iv) use commercially reasonable efforts to assist each Investor with the removal of any legends required under Rule 144 under the 1933 Act, including with respect to any opinions required thereby, provided that the Company’s obligations hereunder are subject to the reasonable determination of the Company and the Company’s counsel that any such legend removal complies with the 1933 Act.

 

4.   Due Diligence Review; Information

 

.  Upon written request, the Company shall make available, during normal business hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company), all financial and other records, all SEC Filings and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement.  As a condition to such inspection and review, the Company may require the Investors to enter into confidentiality agreements.

The Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

 

5.   Obligations of the Investors .

 

(a)   Each Investor shall furnish in writing to the Company such information regarding itself, 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 the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.  At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Investor of the information the Company requires from such Investor if such Investor elects to have any of the Registrable Securities included in the Registration Statement.  An Investor shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if such Investor elects to have any of the Registrable Securities included in the Registration Statement.

 

(b)   Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 

(c)   Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that such dispositions may again be made.

 

6.   Indemnification .

 

(a)   Indemnification by the Company .  The Company will indemnify and hold harmless each Investor and its officers, directors, members, managers, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

(b)   Indemnification by the Investors .  Each Investor agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto.  In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

 

(c)   Conduct of Indemnification Proceedings .  Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided , further , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties.  No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

 

(d)   Contribution .  If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations.  No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation.  In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

7.   Miscellaneous .

 

(a)   Amendments and Waivers .  This Agreement may be amended only by a writing signed by the Company and the Required Investors.  The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Investors.

(b)   Notices .  All notices and other communications provided for or permitted hereunder shall be made as set forth in the Purchase Agreement.

 

(c)   Assignments and Transfers by Investors .  The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns.  An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected and agrees in writing to be bound by the terms hereof.

 

(d)   Assignments and Transfers by the Company .  This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Investors, provided, however, that in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Registrable Securities” shall be deemed to include the securities received by the Investors in connection with such transaction unless such securities are otherwise freely tradable by the Investors after giving effect to such transaction.

 

(e)   Benefits of the Agreement .  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(f)   Counterparts; Faxes .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

 

(g)   Titles and Subtitles .  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(h)   Severability .  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

 

(i)   Further Assurances .  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

(j)   Entire Agreement .  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(k)   Governing Law; Consent to Jurisdiction; Waiver of Jury Trial .  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York  located in New York County and the United States District Court for the Southern District for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

 

MOBIVITY HOLDINGS CORP.

 

By:                                                                

Name: Dennis Becker

Title:  Chief Executive Officer

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

INVESTOR

 

__________________________________________

Name of Investor

 

__________________________________________

Signature of Investor or by Authorized Person executing for Investor

 

Printed Name:______________________________

 

Title:_____________________________________

 

Its:_______________________________________

(Printed Name of Authorized Person and Title

 

for Person executing for Investor)

[EXECUTED SIGNATURE PAGES OF THE INVESTORS OMITTED]

Exhibit A

 

Plan of Distribution

 

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

 

The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

 

- ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

- block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

 

- purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

- an exchange distribution in accordance with the rules of the applicable exchange;

 

- privately negotiated transactions;

 

- short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;

 

- through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

- broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; and

 

- a combination of any such methods of sale.

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any.  Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents.  We will not receive any of the proceeds from this offering.

 

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

 

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act.  Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act.  Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.  In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

 

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates.  In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.  The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

 

We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

 

We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.