Exhibit 4.1

 

EXHIBIT A

 

FORM OF CONVERTIBLE NOTE

 

THE ISSUANCE OF THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS. THIS CONVERTIBLE PROMISSORY NOTE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

THE OBLIGATIONS OF THE COMPANY UNDER THIS CONVERTIBLE PROMISSORY NOTE ARE SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF MARCH 28, 2018 BETWEEN INVESTOR AND WESTERN ALLIANCE BANK.

 

SHARPSPRING, INC.

 

CONVERTIBLE PROMISSORY NOTE

 

$8,000,000

March 28, 2018

FOR VALUE RECEIVED, SharpSpring, Inc. a Delaware corporation (the “Company”), hereby promises to pay to SHSP Holdings, LLC (“Investor”), a Delaware limited liability company, Eight Million Dollars ($8,000,000) in principal amount together with interest accrued and unpaid thereon as provided herein. Interest shall accrue at a rate of 5.0% per annum, beginning on the date hereof until such principal amount and all accrued but unpaid interest thereon have been paid or converted into shares of the Company’s capital stock as provided herein. This Convertible Promissory Note (this “Note”) is not secured.

 

1.           Maturity Date .

 

1.1.            Maturity Date . The principal amount of this Note shall be due and payable in full on the fifth anniversary of the date of this Note, or if such day is not a business day, then on the first business day thereafter (the “Maturity Date”). Interest under this Note shall be due and payable on each anniversary of the date of this Note (each, an “Interest Payment Date”) by the issuance of an additional convertible promissory note of like tenor to this Note (each, a “PIK Note” and this Note and any outstanding PIK Notes, the “Notes”), dated as of the applicable Interest Payment Date and with a principal amount equal to the accrued interest being paid by delivery of such PIK Note. The Company may not prepay any amounts under any of the Notes without the prior written consent of Investor.

 

 

1.2.            Company’s Right to Extend the Maturity Date . The provisions of Section 1.1 notwithstanding, the Company shall have the right to extend the Maturity Date for up to six (6) months on up to three separate occasions (each such six- (6-) month period, an “Extension Period”). To exercise this extension right for the initial Extension Period, the Company shall give written notice of such extension to Investor no later than sixty (60) days prior to the original Maturity Date. To exercise this extension right during the first or second Extension Periods, the Company shall give written notice of such extension to Investor no later than sixty (60) days prior to the end of such Extension Period. In the event of any such extension of the Maturity Date, (i) except as otherwise noted, the term “Maturity Date” as used in this Note shall refer to the Maturity Date as so extended and (ii) the rate at which interest shall accrue on the outstanding principal amount of this Note shall increase during the Extension Periods from five percent (5%) per annum to ten percent (10%) per annum, subject to any limitation on such rate under Section 4.6 (which limits the maximum rate of interest payable hereunder to the maximum rate of interest payable under applicable law). Investor agrees that it will not buy or sell any shares of Common Stock, or otherwise take any other affirmative actions that could impact the price of the Common Stock, during the six- (6-) month period prior to the Maturity Date or during any of the Extension Periods.

 

 

2.1.            Voluntary Conversion by Investor . The principal amount of this Note and any accrued interest thereon may be converted by Investor, in whole or in part, into shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at any time prior to the Maturity Date as provided in this Section 2 . (The shares of Common Stock issued or issuable upon conversion of this Note are referred to herein as the “Conversion Shares”.)

 

2.2.            Conversion Shares Issuable Upon Conversion . The number of Conversion Shares to be issued upon conversion of all or any portion of this Note shall be equal to (i) the principal amount and accrued but unpaid interest that is being converted divided by (ii) $7.50 (the “Conversion Price”) (except as otherwise provided in Section 2.8(b)) . The Conversion Price is subject to adjustment as provided in Section 2.5 .

 

2.3.            Method of Conversion . To convert all or any portion of this Note into Conversion Shares, Investor shall deliver to the Company (i) a conversion notice in the form attached hereto as Annex I (a “Conversion Notice”) and (ii) this Note. An election to convert all or any part of this Note shall be deemed effective, and Investor shall be deemed to be the holder of record of the Conversion Shares, at the time the Conversion Notice and this Note are delivered to the Company (the “Conversion Date”), regardless of when the Conversion Shares are actually issued. The amount of interest that will be converted in connection with any partial conversion of this Note will be equal to the accrued interest with respect to the principal amount being converted computed through the Conversion Date. Upon any conversion of this Note in whole or in part, the Company shall promptly (and in any event within ten (10) business days) issue and promptly deliver to Investor, at no cost to Investor, one or more stock certificates registered in Investor’s name evidencing the Conversion Shares issued upon such conversion. In lieu of delivering physical certificates representing the Conversion Shares, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of Investor, to the extent permitted by Law, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to Investor by crediting the account of Investor’s prime broker with DTC through its Deposit Withdrawal at Custodian system. If only a portion of this Note is being converted, then the Company shall deliver to Investor without charge a new Note of like tenor to this Note registered in the name of Investor with a principal amount equal to the principal amount that was not converted, and the accrued interest with respect to such principal amount from the last Interest Payment Date will remain accrued with respect thereto and interest will continue to accrue with respect to such principal amount until the next Interest Payment Date.

 

 

2.4.            No Obligation to Issue Fractional Shares . Any fractional shares that would otherwise be issuable upon conversion of this Note shall be paid in cash based on the closing price of a share of Common Stock on the applicable Conversion Date.

 

2.5.            Adjustment of the Conversion Price . The Conversion Price shall be subject to adjustment from time to time as follows:

 

(i)            Stock Splits and Dividends . If at any time while this Note is outstanding, the number of outstanding shares of Common Stock is increased by means of a stock split or a stock dividend payable in shares of Common Stock, or other similar event, then, on the effective date of such event, the Conversion Price shall be decreased in proportion to such increase in the number of outstanding shares of Common Stock. (By way of example, if there were to be a 2:1 stock split with respect to the Common Stock, the Conversion Price would be reduced from $7.50 to $3.75.)

 

(ii)            Reverse Stock Splits and Share Combinations . If at any time while this Note is outstanding, the number of outstanding shares of Common Stock is decreased by means of a reverse stock split or a stock combination, or other similar event, then, on the effective date of such event, the Conversion Price shall be increased in proportion to such decrease in the number of outstanding shares of Common Stock. (By way of example, if there were to be a 1:2 reverse stock split with respect to the Common Stock, the Conversion Price would be increased from $7.50 to $15.00.)

 

2.6.            Other Adjustments . If the outstanding shares of Common Stock are converted at any time into another class of securities as a result of any reclassification, reorganization, merger, consolidation or similar transaction, then from and after such event, upon the conversion of the Notes, provision shall be made such that Investor shall receive such number and kind of securities as Investor would have received if the conversion had occurred immediately prior to such reclassification, reorganization, merger, consolidation or similar transaction and Investor had held the Conversion Shares issuable upon such conversion at the time of such reclassification, reorganization, merger, consolidation or similar transaction.

 

 

2.7.            Notice of Adjustments . Whenever the Conversion Price is adjusted pursuant to Section 2.5 or any adjustment occurs pursuant to Section 2.6 , the Company shall promptly deliver to Investor a notice describing such adjustment in reasonable detail.

 

2.8.            Conversion by the Company .

 

(a)           If the closing price of the Common Stock on the Nasdaq Capital Market (or, if the Common Stock is not listed for trading on the Nasdaq Capital Market, on such market as it may be listed for trading) is greater than 175% of the then applicable Conversion Price for a period of 120 consecutive trading days, the Company shall have the right, on at least thirty (30) days’ prior written notice to Investor, which notice must be given no later than thirty (30) days after the last day of such period of 120 consecutive trading days, to convert all outstanding Notes into such number of Conversion Shares as would be issuable as of the date of delivery of such notice to Investor (a “Mandatory Conversion”); provided, however, that in the event of any Mandatory Conversion prior to the Maturity Date, the Company shall, immediately prior to such Mandatory Conversion, issue to Investor such additional PIK Notes as would have been issued hereunder if this Note had remained outstanding through the Maturity Date (excluding any Extension Period), and all such PIK Notes shall be converted in connection with such Mandatory Conversion.

 

(b)           At the Maturity Date, the Company may, in lieu of paying the outstanding principal amount of, and any accrued interest on, the Notes, elect, on at least thirty (30) days’ prior written notice to Investor, to convert all outstanding Notes into shares of Common Stock at a Conversion Price equal to 80% of the volume weighted average closing price of the Common Stock on the Nasdaq Capital Market (or, if the Common Stock is not listed for trading on the Nasdaq Capital Market, on such market as it may be listed for trading) over the thirty (30) trading days prior to and including the Maturity Date (the “VWA Price”). The foregoing notwithstanding, Investor shall irrevocably elect in a writing delivered to the Company no later than 120 days prior to the Maturity Date, to either (i) convert all of the outstanding Notes on the Maturity Date, in which case Investor shall deliver the Notes to the Company prior to the Maturity Date and the Notes shall be so converted on and as of the Maturity Date in accordance with Section 2 , or (ii) not convert any of the outstanding Notes on or prior to the Maturity Date, in which case the Company shall either pay the outstanding principal amount of, and any accrued interest on, the Notes in cash on the Maturity Date or convert the outstanding Notes into shares of Common Stock on and as of the Maturity Date at a conversion price equal to 80% of the VWA Price as provided above.

 

(c)           In the event of any conversion of the Notes by the Company as provided in this Section 2.8 , the Company shall take all such actions under this Section 2 as it would have taken if the Notes had been voluntarily converted by Investor.

 

 

2.9.            Change in Control Transactions .

 

(a)           In the event of any Change in Control Transaction (as defined below) prior to the Maturity Date, the Company shall, subject to Section 4.6 , issue to Investor such additional PIK Notes as would have been issued hereunder if this Note had remained outstanding through the Maturity Date (excluding any Extension Period).

 

(b)           In connection with any Change in Control Transaction, Investor shall have the right, at its option, to either (i) convert the Notes, in whole or in part in accordance with the terms hereof, into the shares of stock and other securities, cash or property receivable upon or deemed to be held by holders of Common Stock in connection with such Change in Control Transaction, in which case Investor shall receive such securities, cash or property as Investor would have been entitled to receive if such conversion had occurred immediately prior to such Change in Control Transaction and Investor had held the Conversion Shares issuable upon such conversion at the time of such Change of Control Transaction or (ii) require the Company or its successor to pay the outstanding principal amount of, and all accrued interest on, the Notes concurrently with the consummation of such Change in Control Transaction.

 

(c)           As used in this Note, the term “Change of Control Transaction” means any transaction in which any “person” or “group” (within the meaning of section 13(d) and 14(d)(2) of the 1934 Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 Act), directly or indirectly, of a sufficient number of shares of all classes of the Company’s stock then outstanding ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the members of the Company’s Board Directors, who did not have such power before such transaction.

 

2.10.                       Notice of Certain Other Events . If any time while this Note is outstanding, the Company shall propose to (i) declare a dividend or other distribution payable in cash with respect to its Common Stock, or (ii) grant all holders of Common Stock any rights or warrants to subscribe for or purchase shares of its capital stock, then, in any such case, the Company shall give Investor at least ten (10) days prior written notice of the record date for determining stockholders of record for such event.

 

2.11.                       Reservation and Issuance of Conversion Shares . The Company shall at all times keep authorized and reserved and available for issuance, free of preemptive rights, such number of shares of Common Stock as are issuable upon conversion of the Notes at any time. If the Company determines at any time that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 2.11 , the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking stockholder approval for the authorization of such additional shares. The Company shall take any and all actions to ensure that the Conversion Shares, when issued in accordance with the terms hereof, will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

 

 

2.12.                       Limitation on Conversion . Notwithstanding anything herein to the contrary, Investor shall not attempt to convert any portion of this Note, and the Company shall not issue to Investor any Conversion Shares upon any attempted conversion of this Note, if the number of shares of Common Stock issuable upon such conversion, plus (i) the number of Conversion Shares issued prior thereto and (ii) the number of shares of Common Stock beneficially owned by any Affiliate of Investor would (x) equal 20% or more of the number of the outstanding shares of Common Stock (computed in accordance with the Nasdaq Stock Market Rules) (the “Maximum Number of Shares”) or (y) represent 20% or more of the total voting power of the Company’s securities outstanding immediately after giving effect to such issuance that are entitled to vote on a matter being voted on by holders of the Common Stock (computed in accordance with the Nasdaq Stock Market Rules) (the “Maximum Aggregate Voting Amount”), unless and until the Company obtains stockholder approval permitting such issuance in accordance with Nasdaq Stock Market Rule 5635(d) (or any corresponding rule under any other applicable national securities exchange) (“Stockholder Approval”). If, in connection with any attempted conversion of this Note by Investor, the resulting issuance of Conversion Shares would exceed the Maximum Number of Shares or the Maximum Aggregate Voting Amount and the Company shall not have previously obtained Stockholder Approval at the time of conversion, then the Company shall only issue to Investor such number of Shares as may be issued below the Maximum Number of Shares and the Maximum Aggregate Voting Amount. The Company hereby covenants and agrees to seek Stockholder Approval at the 2018 annual meeting of the Company’s stockholders (the “2018 Annual Stockholders Meeting”) and to cause the Company’s Board of Directors to make an affirmative recommendation to the Company’s stockholders in the proxy statement relating to the 2018 Annual Stockholders Meeting to vote their shares in favor of Stockholder Approval and to use the Company’s best efforts to solicit such votes. If Stockholder Approval is not obtained at the 2018 Stockholders Meeting, the Company shall call a special meeting of its stockholders to be held no later than 90 days after the 2018 Annual Stockholders Meeting at which it shall again seek Stockholder Approval and shall again cause the Company’s Board of Directors make an affirmative recommendation to the Company’s stockholders in the proxy statement relating to such special stockholders meeting to vote their shares in favor of Stockholder Approval and to use the Company’s best efforts to solicit such votes. If Stockholder Approval is not obtained at such special meeting of the Company’s stockholders, the Company shall continue to call special meetings of its stockholders at least quarterly until Stockholder Approval is obtained. If Stockholder Approval is not obtained in accordance with this Section 2.12 within two years of the date of this Note and Affiliates of Investor elect to sell shares of Common Stock held by them in order to permit the conversion of the Notes without exceeding the Maximum Number of Shares and the Maximum Voting Amount, the Company will reimburse such Affiliates for any underwriting commissions and other reasonable and documented out-of-pocket transaction costs of any such sales. Any failure to obtain Stockholder Approval at a stockholders meeting conducted in accordance with this Section 2.12 shall not constitute an Event of Default under Section 3.1 . As used in this Note, the term “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

 

3.            Events of Default; Remedies .

 

3.1.            Definition of Event of Default . Except as set forth in Section 2.12, each of the following shall constitute an “ Event of Default ” hereunder:

 

(a)           The Company shall fail to issue any PIK Note when due and such failure is not remedied within ten (10) business days after demand from Investor;

 

(b)           The Company shall fail to issue the Conversion Shares (or other securities) upon and in accordance with terms hereof and such failure continues for ten (10) business days after demand from Investor;

 

(c)           The Company’s Common Stock shall at any time cease to be listed for trading on the Nasdaq Capital Market or another national securities exchange;

 

 

(d)           The Company shall (i) voluntarily terminate operations or apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of the Company or of all or a substantial part of the assets of the Company, (ii) admit in writing its inability to pay debts as the debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (v) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code or applicable state bankruptcy laws, or (vii take any corporate action for the purpose of effecting any of the foregoing;

 

(e)           Without the Company’s application, approval or consent, a proceeding shall be commenced, in any court of competent jurisdiction, seeking in respect of the Company for the liquidation, reorganization, dissolution, winding-up, or composition or readjustment of debt, the appointment of a trustee, receiver, liquidator, or like relief in respect of the Company or all or any substantial part of the assets of the Company, or other like relief in respect of the Company under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts and, if the proceeding is being contested in good faith by the Company, the same shall continue undismissed, or unstayed and in effect for any period of 90 consecutive days, or an order for relief against the Company shall be entered in any case under the Federal Bankruptcy Code or applicable bankruptcy laws; and

 

(f)           The Company breaches any material obligation to Investor under that certain Investors’ Rights Agreement of even date herewith by and among the Company, Investor, an Affiliate of Investor and certain management stockholders of the Company (the “Investors ’ Rights Agreement”) and such breach is not remedied within ten (10) business days after demand from Investor.

 

3.2.            Consequences of an Event of Default . If any Event of Default (as defined above) shall occur, then, at any time thereafter while such Event of Default is continuing, Investor by written notice to the Company may declare the entire outstanding principal amount of this Note and all accrued but unpaid interest to be immediately due and payable. During the continuance of an Event of Default, Investor shall have recourse to any and all remedies available to it under applicable law.

 

4.            Miscellaneous .

 

4.1.            Restrictions on Transfer .

 

(a)           The issuance of this Note was not registered under the Securities Act of 1933 or registered or qualified under any applicable state securities laws in reliance upon exemptions from such registration and qualification requirements, and the issuance of the Conversion Shares will also not be so registered or qualified in reliance on available exemptions. Accordingly, this Note, each PIK Note and any Conversion Shares shall bear substantially the following legend:

 

THE ISSUANCE OF THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS. THIS SECURITY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

 

(b)            Investor covenants that it will not sell, pledge, assign or transfer this Note or any Conversion Shares except in compliance with all applicable federal and state securities laws. Notwithstanding the foregoing, the Company shall issue a certificate evidencing any Conversion Shares without such legend in connection with any sale of such Conversion Shares that is registered under the Securities Act or at any other time that such legend can be removed under applicable securities laws.

 

(c)          Investor agrees that (i) it will not transfer this Note, and (ii) it will not permit transfers of equity interests in Investor to any person other than the owners of such equity interests as of the date of this Agreement (the “Investor Owners”), in each case without the Company’s prior written consent, which consent may be granted or withheld in the Company’s sole discretion; provided , however , that no such consent shall be required (x) for any transfer by Investor to any of its members or any Affiliate of Investor so long as such transferee(s) agree to similar restrictions on further transfers, or (y) for any transfer of equity interests in Investor to any Affiliate of the Investor Owners; and provided further that, if at any time Investor reasonably determines upon the advice of Investor’s outside legal counsel that it is required to transfer this Note to a third party in order to ensure that Investor and its Affilitates will be in compliance with any applicable regulatory requirements, the Company shall not unreasonably withhold, condition or delay its consent to such transfer, it being agreed that the Company may reasonaby withhold its consent to any such transfer, without limitation, if the proposed transferee is the beneficial owner of three percent (3%) or more of the outstanding shares of Common Stock immediately prior to such proposed transfer.

 

4.2.            Exchange of Note . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note, the Company will issue a new Note, of like tenor and principal amount and dated the date to which interest has been paid, in lieu of such lost, stolen, destroyed or mutilated Note, and in such event Investor agrees to indemnify and hold harmless the Company in respect of any such lost, stolen, destroyed, or mutilated Note.

 

4.3.            No Rights as Stockholder . This Note, by itself, does not entitle Investor to any voting rights or other rights as a stockholder of the Company and nothing herein shall be construed as conferring upon Investor the right to vote as a stockholder on any matter. The foregoing notwithstanding, the Company acknowledges that Investor has certain additional rights and obligations pursuant to the terms of the Investors’ Rights Agreement.

 

4.4.            Notices . Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively given (i) upon personal delivery, (ii) on the next business day if sent by a nationally recognized overnight delivery service, (iii) upon confirmed transmission if sent by facsimile or electronic mail, or (iv) three business days after deposit if sent by United States mail, by registered or certified mail, postage prepaid. Any such notice to either party shall be sent to the address, facsimile number or electronic mail address set forth below such party’s name on the signature page of this Note or at such other address as either party may designate by advance written notice to the other party.

 

 

4.5.            Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws or choice of laws.

 

4.6.            Severability . If any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

4.7.            Jurisdiction and Venue . Any action, proceeding or claim arising out of, or relating in any way to this Note shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York. The Company and Investor irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive and hereby waive any objection to such exclusive jurisdiction or that such courts represent an inconvenient forum. The prevailing party in any such action shall be entitled to recover its reasonable and documented attorneys’ fees and out-of-pocket expenses relating to such action or proceeding.

 

4.8.            WAIVER OF RIGHT TO JURY TRIAL . THE COMPANY AND INVESTOR HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.

 

4.9.            Waiver of Presentment, etc . The Company hereby waives presentment, protest, notice of protest, demand for payment, notice of dishonor or nonpayment and any and all other notices or demands in connection with the delivery, acceptance, performance, default, or enforcement of this Note. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

4.10.         Costs of Collection . The Company shall, subject only to any limitation imposed by applicable law, pay all expenses, including reasonable attorneys’ fees, incurred by Investor in endeavoring to collect any amounts payable hereunder which are not paid when due.

 

4.11.         Amendments and Waivers . No provision of this Note may be amended other than by an instrument in writing signed by the party against which such amendment is to be enforced. No provision of this Note may be waived other than by an instrument n writing signed by the party against which enforcement of such provision is sought.

 

4.12.         Successors and Assigns . This Note shall be binding upon, and inure to the benefit of and be enforceable by, the Company and Investor and their respective successors and assigns.

 

 

 [Remainder of page intentionally left blank. Signature page follows.]

 

 

 

 

 

 

IN WITNESS WHEREOF, each of the undersigned has caused this instrument to be executed by its duly authorized officers as of the date first above written.

 

 

THE COMPANY:

 

SHARPSPRING, INC.

 

By: /s/                                            

 

Name:                                            

 

Title:                                              

 

Notice Address :

 

550 SW 2nd Avenue

Gainesville, FL 32601

Facsimile: (___)                                   

Attention: Richard A. Carlson

 

 

ACCEPTED AND AGREED :

 

INVESTOR:

 

SHSP HOLDINGS, LLC

 

By: /s/                                            

 

Name:                                            

 

Title:                                              

 

 

228 Park Avenue South

Suite 90959

New York, New York 10003

Attention:                                           

 

 

Annex I

 

Form of Conversion Notice

 

Reference is made to that certain Convertible Promissory Note (the “Note”) issued by SharpSpring, Inc., a Delaware corporation (the “Company”), pursuant to that certain Convertible Note Purchase Agreement dated as of March 28, 2018 between the undersigned and the Company. Defined terms used below have the meaning given to them in the Note.

 

The undersigned hereby elects to convert $_________ in principal amount of the Note being tendered herewith, together with all accrued but unpaid interest thereon through the Conversion Date, to acquire such number of Conversion Shares as are issuable upon such conversion as provided under the terms of the Note.

 

Please issue the Conversion Shares in the name of the undersigned and, if applicable, please issue a new Note (also registered in the name of the undersigned) representing any principal amount of the Notes tendered herewith that is not being converted into Shares.

 

                                                                       

[Print or Type Name of Investor Above]*

 

 

 

 

Address to which shares should be delivered or account and DTC participation information for DWAC:

 

 

 

 

* The signature to this form must correspond with the name as written upon the face of the Note(s) being converted without alteration or enlargement or any change whatsoever.

 

Exhibit 4.2

 

 

EXHIBIT B

 

FORM OF INVESTORS’ RIGHTS AGREEMENT

 

This Investors’ Rights Agreement (this “Agreement”) is entered into by and among SharpSpring, Inc., a Delaware corporation (the “Company”), SHSP Holdings, LLC, a Delaware limited liability company (“SHSP Holdings”), Evercel Holdings LLC, a Delaware limited liability company and an affiliate of SHSP Holdings (“Evercel Holdings”), and the stockholders of the Company signatory hereto (the (“Management Stockholders”).

 

BACKGROUND

 

A.   Concurrently with the execution of this Agreement, the Company and SHSP Holdings are entering into a Convertible Note Purchase Agreement (the “Note Purchase Agreement”) pursuant to which the Company is issuing to SHSP Holdings a Convertible Promissory Note in the principal amount of $8,000,000 (the “Note”) which is convertible on the terms and conditions set forth therein into shares of the Company’s common stock par value $0.001 per share (“Common Stock”).

 

B.  The Management Stockholders are members of the senior management team of the Company and own certain shares of Common Stock.

 

C.   The execution of this Agreement by the parties hereto is material to SHSP Holdings’s willingness to enter into the Note Purchase Agreement and to acquire the Note.

 

D.  In consideration of the benefits that will be derived by the parties hereto from the issuance of the Note to SHSP Holdings, the parties hereto desire to enter into this Agreement.

 

AGREEMENT

 

             NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Registration Rights .

 

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

 

 

 

 

“Notes” means the Note and any PIK Notes (as such term is defined in the Note), that may be outstanding at any time.

 

“Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.

 

“Register,” “Registered,” and “Registration” refer to the registration effected by preparing and filing one (1) or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

 

“Registrable Securities” means (i) the shares of Common Stock issued or issuable upon conversion of the Notes; (ii) after the first to occur of (A) the Company's failure to obtain Stockholder Approval (as defined in the Note) in accordance with Section 2.12 of the Note within two years of the date of the Note, or (B) the conversion of a majority of the original aggregate principal amount of the Notes, any shares of Common Stock held by any Investor; and (iii) any shares of capital stock issued or issuable with respect to the shares of Common Stock described in clauses (i) and (ii), if any, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, which have not been (x) included in a Registration Statement that has been declared effective by the SEC, or (y) sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the 1933 Act.

 

“Registration Statement” means the registration statement or statements of the Company filed under the 1933 Act covering the Registrable Securities.

 

 

(a)            Investors may at any time request registration under the Securities Act of any portion of the Registrable Securities that is equal to or greater than 25% of the aggregate number of Registrable Securities issuable upon conversion of the Note (i) on Form S-1 or any similar long-form registration statement (each, a “Long Form Registration”) or (ii) on Form S-3 or any similar short-form registration statement, if available. Investors may also request that the registration be made pursuant to Rule 415. The Company shall use its best efforts to cause any Registration Statement to be declared effective under the 1933 Act as soon as practicable after filing. The Company shall not be required to effect a Long-Form Registration under this Section 1.2(a) more than two times; provided, that a Registration Statement shall not count as a Long-Form Registration requested under this Section 1.2(a) unless and until it has become effective and Investors are able to register and sell at least 85% of the Registrable Securities requested to be included in such Registration.

 

(b)            The Company shall not include in any Registration requested by any Investor pursuant to Section 1.2(a) any securities that are not Registrable Securities without the prior written consent of such Investor.

 

 

 

(c)            The Company shall not be obligated to effect any Registration within ninety (90) days after the effective date of a previous Registration in which Registrable Securities were included. The Company may postpone, for up to ninety (90) days from the date of any request for any Registration, the filing or the effectiveness of a Registration Statement for such Registration or suspend the use of a prospectus that is part of a shelf Registration for up to ninety (90) days if the Board reasonably determines that such postponement or suspension is in the best interests of the Company.

 

(d)            If, in connection with a Registration requested by Investors pursuant to Section 1.2(a) , Investors wish to engage in an underwritten offering with respect to the Registrable Securities, Investors shall have the right to select the investment banker(s) and manager(s) to administer such underwritten offering, subject to the Company’s approval, which shall not be unreasonably withheld, conditioned or delayed.

 

(e)            Whenever the Company proposes to register any of its securities under the 1933 Act (other than (i) in connection with registrations on Form S-4 or Form S-8 promulgated by the SEC or any successor or similar forms or (ii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), and the registration form to be used may be used for the registration of Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice and shall, subject to the limitations in Section 1.2(f) , include in such Piggyback Registration (and in all related registrations or qualifications under blue sky laws and in any related underwriting) all Registrable Securities which Investors request be included in such Piggyback Registration.

 

(f)            If a Piggyback Registration is an underwritten primary Registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability, proposed offering price, timing or method of distribution of the offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect, and (iii) third, other securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect.

 

1.3             Related Obligations . At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 1.2 , the Company shall have the following obligations with respect to the Registration Statement:

 

(a)            The Company shall use all commercially reasonable efforts to cause such Registration Statement to remain effective until the date on which Investors shall have sold all the Registrable Securities (the “Registration Period”).

 

 

 

(b)            The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any 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 light of the circumstances in which they were made, not misleading. The Company shall use all commercially reasonable efforts to respond to all SEC comments within ten (10) business days from receipt of such comments by the Company.

 

(c)            The Company shall use all commercially reasonable efforts to cause such Registration Statement to become effective no later than five (5) business days after notice from the SEC that the Registration Statement may be declared effective. Investors agree to provide in writing all information which it is required by law to provide to the Company, including the intended method of disposition of the Registrable Securities, and the Company’s obligations set forth above shall be conditioned on the receipt of such information.

 

(d)            The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by Investors as set forth in such Registration Statement.

 

(e)           The Company shall make available to Investors and their legal counsel without charge (i) if requested by Investors, promptly after the same is prepared and filed with the SEC at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, the prospectus included in such Registration Statement (including each preliminary prospectus) and, with regards to such Registration Statement(s), any correspondence by or on behalf of the Company to the SEC or the staff of the SEC and any correspondence from the SEC or the staff of the SEC to the Company or its representatives; and (ii) upon the effectiveness of any Registration Statement, the Company shall make available copies of the prospectus, via EDGAR, included in such Registration Statement and all amendments and supplements thereto.

 

(f)           The Company shall use commercially reasonable efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or “blue sky” laws of such states in the United States as Investors reasonably request; (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period; (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period; and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for its obligations under this Agreement, or (y) subject itself to general taxation in any such jurisdiction. The Company shall promptly notify Investors of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

 

 

(g)           As promptly as practicable after becoming aware of such event, the Company shall notify Investors in writing of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (“Registration Default”) and use all diligent efforts to promptly prepare a supplement or amendment to such Registration Statement and take any other necessary steps to cure the Registration Default (which, if such Registration Statement is on Form S-3, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and make available copies of such supplement or amendment to Investors.

 

(h)           The Company shall also promptly notify Investors (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when the Registration Statement or any post-effective amendment has become effective (Investors’ access to such documents via the SEC’s EDGAR website shall constitute sufficient notice hereunder); (ii) of any request by the SEC for amendments or supplements to the Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, (iv) in the event the Registration Statement is no longer effective, or (v) if the Registration Statement is stale as a result of the Company’s failure to timely file its financials or otherwise.

 

(i)           The Company shall use all commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of the Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify any Investor holding Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding concerning the effectiveness of the Registration Statement.

 

(j)           The Company shall permit Investors and one (1) legal counsel, designated by Investors, to review and comment upon the Registration Statement and all amendments and supplements thereto at least one (1) calendar day prior to their filing with the SEC. The Company shall consider in good faith any comments received from Investors and such designated legal counsel in connection with such review, but shall be under no obligation to make revisions in response thereto.

 

 

 

(k)           The Company shall hold in confidence and not make any disclosure of information concerning Investors unless (i) in the opinion of the Company or upon the advice of its legal counsel, disclosure of such information is necessary to comply with federal or state securities laws, (ii) in the opinion of the Company or upon the advice of its legal counsel, the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement, or (v) Investors has consented to such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning any Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order covering such information.

 

(l)           The Company shall use all commercially reasonable efforts to maintain designation and quotation of all the Registrable Securities covered by any Registration Statement on all markets on which the Common Stock is traded and shall pay all fees and expenses in connection therewith.

 

(m)           The Company shall provide a transfer agent for all the Registrable Securities not later than the effective date of the first Registration Statement filed pursuant hereto.

 

(n)           If requested by Investors, the Company shall (i) as soon as reasonably practical incorporate in a prospectus supplement or post-effective amendment such information as Investors reasonably determine should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the offering of the Registrable Securities to be sold in such offering; and (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as reasonably possible after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment.

 

(o)           The Company shall otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

 

(p)           Within one (1) business day after the Registration Statement which includes Registrable Securities is declared effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities, with a copy to Investor, a written notification that such Registration Statement has been declared effective by the SEC.

 

1.4             Obligations of Investors .

 

(a)            At least five (5) calendar days prior to the first anticipated filing date of the Registration Statement the Company shall notify each Investor in writing of the information the Company requires from such Investor for the Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities and Investors agree to furnish to the Company that information regarding itself, the Registrable Securities and the intended method of disposition of the Registrable Securities as shall reasonably be required to effect the registration of the resale of such Registrable Securities , and Investors shall execute such documents in connection with such registration as the Company may reasonably request. Investors covenant and agree that, in connection with any sale of Registrable Securities by it pursuant to the Registration Statement, they shall comply with the “Plan of Distribution” section of the then current prospectus relating to such Registration Statement.

 

 

 

(b)            Investors shall cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder.

 

(c)            Upon receipt of written notice from the Company of the happening of any event of the kind described in Section 1.2( g) , Investors will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering the resale of such Registrable Securities until Investors’ receipt of the copies of the supplemented or amended prospectus contemplated hereby.

 

1.5             Expenses of Registration . All reasonable expenses, other than underwriting discounts and commissions, incurred by the Company in connection with registrations including comments, filings or qualifications pursuant to Section 1.2 and Section 1.3 , including, without limitation, all registration, listing and qualifications fees, printing and accounting fees, and fees and disbursements of counsel for the Company , shall be paid by the Company.

 

1.6             Indemnification . In the event any Registrable Securities are included in a Registration Statement pursuant to this Agreement:

 

(a)            To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend Investors, the directors, officers, partners, employees, counsel, agents, representatives of, and each person, if any, who controls Investors within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Investors have requested in writing that the Company register or qualify the Shares (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements therein were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus for the offer of the Registrable Securities (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to the restrictions set forth in Section 1.6(e), the Company shall reimburse each Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable and documented legal fees or other reasonable out-of-pocket expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 1.6(a) : (i) shall not apply to a Claim arising out of or based upon a Violation which is due to the inclusion in the Registration Statement of the information furnished to the Company by any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not be available to the extent such Claim is based on (A) a failure of any Investor to deliver or to cause to be delivered the prospectus made available by the Company; (B) the Indemnified Person’s use of an incorrect prospectus despite being promptly advised in advance by the Company in writing not to use such incorrect prospectus; (C) the manner of sale of the Registrable Securities by Investors or of Investors’ failure to register as a dealer under applicable securities laws; (D) any omission of any Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to such Investor or the manner of sale; and (E) any amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (iii) shall not be available to the extent the Claim arises out of the gross negligence or willful misconduct of the Indemnified Person. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the resale of the Registrable Securities by any Investor pursuant to the Registration Statement.

 

 

 

(b)            In connection with any Registration Statement in which any Investor is participating, such Investor shall indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 1.6(a) , the Company, each of its directors, officers, employees, counsel, agents and representatives and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation is due to (i) the inclusion in the Registration Statement of the written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; (ii) a failure of any Investor to deliver or to cause to be delivered the prospectus made available by the Company or such Investor’s use of an incorrect prospectus despite being timely advised by the Company in writing not to use such incorrect prospectus; (iii) such Investor’s gross negligence or willful misconduct; or (iv) any omission of such Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to such Investor or the manner of sale; and, subject to Section 1.6(e) , such Investor will reimburse any documented legal or other out-of-pocket expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 1.6(b) and the agreement with respect to contribution contained herein shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of Investor, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the resale of the Registrable Securities by such Investor pursuant to the Registration Statement.

 

(c)             Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 1.6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 1.6 , deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party, as the case may be, shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, the representation by counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The indemnifying party shall pay for only one (1) separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such counsel shall be selected by Investors, if Investors are entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding affected without its written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 1.6 , except to the extent that the indemnifying party is prejudiced by such failure in its ability to defend such action.

 

 

 

(d)            The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

(e)            To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 1.6 to the fullest extent permitted by law; provided, however, that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 1.6 ; (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

 

1.7             Reports Under the 1934 Act .

 

(a)            With a view to making available to Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit Investors to sell securities of the Company to the public without registration (“Rule 144”), provided that any Investor holds any Registrable Securities which are eligible for resale under Rule 144 and such information is necessary in order for such Investor to sell such Securities pursuant to Rule 144, the Company agrees to:

 

(i)            make and keep public information available, as those terms are understood and defined in Rule 144;

 

(ii)          file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

(iii)        furnish to such Investor, promptly upon request, (A) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act applicable to the Company, (B) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (C) such other information as may be reasonably requested to permit such Investor to sell such securities pursuant to Rule 144 without registration.

 

1.8             No Assignment of Registration Rights . This Agreement and the rights, agreements or obligations hereunder may not be assigned, by operation of law, merger or otherwise, and without the prior written consent of the other party hereto, and any purported assignment by a party without prior written consent of the other party will be null and void and not binding on such other party. Subject to the preceding sentence, all of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors and assigns.

 

 

 

2.             Right to Nominate a Director . For so long as SHSP Holdings continues to hold any Notes, SHSP Holdings shall have the right to designate one person for election to the Company’s Board of Directors (the “Board”) and the Company shall use its reasonable best efforts to cause such person (the “Investor Nominee”) to be elected to the Board at each annual meeting of the stockholders of the Company, commencing with the first annual meeting of stockholders to be held after the date of such designation. The Investor Nominee shall be subject to the Company’s ordinary background check procedures prior to his or her initial election to the Board. The Investor Nominee shall be entitled to the same compensation, indemnification rights and other benefits that are provided to any other non-management director. If at any time the Notes are held by more than one person or legal entity, the holder(s) of a majority in aggregate principal amount of the Notes shall have the right to nominate a director pursuant to this Section 2 . If the Board at any time reasonably determines that the Investor Nominee is not positively contributing to the achievement of the Company’s goals and objectives and the Board requests the resignation of the Investor Nominee, SHSP Holdings shall cause the Investor Nominee to resign from the Board and SHSP Holdings shall designate a new person as the Investor Nominee to fill the vacancy created by such resignation and to stand for election in future elections of directors, subject to the same conditions set forth in this Section 2 with respect to the initial Investor Nominee.

 

3.             Restrictions on Sales of Stock by the Management Stockholders . For so long as SHSP Holdings continues to hold any Notes, and for so long as each such individual remains employed by the Company, (i) Richard Carlson shall not, without the prior written consent of Investor, sell shares of Common Stock with an aggregate gross sale price of (A) more than $250,000 prior to the eighteen- (18-) month anniversary of the date of this Agreement, or (B) more than $1,000,000 in total and (ii) Travis Whitton shall not, without the prior written consent of Investor, sell shares of Common Stock with an aggregate gross sale price of (A) more than $250,000 prior to the eighteen- (18-) month anniversary of the date of this Agreement or (B) more than $500,000 in total.

 

4.             Limitations on Additional Senior Debt . So long as any Notes are outstanding, except as SHSP Holdings may otherwise agree in writing, the Company shall at no time (i) have outstanding senior indebtedness in an aggregate amount exceeding 18.6% of the Company’s trailing twelve-month revenue, (ii) incur any indebtedness that is both junior in right of payment to the obligations of the Company to its senior secured lender and senior to the Company’s obligations under the Notes or (iii) enter into any agreement with any lender or other third party that would (A) prohibit the Company from issuing PIK Notes (as such term is defined in the Note) at any time or under any circumstances or (B) prohibit the conversion of the Notes in accordance with their terms at any time or under any circumstances.

 

5.             Miscellaneous .

 

5.1             Governing Law . This Agreement shall be governed by and construed in accordance with laws of the State of Delaware, without giving effect to any choice of law or conflict of laws rules or provisions.

 

5.2             Amendment and Waiver . Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), and this Agreement may be terminated, only with the written consent of all of the parties hereto.

 

 

 

5.3             Entire Agreement . This Agreement, the Note Purchase Agreement and the Note constitute the entire agreement among the parties relative to the specific subject matter hereof and thereof and supersede any and all previous agreements among the parties or any of them relative to the specific subject matter hereof and thereof.

 

5.4             Notices . All notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be given by (i) personal delivery, which notice shall be effective when actually delivered, (ii) private overnight courier, which notice shall be effective on the day of delivery, (iii) by facsimile or electronic mail, which notice shall be effective upon confirmation of transmission, or (iv) certified or registered mail, which notice shall be effective three business days after being deposited in the mail, postage prepaid. Any such notice, to be valid, must be addressed (x) if sent to the Company, to the Company’s principal executive offices, (y) if sent to SHSP Holdings or to Evercel Holdings, at such party’s notice address, facsimile number or electronic mail address set forth on the signature page to this Agreement or to such other address as such Investor has specified by prior written notice to the other parties hereto after the date hereof and (z) if sent to a Management Stockholder, to such Management Stockholder’s address, facsimile number or electronic mail address as is in the Company’s personnel records for such Management Stockholder.

 

5.5             Severability . Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

5.6             Counterparts . This Agreement may be executed in two or more counterparts (including by means of facsimile or electronically scanned copies), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

5.7             Successors and Assigns . This Agreement may not be assigned by any party hereto without the prior written consent of the other parties. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

 

5.8             No Third Party Beneficiaries . This Agreement shall not confer any rights or remedies upon any person or entity other than the Company and the Stockholders and their respective successors and permitted assigns.

 

5.9             Specific Performance . The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

 

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows.]

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Investors’ Right Agreement as of the date first above written.

 

THE COMPANY:		INVESTORS:
SHARPSPRING, INC.		SHSP HOLDINGS, LLC
By: /s/		By: /s/
Name:		Name:
Title:		Title:
MANAGEMENT STOCKHOLDERS:		Notice Address for SHSP Holdings:
/s/		228 Park Avenue South, Suite 90959
RICHARD A. CARLSON		Street Address
		New York, New York 10003
		City           State             Zip
/s/		E-Mail Address:
TRAVIS WHITTON
		Facsimile No.:
		EVERCEL HOLDINGS, LLC
		By: /s/
		Name:
		Title:
		Notice Address for Evercel Holdings:
		228 Park Avenue South, Suite 90959
		Street Address
		New York, New York 10003
		City           State             Zip
		E-Mail Address:
		Facsimile No.:

 

 

Exhibit 4.3

 

SUBORDINATION AGREEMENT

 

This Subordination Agreement (this “Agreement”) is made as of March 28, 2018 by and between SHSP Holdings, Inc., a Delaware limited liability company (“Creditor”) and Western Alliance Bank (“Bank”).

 

Recitals

 

A.            SHARPSPRING, INC. (“SharpSpring”), SHARPSPRING TECHNOLOGIES, INC. and QUATTRO HOSTING LLC (individually and collectively, “Borrower”) has requested and/or obtained certain loans or other credit accommodations from Bank which are or may be from time to time secured by assets and property of Borrower.

 

B.            Creditor has made a loan to Borrower evidenced by that certain Convertible Promissory Note dated as of March ___, 2018 issued by SharpSpring to Creditor (the “Convertible Note” and, together with all PIK Notes, as such term is defined in the in Convertible Note in effect on the date hereof, issued as provided in the Convertible Note, the “Convertible Notes”) pursuant to that certain Convertible Note Purchase Agreement between SharpSpring and Creditor dated as of March __, 2018 (the “Note Purchase Agreement, and together with the Convertible Notes, the “Subordinated Debt Documents”).

 

C.            In order to induce Bank to extend credit to Borrower and, at any time or from time to time, at Bank’s option, to make such further loans, extensions of credit, or other accommodations to or for the account of Borrower, or to extend credit upon any instrument or writing in respect of which Borrower may be liable in any capacity, or to grant such renewals or extensions of any such loan, extension of credit, or other accommodation as Bank may deem advisable, Creditor is willing to subordinate: (i) all of Borrower’s indebtedness to Creditor under the Subordinated Debt Documents, whether presently existing or arising in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and obligations to Bank (including, without limitation, principal, premium (if any), interest, fees, charges, expenses, costs, professional fees and expenses, and reimbursement obligations); and (ii) all of Creditor’s security interests, if any, to all of Bank’s security interests in the property of Borrower.

 

Now, Therefore, the Parties Agree as Follows :

 

1.            Creditor subordinates to Bank any security interest or lien that Creditor may have in any property of Borrower. Notwithstanding the respective dates of attachment or perfection of the security interest of Creditor and the security interest of Bank, the security interest of Bank in the accounts, including health care receivables, chattel paper, general intangibles, inventory, equipment, instruments, including promissory notes, deposit accounts, investment property, documents, letter of credit rights, any commercial tort claim of Borrower which is now or hereafter identified by Borrower or Bank, and other property of the Borrower (the "Collateral"), shall at all times be prior to any security interest of Creditor.

 

2.            All Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Bank, now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding (the “Senior Debt”).

 

3.            Creditor will not demand or receive from Borrower (and Borrower will not pay to Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise until such time as (i) the Senior Debt is fully paid (other than contingent indemnification and cost reimbursement obligations for which a claim has not been made) in cash, (ii) all of Bank’s obligations owing to Borrower (including any commitment or obligation to lend any further funds to Borrower) have been terminated, and (iii) all financing agreements between Bank and Borrower are terminated (other than provisions relating to contingent indemnification and cost reimbursement obligations which expressly survive termination of the Senior Debt) (collectively, the “Termination of the Senior Debt”).

 

 

4.            Until the Termination of the Senior Debt, Creditor shall not exercise any remedy with respect to any Collateral or any other collateral securing the Subordinated Debt, nor shall Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower to collect the Subordinated Debt. The foregoing notwithstanding, neither the foregoing restrictions nor any other provision contained in this Agreement shall restrict or limit in any way: (i) the issuance of the PIK Notes, (ii) the conversion of all or any portion of the Subordinated Debt into equity securities of Borrower pursuant to the terms of the Subordinated Debt (subject to the last sentence of this Section), (iii) any rights with respect to any equity securities of Borrower issued upon conversion of the Subordinated Debt (subject to the last sentence of this Section), (iv) the acceleration of the Subordinated Debt upon the acceleration of the Senior Debt or the commencement of any proceeding identified in Section 6 below (but subject to the restrictions of Section 3 of this Agreement), or (v) Creditor’s ability to commence, prosecute or participate in any administrative, legal or equitable action solely with respect to seeking specific performance to compel Borrower to convert the Subordinated Debt into equity securities of Borrower. Creditor acknowledges that the Senior Debt documents provide certain restrictions on Borrower’s ability to declare, pay or make dividends, distributions or other payments on such equity securities of Borrower or otherwise pay any money or deliver any other securities or consideration to the holder of such equity securities, and Creditor shall not receive any dividends, distributions or other payments that are made in cash on such equity securities received from the conversion of the Convertible Notes except to the extent permitted by the terms of the Senior Debt documents.

 

5.            Creditor shall promptly deliver to Bank in the form received (except for endorsement or assignment by Creditor where required by Bank) for application to the Senior Debt any cash payment, distribution, security or proceeds received by Creditor with respect to the Subordinated Debt other than in accordance with this Agreement.

 

6.            In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Bank’s claims against Borrower and the estate of Borrower shall be paid in full before any cash payment is made to Creditor. For the avoidance of any doubt, Senior Debt includes, without limitation, any of Bank's claims against Borrower and the estate of Borrower arising from the granting of credit under Section 364 or the use of cash collateral under Section 363 of the United States Bankruptcy Code, and Creditor agrees that it will raise no objection thereto.

 

7.            Until the Termination of the Senior Debt, Creditor agrees that it will not object to or oppose (i) the sale of the Borrower, or (ii) the sale or other disposition of any property of the Borrower, if Bank has consented to such sale of the Borrower or sale or disposition of any property of the Borrower. If requested by Bank, Creditor shall affirmatively consent to such sale or disposition and shall take all necessary actions and execute such documents and instruments as Bank may reasonably request in connection with and to facilitate such sale or disposition. Bank shall have the sole and exclusive right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of Collateral except in accordance with the terms of the Senior Debt. Upon written notice from Bank to Creditor of Bank's agreement to release its lien on all or any portion of the Collateral in connection with the sale, transfer or other disposition thereof by Bank (or by Borrower with consent of Bank), Creditor shall be deemed to have also, automatically and simultaneously, released its lien on such Collateral, and Creditor shall upon written request by Bank, immediately take such action as shall be necessary or appropriate to evidence and confirm such release. All proceeds resulting from any such sale, transfer or other disposition shall be applied first to the Senior Debt until payment in full (other than contingent indemnification and cost reimbursement claims for which a claim has not been made) thereof, with the balance, if any, to the Subordinated Debt, or to any other entitled party. If Creditor fails to release its lien as required hereunder, Creditor hereby appoints Bank as attorney in fact for Creditor with full power of substitution to release Creditor's liens as provided hereunder. Such power of attorney being coupled with an interest shall be irrevocable.

 

8.            Until Termination of the Senior Debt, Creditor irrevocably appoints Bank as Creditor’s attorney in fact, and grants to Bank a power of attorney with full power of substitution, in the name of Creditor or in the name of Bank, for the use and benefit of Bank, without notice to Creditor, to perform at Bank’s option the following acts in any bankruptcy, insolvency or similar proceeding involving Borrower: (i) to file the appropriate claim or claims in respect of the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 15 days before the expiration of the time to file claims in such proceeding and if Bank elects, in its sole discretion, to file such claim or claims; and (ii) to accept or reject any plan of reorganization or arrangement on behalf of Creditor and to otherwise vote Creditor’s claims in respect of any Subordinated Debt in any manner that Bank deems appropriate for the enforcement of its rights hereunder.

 

 

 

 

9.            Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Creditor may have in any property of Borrower. Without limiting the foregoing, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt, except, in either such case, to the extent any such principal or interest is paid only through the issuance of PIK Notes or equity securities of Borrower.

 

10.            This Agreement shall remain effective for so long as Bank has any obligation to make credit extensions to Borrower or Borrower owes any amounts to Bank. If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Bank for any reason (including, without limitation, the bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Creditor shall immediately pay over to Bank all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to Creditor , Bank may take such actions with respect to the Senior Debt and the Collateral as Bank, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any Collateral, judicial foreclosure, nonjudicial foreclosure, exercise of a power of sale, and taking a deed, assignment or transfer in lieu of foreclosure as to any of the Collateral, and enforcing or failing to enforce any rights against Borrower or any other person. No such action or inaction shall impair or otherwise affect Bank’s rights hereunder. Creditor agrees not to assert against Bank (a) any rights which a guarantor or surety could exercise; but nothing in this Agreement shall constitute Creditor as a guarantor or surety; (b) the right, if any, to require Bank to marshal or otherwise require Bank to proceed to dispose of or foreclose upon any of the Collateral in any manner or order; and (c) any right of subrogation, contribution, reimbursement, or indemnity which it may have against Borrower arising directly or indirectly out of this Agreement. Creditor waives the benefits, if any, of California Civil Code Sections 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2839, 2845, 2847, 2848, 2849, 2850, 2899 and 3433. Pursuant to Section 2856 of the California Civil Code, Creditor waives all rights and defenses that Creditor may have because the Senior Debt may be secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.

 

11.            All necessary action on the part of Creditor, its officers, directors, partners, members and shareholders, as applicable, necessary for the authorization of this Agreement and the performance of all obligations of Creditor hereunder has been taken. This Agreement constitutes the legal, valid and binding obligation of Creditor, enforceable against Creditor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability. The execution, delivery and performance of and compliance with this Agreement by Creditor will not (i) result in any material violation or default of any term of any of Creditor’s formation or operating agreement or (ii) violate any material applicable law, rule or regulation.

 

12.            This Agreement shall bind any successors or assignees of Creditor and shall benefit any successors or assigns of Bank. This Agreement is solely for the benefit of Creditor and Bank and not for the benefit of Borrower or any other party. Creditor further agrees that if Borrower is in the process of refinancing a portion of the Senior Debt with a new lender, and if Bank makes a request of Creditor, Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.

 

 

13.            This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of laws principles. Creditor and Bank submit to the exclusive jurisdiction of the state and federal courts located in Santa Clara County, California. CREDITOR AND BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

14.            Reference Provision.

 

a.           In the event the jury trial waiver set forth above is not enforceable, the parties elect to proceed under this judicial reference provision.

 

b.           With the exception of the items specified in the subsection (c) below, any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this Agreement or any other document, instrument or agreement between the undersigned parties (collectively in this Section, the “Loan Documents”), will be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Except as otherwise provided in the Loan Documents, venue for the reference proceeding will be in the state or federal court in the county or district where the real property involved in the action, if any, is located or in the state or federal court in the county or district where venue is otherwise appropriate under applicable law (the “Court”).

 

c.           The matters that shall not be subject to a reference are the following: (i) nonjudicial foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including, without limitation, set-off), (iii) appointment of a receiver and (iv) temporary, provisional or ancillary remedies (including, without limitation, writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). This reference provision does not limit the right of any party to exercise or oppose any of the rights and remedies described in clauses (i) and (ii) or to seek or oppose from a court of competent jurisdiction any of the items described in clauses (iii) and (iv). The exercise of, or opposition to, any of those items does not waive the right of any party to a reference pursuant to this reference provision as provided herein.

 

d.           The referee shall be a retired judge or justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party shall have one peremptory challenge to the referee selected by the Presiding Judge of the Court (or his or her representative).

 

e.           The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within fifteen (15) days after the date of selection of the referee, (ii) if practicable, try all issues of law or fact within one hundred twenty (120) days after the date of the conference and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.

 

f.           The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered based upon good cause shown, no party shall be entitled to “priority” in conducting discovery, depositions may be taken by either party upon seven (7) days written notice, and all other discovery shall be responded to within fifteen (15) days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

 

 

 

g.           Except as expressly set forth herein, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings conducted before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a courtesy copy of the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost of the referee and the court reporter at trial.

 

h.           The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision at the close of the reference proceeding which disposes of all claims of the parties that are the subject of the reference. Pursuant to CCP § 644, such decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court and any such decision will be final, binding and conclusive. The parties reserve the right to appeal from the final judgment or order or from any appealable decision or order entered by the referee. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

 

i.           If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

 

j.           THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

15.            This Agreement may be amended only by written instrument signed by Creditor and Bank.

 

16.            This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

17.            This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. Creditor is not relying on any representations by Bank or Borrower in entering into this Agreement, and Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower.

 

18.            In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.

 

[signature pages follow]

 

In Witness Whereof, the undersigned have executed this Agreement as of the date first above written.

 

 “Bank”

 

Western Alliance Bank

 

 

 

 

 

 

Address for Notices:

Attn: Note Department

55 Almaden Blvd.

San Jose, CA 95113

FAX: (408) 282-1681

 

 

In Witness Whereof, the undersigned have executed this Agreement as of the date first above written.

 

“Creditor”

 

SHSP HOLDINGS, LLC,

a Delaware limited liability company

 

By: /s/                                            

 

Name:                                            

 

 

 

Address for Notices:

228 Park Avenue South

Suite 90959

New York, New York 10003

 

 

 

 

 

 

The undersigned acknowledge and agree to the terms of this Agreement.

 

 

“Borrower”

 

SHARPSPRING, INC.

 

By: /s/                                           

 

Name:                                           

 

Title:                                            

 

 

 

SHARPSPRING TECHNOLOGIES, INC.

 

By: /s/                                            

 

Name:                                            

 

Title:                                              

 

 

QUATTRO HOSTING LLC

 

By: /s/                                            

 

Name:                                            

 

Title: