UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (date of earliest event reported):
March
28, 2018
SharpSpring, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
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001-36280
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05-0502529
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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550
SW 2nd Avenue,Gainesville, FL 32601
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(Address
of principal executive offices, including zip code)
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Registrant’s
telephone number, including area code: (888) 428-9605
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|
☐
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
☐
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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☐
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01
Entry into a Material Definitive Agreement
On
March 28, 2018, SharpSpring, Inc. (the “Company”)
entered into a Convertible Note Purchase Agreement (the “Note
Purchase Agreement”) with SHSP Holdings, LLC
(“Investor”), pursuant to which the Company issued to
Investor a Convertible Promissory Note in the aggregate principal
amount of $8,000,000 (the “Note”). The Note Purchase
Agreement contains customary representations, warranties and
covenants of the Company and the Investor. A description of the
material terms of the Note is set forth under Item 2.03,
below.
Simultaneously
with the execution of the Note Purchase Agreement and the issuance
of the Note, on March 28, 2018, the Company entered into the
Investors’ Rights Agreement (the “Investors’
Rights Agreement”) by and among the Company, Investor and two
management stockholders, Richard A. Carlson and Travis Whitton (the
“Management Stockholders”). Under the Investors’
Rights Agreement, the Investor has customary demand and piggyback
registration rights with respect to the shares of Company common
stock, par value $.001 (the “Common Stock”), issued or
issuable upon conversion of the Notes and, under specified
conditions, held by members of Investor or Evercel Holdings LLC, an
affiliate of Investor, or its members. In addition, Investor will
have the right to designate one person for election to the
Company’s Board of Directors for as long as Investor
continues to hold any of the Notes, and the Company agreed to use
its reasonable best efforts to cause such person to be elected to
the Company’s Board at each annual meeting of the
Company’s stockholders. The Management Stockholders also
agreed under the Investors’ Rights Agreement, for so long as
the Investor continues to hold any Notes and the respective
Management Stockholders remain employed by the Company, to limit
their sales of Common Stock to specified aggregate values. The
Company further agreed, so long as any Notes are outstanding, to
limit its outstanding senior indebtedness to 18.6% of the
Company’s trailing 12-month revenue, based on the
Company’s current credit facility limit as a percentage of
trailing 12-month revenue.
The
foregoing descriptions
of the Note Purchase
Agreement and the Investors’ Rights Agreement are not
intended to be complete and are qualified in their entirety by the
full text of the Note Purchase Agreement, a copy of which is
attached hereto as Exhibit 10.1, and the form of Investors’
Rights Agreement, a copy of which is attached hereto as Exhibit
4.2, each of which is incorporated herein by
reference.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant
Pursuant
to the Note Purchase Agreement, Company issued the Note to Investor
on March 28, 2018 (the “Issue Date”). Interest on the
Note will accrue at a rate of 5.0% per annum, beginning on the
Issue date until the principal amount and all accrued but unpaid
interest shall have been paid or converted into shares of Common
Stock. The Note is an unsecured debt obligation of the Company,
subordinate to the Company’s senior credit facility and
subject to a Subordination Agreement by and between Investor and
Western Alliance Bank dated as of March 28, 2018. A copy of the
Form of Subordination Agreement is attached hereto as Exhibit
4.3.
The
Note will be due and payable on the fifth anniversary of the
Issuance Date (the “Maturity Date”). Interest under the
Note will be due and payable on each anniversary of the Issuance
Date, and will be paid by the issuance of additional convertible
promissory notes of like tenor to the Notes (each, a “PIK
Note” and, together with the Note, the “Notes”)
with a principal amount equal to the accrued interest being paid by
delivery of such PIK Note. Except under limited circumstances as
described in the Note, the Company may not prepay any amounts under
any of the Notes without the prior written consent of Investor. At
the Maturity Date, the Company may elect 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 for the 30 trading days prior to and including the Maturity
Date. The Company will have the right to extend the Maturity Date
for up to six months on up to three separate occasions, during
which time interest would accrue on the outstanding principal
amount of the Note at a rate of 10% per annum.
The
principal amount of the Note and any accrued interest thereon may
be converted, in whole or in part, into shares of Common Stock at
any time prior to the Maturity Date at a conversion price of $7.50
per share, subject to customary adjustments (the “Conversion
Price”). If the closing price of the Common Stock exceeds
175% of the Conversion Price for a period of 120 consecutive
trading days, the Company will have the right to convert all of the
outstanding Notes, provided that immediately prior to such
conversion the Company will be required to issue to Investor any
PIK Notes that would have been issued under the Note had it
remained outstanding through the Maturity Date, and all such PIK
Notes will be included in the conversion.
In the
event of a Change in Control (as defined in the Note) of the
Company prior to the Maturity Date, the Company would be required
to issue to Investor any additional PIK Notes as would have been
issued if the Note had remained outstanding through the Maturity
Date, and Investor will have the right, at its option, to (i)
convert the Note, in whole or in part, into the consideration
receivable by holders of Common Stock in the Change in Control
transaction, or (ii) require the Company or its successor to pay
the outstanding principal amount and all accrued interest on the
Note concurrently with the consummation of the Change in Control
transaction.
The
Note contains an “exchange cap” pursuant to which the
Company and Investor have agreed that Investor will not attempt to
convert any portion of the Note, and the Company will not issue to
Investor any Common Stock upon any attempted conversion of the
Note, if the number of shares of Common Stock issuable upon such
conversion, plus (i) the number of shares of Common Stock issued
pursuant to conversions 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 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, unless and
until the Company obtains stockholder approval permitting such
issuance. The Company has agreed to seek stockholder approval of
the issuance of the Common Stock to Investor upon conversion of the
Notes at its next annual meeting of stockholders and at subsequent
stockholder meetings as and if necessary.
The
Note contains customary events of default, as defined in the Note
(each, an “Event of Default”). If any Event of Default
occurs, then, at any time thereafter and while such Event of
Default is continuing, Investor may declare the entire outstanding
principal amount of the Note and all accrued but unpaid interest to
be immediately due and payable.
The
foregoing description of the Note is not intended to be complete
and is qualified in its entirety by the full text of the Note, the
form of which is attached hereto as Exhibit 4.1 and incorporated
herein by reference.
Item 3.02
Unregistered Sales of Equity Securities
On March 28, 2018, the Company entered into the Note Purchase
Agreement with Investor, pursuant to which the Company issued the
Note to Investor in the aggregate principal amount of $8,000,000.
The principal amount of the Note and any accrued interest thereon
may be converted, in whole or in part, into shares of Common Stock
at any time prior to the Maturity Date at a conversion price of
$7.50 per share, subject to customary adjustments. Assuming full
conversion of the principal amount of the Notes and accrued
interest on the Maturity Date, the Company anticipates that it
would issue 1,361,000 shares of Common Stock. Additional
information regarding the terms of conversion of the Note is
provided under Item 2.03, above.
The Company offered and sold the Notes to Investor in reliance on
the exemption from registration provided by Section 4(a)(2) of
the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The Company relied on these
exemptions from registration based in part on representations made
by Investor in the Note Purchase Agreement.
On March 28, 2018, the Company issued a press release announcing
the issuance of the Note and the other transactions described in
this Current Report on Form 8-K. A copy of the press release is
attached hereto as Exhibit 99.1 and incorporated herein by
reference.
Item 9.01
Financial Statements and Exhibits
(d) Exhibits
Exhibit No.
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Description
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Form of Convertible Promissory Note, attached as Exhibit A to the
Note Purchase Agreement
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Form of Investors’ Rights Agreement by and among SharpSpring,
Inc., SHSP Holdings, LLC and the Management Stockholders signatory
thereto, attached as Exhibit B to the Note Purchase
Agreement
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Form of Subordination Agreement by and between SHSP Holdings, LLC
and Western Alliance Bank, attached as Exhibit C to the Note
Purchase Agreement
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Convertible Note Purchase Agreement among SharpSpring, Inc. and
SHSP Holdings, LLC
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Press Release dated March 28, 2018
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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SHARPSPRING,
INC.
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Dated:
March 28, 2018
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By:
/s/ Edward S. Lawton
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Edward
S. Lawton
Chief
Financial Officer
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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
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March 28,
2018
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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.
Conversion of the
Note
.
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:
Notice Address
:
228 Park Avenue South
Suite 90959
New York, New York 10003
Facsimile:
(___)
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:
“1933
Act” means the Securities Act of 1933, as
amended.
“1934
Act” means the Securities Exchange Act of 1934, as
amended.
“Investors” means, collectively, (i) SHSP
Holdings, (ii) the members of SHSP Holdings, (iii) Evercel
Holdings, and (iv) the members of Evercel Holdings, and
“Investor” means any of the Investors who may hold
shares of Common Stock at any time.
“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.
“SEC”
means the United States Securities and Exchange
Commission.
1.2
Requests
for Registration
.
(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:
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INVESTORS:
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SHARPSPRING,
INC.
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SHSP
HOLDINGS, LLC
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By:
/s/
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By:
/s/
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Name:
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Name:
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Title:
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Title:
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MANAGEMENT STOCKHOLDERS:
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Notice Address for
SHSP Holdings:
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/s/
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228 Park Avenue
South, Suite 90959
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RICHARD
A. CARLSON
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Street
Address
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New York, New York
10003
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City
State
Zip
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/s/
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E-Mail
Address:
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TRAVIS
WHITTON
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Facsimile
No.:
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EVERCEL
HOLDINGS, LLC
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By:
/s/
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Name:
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Title:
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Notice Address for
Evercel Holdings:
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228 Park Avenue South, Suite
90959
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Street
Address
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New York, New York
10003
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City
State
Zip
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E-Mail
Address:
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Facsimile
No.:
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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:
Exhibit
10.1
CONVERTIBLE NOTE
PURCHASE AGREEMENT
This
Convertible Note Purchase Agreement (this “Agreement”)
is entered into as of March 28, 2018 among SharpSpring, Inc., a
Delaware corporation (the “Company”), and SHSP
Holdings, LLC, a Delaware limited liability company
(“Investor”).
BACKGROUND
A.
The Board of Directors of the Company has authorized the issuance
to Investor of a Convertible Promissory Note in the principal
amount of $8,000,000 in the form attached hereto as Exhibit A (the
“Note”).
B
Investor desires to purchase the Note on the terms and conditions
set forth in this Agreement.
C.
Concurrently with the issuance of the Note, the Company, Investor
and certain officers of the Company will enter into an
Investors’ Rights Agreement substantially in the form
attached hereto as Exhibit B (the “Investors’ Rights
Agreement”).
D.
Concurrently with the issuance of the Note, Investor and Western
Alliance Bank will enter into a Subordination Agreement
substantially in the form attached hereto as Exhibit C (the
“Subordination Rights Agreement”).
NOW
THEREFORE, in consideration of the foregoing recitals and the
covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Investor hereby agree as
follows:
1.
DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings specified or indicated below, and such meanings
shall be equally applicable to the singular and plural forms of
such defined terms:
“1933
Act” means the Securities Act of 1933, as
amended.
“1934
Act” means the Securities Exchange Act of 1934, as it may be
amended.
“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.
“Agreement”
has the meaning set forth in the preamble.
“Common
Stock” means the common stock of the Company, par value
$0.001 per share.
“Company”
has the meaning set forth in the preamble.
“Conversion
Shares” means the shares of Common Stock issuable upon
conversion of the Note.
“Investor”
has the meaning set forth in the preamble.
“Investors’
Rights Agreement” has the meaning set forth in the
recitals.
“IP
Rights” has the meaning set forth in
Section 3.10
.
“Law”
means any law, rule, regulation, order, judgment or decree,
including any federal and state securities Laws.
“Material
Adverse Effect” means any material adverse effect on (i) the
businesses, properties, assets, prospects, operations, results of
operations or financial condition of the Company and the
Subsidiaries, taken as a whole, or (ii) the ability of the Company
to consummate the transactions contemplated by this Agreement and
to perform its obligations under the Note or the Investors’
Rights Agreement; provided, however, that “Material Adverse
Effect” shall not include any event, occurrence, fact,
condition or change, directly or indirectly, arising out of or
attributable to: (i) general economic or political conditions; (ii)
conditions generally affecting the industries in which the Company
operates; (iii) any changes in financial or securities markets in
general; (iv) acts of war (whether or not declared), armed
hostilities or terrorism, or the escalation or worsening thereof;
(v) any changes in applicable Laws or accounting rules, including
GAAP; (vi) the public announcement or completion of the
transactions contemplated by this Agreement; (vii) actions taken by
the Company in compliance with the terms of this Agreement, the
Note or the Investors’ Rights Agreement, provided further,
however, that any event, occurrence, fact, condition or change
referred to in clauses (i) through (iv) immediately above shall be
taken into account in determining whether a Material Adverse Effect
has occurred or could reasonably be expected to occur to the extent
that such event, occurrence, fact, condition or change has a
disproportionate effect on the Company compared to other
participants in the industry in which the Company
operates.
“Note”
has the meaning set forth in the recitals.
“PIK
Notes” means any additional convertible promissory notes
issued by the Company in payment of interest under the Note or any
other PIK Note.
“Proceedings”
has the meaning set forth in
Section 3.6
.
“SEC”
means the United States Securities and Exchange
Commission.
“SEC
Documents” has the meaning set forth in
Section 3.5(a)
.
“Stockholder
Approval Requirement” has the meaning set for in
Section 3.2
.
“Subordination Agreement” has
the meaning set forth in the recitals.
“Subsidiaries”
and “Subsidiary” have the meaning set forth in
Section
3.4(b)
.
2.
PURCHASE
AND SALE OF THE NOTE
.
2.1
Purchase
and Sale of the Note
. Subject to the terms and conditions
set forth herein, concurrently with the execution hereof, the
Company shall issue and sell to Investor, and Investor shall
purchase from the Company, a Note in the principal amount of Eight
Million Dollars ($8,000,000). Concurrently with the issuance and
sale of the Note, (i) Investor shall pay Eight Million Dollars
($8,000,000) to the Company, by wire transfer of immediately
available funds and (ii) the Company shall deliver to Investor the
Note being purchased by Investor.
2.2
Investors’
Rights Agreement
. Concurrently with the issuance and sale of
the Note, the Company, Investor and certain officers of the Company
will execute and exchange the Investors’ Rights
Agreement.
2.3
Subordination
Agreement
. Concurrently with the issuance and sale of the
Note, the Investor will execute and exchange with Western Alliance
Bank the Subordination Agreement, and the Company and certain of
its subsidiaries will acknolwedge and agree to the terms
thereof.
3.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
. The Company represents and
warrants to Investor and covenants with Investor that, except as is
set forth in the Disclosure Letter being delivered to Investor as
of the date hereof, the following representations and warranties
are true and correct:
3.1
Organization and
Qualification
. The Company is a corporation duly organized
and validly existing in good standing under the Laws of the State
of Delaware and has the requisite corporate power and authority to
own its properties and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in
good standing in every jurisdiction in which the ownership of its
property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material
Adverse Effect.
3.2
Authorization;
Enforcement; Compliance with Other Instruments
. The Company
has the requisite corporate power and authority to execute this
Agreement, the Investors’ Rights Agreement and the Note, to
issue and sell the Note pursuant hereto, and to perform its
obligations under this Agreement, the Investors’ Rights
Agreement and the Note. The execution and delivery of this
Agreement, the Investors’ Rights Agreement and the Note by
the Company and the issuance and sale of the Note pursuant hereto,
including without limitation the reservation of the Conversion
Shares for future issuance, have been duly and validly authorized
by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors,
or, subject to the requirement for future stockholder approval
described in Section 2.12 of the Note (the “Stockholder
Approval Requirement”), its stockholders in connection
therewith. This Agreement, the Investors’ Rights Agreement,
the Subordination Agreement and the Note have been duly and validly
executed and delivered by the Company and constitute valid and
binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar Laws relating to, or affecting generally,
the enforcement of creditors’ rights and
remedies.
3.3
No
Conflicts
. The execution, delivery and performance of this
Agreement, the Investors’ Rights Agreement, the Subordination
Agreement and the Note by the Company and the issuance and sale of
the Note hereunder will not (i) conflict with or result in a
violation of the Company’s Certificate of Incorporation or
Bylaws, (ii) conflict with, or constitute a material default (or an
event which, with notice or lapse of time or both, would become a
material default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, any
material agreement to which the Company or any of the Subsidiaries
is a party, or (iii) subject to the making of the filings referred
to in
Section 5
,
and subject to the Stockholder Approval Requirement, violate in any
material respect any Law or any rule or regulation of the Nasdaq
Stock Market applicable to the Company or any of the Subsidiaries
or by which any of their properties or assets are bound or
affected. Assuming the accuracy of the Investor’s
representations in
Section 4
and subject to
the making of the filings referred to in
Section 5
and subject to
the Stockholder Approval Requirement, (i) no approval or
authorization will be required from any governmental authority or
agency, regulatory or self-regulatory agency or other third party
(including the Nasdaq Stock Market) in connection with the issuance
of the Note and the other transactions contemplated by this
Agreement (including the issuance of the Conversion Shares upon
conversion of the Note) and (ii) the issuance of the Note and the
issuance of the Conversion Shares upon the conversion of the Note
will be exempt from the registration and qualification requirements
under the 1933 Act and all applicable state securities
Laws.
3.4
Capitalization
and Subsidiaries
.
(a)
The
authorized capital stock of the Company consists of: (i) 50,000,000
shares of Common Stock; and (ii) 5,000,000 shares of preferred
stock, par value $0.001 per share, of the Company (the
“Preferred Stock”). As of the close of business on
March 26 2018: (A) 8,446,740 shares of Common Stock were issued and
outstanding (not including shares held in treasury); (B) 20,000
shares of Common Stock were issued and held by the Company in its
treasury; and (C) no shares of Preferred Stock were issued and
outstanding or held by the Company in its treasury; and since March
26, 2018 and through the date of this Agreement, no additional
shares of Common Stock or Preferred Stock have been issued. As of
the date of this Agreement, an aggregate of 80,937 shares of Common
Stock are reserved for issuance pursuant to stock option awards not
yet granted under the Company’s equity compensation plans,
and 1,517,450 shares of Common Stock are reserved for issuance
pursuant to outstanding options to purchase Common Stock granted
under the Company’s equity compensation plans. The Company
has duly reserved 1,066,667 shares of Common Stock for issuance
upon conversion of the Note. The Conversion Shares, when issued
upon conversion of the Note in accordance with its terms, will be
validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof. No
shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. The
Company’s Certificate of Incorporation, as amended, and
Bylaws on file on the SEC’s EDGAR website are true and
correct copies of the Company’s Certificate of Incorporation
and Bylaws as in effect as of the date hereof. The Company is not
in violation of any provision of its Certificate of Incorporation
or Bylaws.
(b)
Schedule
3.4(b)
lists each subsidiary of the Company (each, a
“Subsidiary” and collectively, the
“Subsidiaries”) and indicates for each Subsidiary (i)
the authorized capital stock of such Subsidiary as of the date
hereof, (ii) the number and kind of shares or other ownership
interests of such Subsidiary that are issued and outstanding as of
the date hereof, and (iii) the owner of such shares or other
ownership interests. No Subsidiary has any outstanding stock
options, warrants or other instruments pursuant to which such
Subsidiary may at any time or under any circumstances be obligated
to issue any shares of its capital stock. Each Subsidiary is duly
organized and validly existing in good standing under the laws of
its jurisdiction of formation and has all requisite power and
authority to own its properties and to carry on its business as now
being conducted.
(c)
Except
(i) as provided in the Asset Purchase Agreement dated as of August
12, 2014 between SharpSpring, LLC and SMTP, Inc. and (ii) for the
Investors’ Rights Agreement, neither the Company nor any
Subsidiary is bound by any agreement or arrangement pursuant to
which it is obligated to register the sale of any securities under
the 1933 Act. There are no outstanding securities of the Company or
any of the Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may
become bound to redeem or purchase any security of the Company or
any Subsidiary. There are no outstanding securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Note. Neither the Company nor any
Subsidiary has any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or
agreement.
3.5
SEC
Documents; Financial Statements
.
(a)
As
of the date hereof, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the 1934 Act
(all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). As of
their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
(b)
As
of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with
generally accepted accounting principles, and audited by a firm
that is a member a member of the Public Companies Accounting
Oversight Board consistently applied, during the periods involved
(except as may be otherwise indicated in such financial statements
or the notes thereto, or, in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the Company as of
the dates thereof and the consolidated results of its operations
and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf
of the Company to Investor in connection with Investor’s
purchase of the Note which is not included in the SEC Documents
contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in the
light of the circumstance under which they are or were made, not
misleading.
(c)
The
Company and each of the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) reasonable controls to
safeguard assets are in place and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
3.6
Litigation and Regulatory
Proceedings
. There are no material actions, causes of
action, suits, claims, proceedings, inquiries or investigations
(collectively, “Proceedings”) before or by any court,
public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the executive officers of
Company or any of the Subsidiaries, threatened against or affecting
the Company or any of the Subsidiaries, the Common Stock or any of
the Company’s or the Subsidiaries’ officers or
directors in their capacities as such and, to the knowledge of the
executive officers of the Company, there is no reason to believe
that there is any basis for any such Proceeding.
3.7
No Undisclosed Events,
Liabilities or Developments
. No event, development or
circumstance has occurred or exists, or to the knowledge of the
executive officers of the Company is reasonably anticipated to
occur or exist that (i) would reasonably be anticipated to have a
Material Adverse Effect or (ii) would be required to be disclosed
by the Company under applicable securities Laws on a registration
statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly
announced.
3.8
Compliance
with Law
. The Company and each of the Subsidiaries have
conducted and are conducting their respective businesses in
compliance in all material respects with all applicable Laws and
are in compliance in all material respects with the rules and
regulations of the Nasdaq Stock Market. The Company is not aware of
any facts which could reasonably be anticipated to lead to a
delisting of the Common Stock by the Nasdaq Stock Market in the
future.
3.9
Employee Relations
. Neither the
Company nor any Subsidiary is involved in any union labor dispute
nor, to the knowledge of the Company, is any such dispute
threatened. Neither the Company nor any Subsidiary is a party to
any collective bargaining agreement. No executive officer (as
defined in Rule 501(f) of the 1933 Act) has notified the Company
that such officer intends to leave the Company’s employ or
otherwise terminate such officer’s employment with the
Company.
3.10
Intellectual
Property Rights
. The Company and each Subsidiary owns or
possesses adequate rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other
intellectual property rights (collectively, “IP
Rights”) necessary to conduct their respective businesses as
now conducted. None of the material IP Rights of the Company or any
of the Subsidiaries are expected to expire or terminate within
three (3) years from the date of this Agreement. To the
Company’s knowledge, neither the Company nor any Subsidiary
is infringing, misappropriating or otherwise violating any IP
Rights of any other Person. No claim has been asserted, and no
Proceeding is pending, against the Company or any Subsidiary
alleging that the Company or any Subsidiary is infringing,
misappropriating or otherwise violating the IP Rights of any other
Person, and, to the Company’s knowledge, no such claim or
Proceeding is threatened, and the Company is not aware of any facts
or circumstances which might give rise to any such claim or
Proceeding. The Company and the Subsidiaries have taken
commercially reasonable security measures to protect the secrecy,
confidentiality and value of all of their material IP
Rights.
3.11
Environmental
Laws
. Except, in each case, as would not be reasonably
anticipated to have a Material Adverse Effect, the Company and the
Subsidiaries (i) are in compliance with any and all applicable Laws
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants
or contaminants, (ii) have received and hold all permits, licenses
or other approvals required of them under all such Laws to conduct
their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or
approval.
3.12
Title
to Assets
. The Company and the Subsidiaries have good and
marketable title to all personal property owned by them which is
material to their respective businesses, in each case free and
clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company or any Subsidiary. Any real property and facilities held
under lease by the Company or any Subsidiary are held under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the
Subsidiaries.
3.13
Insurance
.
The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company reasonably
believes to be prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor
any of the Subsidiaries has been refused any insurance coverage
sought or applied for, and the Company has no reason to believe
that it will not be able to renew all existing insurance coverage
as and when such coverage expires or to obtain similar coverage
from similar insurers.
3.14
Regulatory
Permits
. The Company and the Subsidiaries have in full force
and effect all certificates, approvals, authorizations and permits
from all regulatory authorities and agencies necessary to own,
lease or operate their respective properties and assets and conduct
their respective businesses, and neither the Company nor any
Subsidiary has received any notice of Proceedings relating to the
revocation or modification of any such certificate, approval,
authorization or permit, except for such certificates, approvals,
authorizations or permits with respect to which the failure to hold
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.15
No
Materially Adverse Contracts, Etc
. Neither the Company nor
any of the Subsidiaries is (i) subject to any charter, corporate or
other legal restriction, or any judgment, decree or order which in
the judgment of the Company’s officers has or is expected in
the future to have a Material Adverse Effect or (ii) a party to any
contract or agreement which in the judgment of the Company’s
management has or would reasonably be anticipated to have a
Material Adverse Effect.
3.16
Taxes
.
The Company and the Subsidiaries have made or filed all United
States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company or any
Subsidiary has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and, the knowledge of the
Company, there is no basis for any such claim.
3.17
Certain
Transactions
. Other than as disclosed in the SEC Documents,
there are no contracts, transactions, arrangements or
understandings between the Company or any of its Subsidiaries, on
the one hand, and any director, officer or employee of thereof on
the other hand, that would be required to be disclosed pursuant to
Item 404 of Regulation S-K promulgated by the SEC in the
Company’s Form 10-K or proxy statement pertaining to an
annual meeting of stockholders.
3.18
No
General Solicitation
. Neither the Company, nor any of its
Affiliates, nor any person acting on its behalf, has engaged in any
form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of
the Note pursuant to this Agreement.
3.19
Acknowledgment
Regarding Investor’s Purchase of the Note
. The
Company’s Board of Directors has approved the execution of
this Agreement, the Investors’ Rights Agreement and the Note
and the issuance and sale of the Note based on its own independent
evaluation and determination that the terms of this Agreement, the
Investors’ Rights Agreement and the Note are reasonable and
fair to the Company and in the best interests of the Company and
its stockholders. The Company is entering into this Agreement, the
Investors’ Rights Agreement and the Subordination Agreement
and is issuing and selling the Note voluntarily and without
economic duress. The Company has had independent legal counsel of
its own choosing review this Agreement, the Investors’ Rights
Agreement, the Subordination Agreement and the Note and advise the
Company with respect thereto. The Company acknowledges and agrees
that Investor is acting solely in the capacity of an arm’s
length purchaser with respect to the Note and the transactions
contemplated hereby and that neither Investor nor any person
affiliated with Investor is acting as a financial advisor to, or a
fiduciary of, the Company (or in any similar capacity) with respect
to execution of this Agreement or the Investors’ Rights
Agreement or the issuance of the Note or any other transaction
contemplated hereby.
3.20
No
Brokers’, Finders’ or Other Advisory Fees or
Commissions
. Other than certain fees payable to one advisory
firm with respect to advisory services provided to the Company in
connection with the transactions contemplated by this Agreement, no
brokers, finders or other similar advisory fees or commissions will
be payable by the Company or any Subsidiary or by any of their
respective agents with respect to the issuance of the Note or any
of the other transactions contemplated by this
Agreement.
4.
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
. Investor represents and warrants
to the Company as follows:
4.1
Organization
and Qualification
. Investor is a limited liability company,
duly organized and validly existing in good standing under the laws
of the State of Delaware.
4.2
Authorization;
Enforcement; Compliance with Other Instruments
. Investor has
the requisite power and authority to enter into this Agreement and
the Investors’ Rights Agreement and to execute the Note, and
to perform its obligations under this Agreement, the
Investors’ Rights Agreement and the Note. The execution and
delivery by Investor of this Agreement, the Investors’ Rights
Agreement and the Note have been duly and validly authorized by
Investor’s governing body and no further consent or
authorization is required. This Agreement, the Investors’
Rights Agreement and the Note have been duly and validly executed
and delivered by Investor and constitute valid and binding
obligations of Investor, enforceable against Investor in accordance
with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’
rights and remedies.
4.3
No
Conflicts
. The execution, delivery and performance of this
Agreement, the Investors’ Rights Agreement and the Note by
Investor and the purchase of the Note by Investor will not (i)
conflict with or result in a violation of Investor’s
organizational documents, (ii) conflict with, or constitute a
material default (or an event which, with notice or lapse of time
or both, would become a material default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which Investor is a party, or (iii)
violate any Law applicable to Investor or by which any of
Investor’s properties or assets are bound or affected. Except
for the Stockholder Approval Requirement, no approval or
authorization will be required from any governmental authority or
agency, regulatory or self-regulatory agency or other third party
in connection with the purchase of the Note and the other
transactions contemplated by this Agreement.
4.4
Investment
Intent; Accredited Investor
. Investor is purchasing the Note
for its own account, for investment purposes, and not with a view
towards distribution. Investor is an “accredited
investor” as such term is defined in Rule 501(a) of
Regulation D of the 1933 Act. Investor has, by reason of its
business and financial experience, such knowledge, sophistication
and experience in financial and business matters and in making
investment decisions of this type that it is capable of (i)
evaluating the merits and risks of an investment in the Note and
the Conversion Shares and making an informed investment decision,
(ii) protecting its own interests and (iii) bearing the economic
risk of such investment for an indefinite period of
time.
4.5
Opportunity
to Discuss
. Investor has received all materials relating to
the business, finance and operations of the Company and the
Subsidiaries as it has requested and has had an opportunity to
discuss the business, management and financial affairs of the
Company and the Subsidiaries with the Company’s management.
In making its investment decision, Investor has relied solely on
its own due diligence performed on the Company by its own
representatives.
5.
COVENANTS.
5.1
Covenants
of the Company.
(a)
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 Note
and any PIK 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
5.1
, 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.
(b)
Promptly
following the Closing (and in any event within the time period
required by applicable Law), the Company will (i) file a Current
Report on Form 8-K describing the terms of the transaction
contemplated by this Agreement, (ii) file a Form D with the SEC
with respect to the issuance and sale of the Note, and (iii) file
any and all other notice filings that may be required under any
applicable state securities Laws with respect to the issuance and
sale of the Note.
(c)
The
Company will use the proceeds from the sale of the Note for general
corporate and working capital purposes.
5.2
Covenants
of Investor.
(a)
Promptly
following the Closing (and in any event within the time period
required by applicable Law), Investor will make all required
filings under Section 13 and Section 16 of the 1934 Act reporting
its ownership of the Note and its right to acquire the Conversion
Shares upon the conversion thereof.
(b)
So
long as Investor continues to hold the Note or any portion thereof,
Investor will comply with the provisions of Section 9 of the 1934
Act, and the rules promulgated thereunder, with respect to
transactions involving the Common Stock and will not, either
directly or indirectly through its Affiliates, principals or
advisors, engage in any short sales or other similar hedging
transactions with respect to the Common Stock.
6.
GENERAL
PROVISIONS
6.1
Governing
Law
. This Agreement 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.
6.2
Expenses
.
The Company and Investor shall each pay their own fees and expenses
incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement.
6.3
Severability
.
If any provision of this Agreement 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 Agreement will not in any way be affected or
impaired thereby.
6.4
Jurisdiction
and Venue
. Any action, proceeding or claim arising out of,
or relating in any way to this Agreement 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 the
jurisdiction of such courts, 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.
6.5
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.
6.6
Entire
Agreement
. This Agreement, the Investors’ Rights
Agreement and the Note constitute the full and final agreement of
the Company and Investor with respect to the subject matter hereof
and thereof.
6.7
Amendments
.
No provision of this Agreement 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 Agreement may be
waived other than by an instrument in writing signed by the party
against which enforcement of such provision is sought.
6.8
Successors
and Assigns
. This Agreement shall be binding upon, and inure
to the benefit of and be enforceable by, the Company and Investor
and their respective successors and assigns.
6.9
Publicity
.
The Company and Investor shall consult with each other in issuing
any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither the
Company nor Investor shall issue any such press release or
otherwise make any such public statement without the prior consent
of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that no such prior consent
shall be required if such disclosure is required by Law, in which
such case the disclosing party shall provide the other party with
prior notice of such public statement to the extent practicable.
Investor acknowledge that the Company may be required to file
copies of this Agreement, the Investors’ Rights Agreement and
the Note as exhibits to, and to include descriptions of the
material terms of such documents and the transactions contemplated
by this Agreement in, reports or registration statements filed or
furnished under the 1933 Act or the 1934 Act.
6.10
Further Assurances
.
Each party hereto shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated
hereby.
6.11
Counterparts
. This
Agreement may be executed in two identical counterparts, both of
which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to the other party. Signature pages delivered by
facsimile or e-mail shall have the same force and effect as an
original signature.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the undersigned have executed this Convertible
Note Purchase Agreement as of the date first set forth
above.
COMPANY:
|
INVESTOR:
|
|
|
SHARPSPRING,
INC.
|
SHSP
HOLDINGS, LLC
|
|
|
|
|
By:
/s/ Richard A.
Carlson
|
By:
/s/ Daniel
Allen
|
Name:
Richard A.
Carlson
|
Name:
Daniel
Allen
|
Title:
CEO and
President
|
Title:
Manager
|
[
Signature
Page of Convertible Note Purchase Agreement
]
EXHIBIT A
FORM OF CONVERTIBLE NOTE
EXHIBIT B
FORM OF INVESTORS’ RIGHTS AGREEMENT
EXHIBIT C
FORM OF SUBORDINATION AGREEMENT
SharpSpring
Issues $8 Million of Unsecured Convertible
Promissory
Notes
GAINESVILLE, FL – March 28, 2018
– SharpSpring, Inc.
(NASDAQ: SHSP),
a leading
cloud-based marketing automation platform, has closed a privately
placed offering of an $8 million unsecured convertible promissory
note due March 2023 (the “Note”) from a group managed
by existing investors Corona Park Investment
Partners.
SharpSpring intends to use the proceeds from the financing for
increasing sales and marketing spend to accelerate customer
acquisition and revenue growth. The company also plans to
strategically invest in research and development to further advance
the functionality and features of its platform.
Interest on the Notes will be payable annually with the issuance of
additional convertible notes (paid-in-kind) at an annual interest
rate of 5.0%. The Notes are convertible into shares of SharpSpring
common stock, par value $0.001 per share, at any time before the
maturity date at a fixed conversion price of $7.50 per share,
subject to customary adjustments. If not converted, principal and
unpaid accrued interest on the Notes will be due and payable on the
fifth anniversary of the issuance date, and may be paid, at the
company’s election, in cash or in shares of common stock at a
discounted conversion price.
The Notes will be unsecured credit obligations, subordinate to the
company’s existing credit facility and future credit
facilities with amounts proportional to the current ratio of credit
facility limits to revenue.
SharpSpring has the option to extend the Notes for up to eighteen
months following the initial maturity at an annual interest rate of
10.0%, and may redeem the Notes at any time that the closing price
for its common stock exceeds 175% of the conversion price (or
$13.13 per share) for 120 consecutive trading days. In the event of
redemption by the company prior to the maturity date, the interest
will accelerate and be paid through the maturity date.
In connection with the transaction, SharpSpring granted the
investor group the right to appoint a director to the
company’s board.
“Securing an investment from a group of our current
shareholders provides us with the necessary capital to accelerate
our growth plan, and it also reflects their continued support and
commitment to our strategy and long-term success,” said
SharpSpring CEO Rick Carlson. “In particular, the capital
enables us to ramp our sales and marketing initiatives, which will
drive new customer wins at a more rapid pace and lead to higher
growth in 2019 and 2020. It also enables us to accelerate our
product development initiatives so that we can enhance our platform
with innovative new features and functionality.”
In
connection with the transaction, Lake Street Capital Markets, LLC
acted as an adviser to the Company.
Additional information
regarding the financing will be included in a Current Report on
Form 8-K filed by SharpSpring with the Securities and Exchange
Commission.
About SharpSpring, Inc.
SharpSpring, Inc.
(NASDAQ:
SHSP
) is a rapidly growing,
highly-rated global provider of affordable marketing automation
delivered via a cloud-based Software-as-a Service (SaaS) platform.
Thousands of businesses aroun
d the world rely on
SharpSpring to generate leads, improve conversions to sales, and
drive higher returns on marketing investments. Known for its
innovation, open architecture and free customer support,
SharpSpring offers flexible monthly contracts at a fraction of the
price of competitors making it an easy choice for growing
businesses and digital marketing agencies. Learn more at
www.sharpspring.com
.
Important Cautions Regarding Forward-Looking
Statements
The
information posted in this release may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. You can identify these statements by use of the
words “may,” “will,” “should,”
“plans,” “explores,” “expects,”
“anticipates,” “continues,”
“estimates,” “projects,”
“intends,” and similar expressions. Forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those projected or anticipated.
These risks and uncertainties include, but are not limited to,
general economic and business conditions, effects of continued
geopolitical unrest and regional conflicts, competition, changes in
technology and methods of marketing, delays in completing new
customer offerings, changes in customer order patterns, changes in
customer offering mix, continued success in technological advances
and delivering technological innovations, our ability to
successfully utilize our cash to develop current and future
products, delays due to issues with outsourced service providers,
those events and factors described by us in Item 1.A “Risk
Factors” in our most recent Form 10-K and other risks to
which our Company is subject, and various other factors beyond the
Company’s control. Except to the extent required by law, the
Company undertakes no obligation to update or revise (publicly or
otherwise) any forward-looking statements to reflect subsequent
events, new information or future circumstances.
Company Contact:
Edward Lawton
Chief Financial Officer
617-500-0122
IR@sharpspring.com
Investor Relations:
Liolios Group, Inc.
Matt Glover or Tom Colton
949-574-3860
SHSP@liolios.com