ASSET PURCHASE AGREEMENT by and among MOBIVITY HOLDINGS CORP., MOBIVITY, INC., SMARTRECEIPT, INC. and THE CONTROLLING OWNERS IDENTIFIED HEREIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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

 

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

 

NOW, THEREFORE, the parties hereto agree as follows:

 

 

 

Section 1.01 Definitions.

 

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

 

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

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

 

“Closing Date” means the date of the Closing.

 

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

 

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

 

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

 

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

 

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

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

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

 

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

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

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

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

 

Term                                                      Section

Acquired Assets                                 2.01

Assumed Liabilities                            2.03

Business                                               Recitals

Cash Payment                                      2.06(a)(i)

Closing                                                  2.07

Commission                                          3.25(a)

Contracts                                              2.01(c)

Damages                                               7.02

Employee                                              3.16(h)

Excluded Assets                                  2.02

Excluded Contracts                             2.02(a)

Excluded Liabilities                             2.04

Fundamental Representations          7.01

Governmental Entity                           3.03

Holdback Shares                                 2.06(d)

Indemnified Parties                             7.02

Indemnifying Parties                          7.02

Intellectual Property Rights              3.15(a)

Permits                                                  3.12

Purchase Price                                     2.06

Restricted Party                                   5.01(c)

Scheduled Obligations                       2.06(c)

Securities Act                                      2.07

Seller Balance Sheet                           3.08

Seller Balance Sheet Date                  3.06

Seller Employee Plan                          3.16(h)

Seller Products                                    3.15(a)

Stock Payment                                    2.06(a)(ii)

Technology                                         3.15(a)

Third Party Claim                                7.04(a)

Transferred Employee                        5.03(f)

 

 

 

 

Section 2.09                      Holdback Shares.

 

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

 

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

 

 

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

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

 

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

 

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

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

 

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

 

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

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

 

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

 

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

 

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

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

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

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

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

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

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

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

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

 

 

 

Buyer and Parent hereby represent and warrant to Seller that:

Section 4.03 Governmental Authorization; Consents.

 

 

 

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

 

(c) Noncompetition.

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

 

 

 

 

 

 

 

 

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

 

(a)	by mutual consent of Buyer and Seller;

 

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

 

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

 

 

 

 

(a) if to Parent or Buyer, to:

 

Mobivity Holdings Corp.

58 W. Buffalo Street, Suite 200

Chandler, AZ  85225

Attn: Dennis Becker, CEO

and

 

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

 

SmartReceipt, Inc.

55 Castilian Drive

Santa Barbara, CA 89134

Attn: Eric Kanowsky, CEO

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

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

 

 

By: 

Name:  Dennis Becker

Title:  Chief Executive Officer

 

 

By: 

Name:  Dennis Becker

Title:  Chief Executive Officer

 

 

By: 

Name:

Title:  Chief Executive Officer

 

 

 

[Signature Page to Asset Purchase Agreement]

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

 

 

 

 

By: 

Name:

Title:

 

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

By: 

Name:

Title:

 

 

By: 

Name:

Title:

 

By: 

Name:

Title:

 

[Signature Page to Asset Purchase Agreement]