UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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MCORPCX, INC.
(Exact name of Registrant as specified in its charter.)
Commission File number 000-54918
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i) and
0-11: Not applicable
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Title of each class of securities to which transaction
applies:
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Aggregate number of securities to which transaction
applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 240.0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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Amount Previously Paid;
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Form, Schedule or Registration Statement No.
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Filing Party:
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Date Filed:
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MCORPCX, INC.
May 22, 2020
Dear Stockholders of McorpCX, Inc.:
We previously announced that McorpCX, Inc. (the “Company”) entered
into an agreement for the sale of our professional and related
consulting services business operated by our wholly-owned
subsidiary McorpCX, LLC, to a company controlled by Michael
Hinshaw, the current President of McorpCX, LLC, for aggregate
proceeds of $352,000 in cash and a $756,000 promissory note.
Assuming this transaction is consummated, the Company intends to
focus on growing its technology services business. Because the
Company’s professional and related consulting services business
currently constitutes substantially all of the Company’s
operations, the sale of McorpCX, LLC constitutes the sale of
substantially all of the Company’s assets under the California
Corporations Code, and as such, the Company will be seeking
stockholder approval of this transaction at the upcoming special
meeting of stockholders of the Company, to be held in lieu of an
annual meeting of stockholders.
You are cordially invited to attend a special meeting of
stockholders to be held in lieu of an annual meeting of
stockholders, which will be at 1:00 p.m. Eastern Time on Monday
June 29, 2020, at 2529 Detroit Avenue, Cleveland, Ohio 44113 (the
“Special Meeting”).
At the Special Meeting, you will be asked to consider and vote on
resolutions: (1) to approve the sale of all of the outstanding
limited liability company membership units of McorpCX, LLC pursuant
to the terms of the Unit Purchase Agreement, dated April 15, 2020,
by and between the Company and mfifty, LLC (the “LLC Sale
Proposal”); (2) to approve the Company’s application for the
delisting of its shares of common stock from the TSX Venture
Exchange; (3) to elect five directors nominated by the Company’s
board of directors to serve until the next annual meeting of
stockholders; (4) to amend the Company’s articles of incorporation
to establish a quorum threshold of one-third of the total
outstanding shares of common stock for future stockholder meetings;
(5) to amend the Company’s bylaws to change the composition of the
Company’s board of directors from five directors to a range of
between five and nine directors, with the specific number to be
determined by the Company’s board of the directors in their
discretion from time-to-time; (6) to amend the Company’s articles
of incorporation to change the name of the corporation from
McorpCX, Inc. to MCX Technologies Corporation; (7) to ratify the
selection of MaloneBailey LLP as the independent auditor for the
Company to conduct the audit of the year ended December 31, 2020;
(8) to approve, on a non-binding advisory basis, the compensation
of the Company’s named executive officers as disclosed in the
enclosed proxy statement; (9) to conduct
a non-binding advisory vote on the frequency of future
advisory votes on executive compensation; and (10) to consider and
vote on a proposal to adjourn or postpone the Special Meeting, if
necessary or appropriate, for the purpose of soliciting additional
votes for the approval of the LLC Sale Proposal if there are not
sufficient votes at the time of the Special Meeting to approve the
LLC Sale Proposal. Each of these proposals is described in detail
in the accompanying Notice of the Special Meeting of Stockholders
and Proxy Statement.
Your vote is important no matter how large or small your
holdings may be. To assure your representation at the
Special Meeting, please vote your shares over the
Internet or via the toll-free telephone number, as instructed on
the enclosed proxy card. You may also vote your shares by signing
and dating the enclosed proxy card and returning it in the
postage-paid envelope provider, whether or not you plan to
attend the Special Meeting.
After careful consideration, our Board of Directors
unanimously recommends that you vote “FOR” each of
the foregoing proposals.
We hope to see you at the Special Meeting of Stockholders.
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Sincerely, |
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/s/ Matthew Kruchko |
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Matthew Kruchko |
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Chief Executive Officer |
NOTICE OF SPECIAL MEETING in lieu of annual
meeting OF STOCKHOLDERS
June 29, 2020
NOTICE IS HEREBY GIVEN that the special meeting of stockholders of
McorpCX, Inc. (the “Company”) to be held in lieu of an annual
meeting will be held at 2529 Detroit Avenue, Cleveland, Ohio 44113
at 1:00 p.m. Eastern Time on June 29, 2020 (the “Special Meeting”).
We are holding the Special Meeting for the following purposes:
(1) |
To approve the sale of all of the outstanding limited liability
company membership units of McorpCX, LLC pursuant to the terms of
the Unit Purchase Agreement, dated April 15, 2020, by and between
the Company and mfifty, LLC (the “LLC Sale Proposal”); |
(2) |
To approve the Company’s application for delisting of its shares of
common stock from the TSX Venture Exchange; |
(3) |
To elect five directors nominated by the Company’s board of
directors to serve until the next annual meeting of
stockholders; |
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To amend the Company’s articles of incorporation to establish a
quorum threshold of one-third of the total outstanding shares of
common stock for future stockholder meetings; |
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To amend the Company’s bylaws to change the composition of the
Company’s board of directors from five (5) directors to a range of
between five (5) and nine (9) directors, with the specific number
to be determined by the Company’s board of the directors in their
discretion from time-to-time; |
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To amend the Company’s articles of incorporation to change the name
of the Company from McorpCX, Inc. to MCX Technologies
Corporation; |
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To ratify the selection of MaloneBailey LLP as the independent
auditor for the Company to conduct the audit of the year ended
December 31, 2020; |
(8) |
To approve, on a non-binding advisory basis, the compensation of
the Company’s named executive officers as disclosed in the enclosed
proxy statement; |
(9) |
To conduct a non-binding advisory vote on the frequency
of future advisory votes on executive compensation; |
(10) |
To consider and vote on a proposal to adjourn or postpone the
Special Meeting, if necessary or appropriate, for the purpose of
soliciting additional votes for the approval of the LLC Sale
Proposal if there are not sufficient votes at the time of the
Special Meeting to approve the LLC Sale Proposal; and |
(11) |
To transact any other business properly brought before the
meeting. |
The board of directors of the Company has fixed the close of
business on May 19, 2020 as the record date for the determination
of stockholders entitled to vote at the meeting or any adjournment,
postponement or rescheduling thereof.
For information on how to vote, please refer to the instructions on
the accompanying proxy card, or review the section titled “Commonly
Asked Questions and Answers” beginning on page 9 of the
accompanying proxy statement.
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BY ORDER OF THE BOARD OF DIRECTORS |
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/s/ Gregg Budoi |
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Gregg Budoi |
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Chairman of the
Board |
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May 22, 2020
Important Notice Regarding the Availability of Proxy Materials
for the Special Meeting of Stockholders to be held on June 29,
2020: Our proxy statement and our Annual Report on Form 10-K are
available at www.investorvote.com/MCCX a site that does not have
“cookies” that identify visitors to the site.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, WE URGE YOU TO CAST YOUR VOTE AND SUBMIT YOUR
PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM. AS AN ALTERNATIVE TO
VOTING IN PERSON AT THE SPECIAL MEETING, YOU MAY VOTE BY PROXY OVER
THE INTERNET, OVER THE TELEPHONE, OR BY MAIL. A PROXY MAY BE
REVOKED IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
PROXY STATEMENT |
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TABLE OF CONTENTS |
GENERAL INFORMATION
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SUMMARY TERM SEET
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COMMONLY ASKED QUESTIONS AND ANSWERS
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RISK FACTORS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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THE SPECIAL MEETING
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Recommendation of the Board
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Record Date, Stockholders Entitled to Vote and Voting Power
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Quorum
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Required Vote
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Voting
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Solicitation of Proxies
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Revocability of Proxies
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Communicating with Members of the Board of Directors
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PROPOSAL 1– Approval of the Sale of McorpCX LLC Membership
Interests
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Background of the LLC Sale Transaction
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Reasons for the LLC Sale Transaction and the Valuation Report
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Parties to the Unit Purchase Agreement
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The Unit Purchase Agreement
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Regulatory Approvals required for the LLC Sale Transaction
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Expected Timing of the sale of McorpCX, LLC
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Use of Proceeds and Future Operations
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Certain United States Federal and State Income Tax Consequences of
the Sale of McorpCX, LLC
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No Dissenters’ Rights
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Interests of the Company’s Directors and Executive Officers in the
Sale of McorpCX, LLC
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Required Vote
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PROPOSAL 2 – Delisiting from TSX-V
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Background of Listing on the TSX Venture Exchange
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Rationale for the Proposed Delisting
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Process to Delist the Shares
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Consequences of the Proposed Delisting
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Determination and Recommendation by the Board
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Required Vote
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PROPOSAL 3 - ELECTION OF DIRECTORS
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Nominees for Election as Directors
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EXECUTIVE OFFICERS
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Background of Officers
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Involvement in Certain Legal Proceedings
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CORPORATE GOVERNANCE AND BOARD MATTERS
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Board Meetings and Attendance
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Independence of Directors
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Board Leadership Structure
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Risk Oversight
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Our Director Nominations Process
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The Committees of the Board
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Special Committee – Selection of President and Chief Executive
Officer
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Compensation Committee Functions
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Audit Committee and Charter
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Audit Committee Financial Expert
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Code of Ethics
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Whistleblower Policy
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Stockholder Communications with Board
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Delinquent Section 16(a) Reports
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EXECUTIVE COMPENSATION
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Compensation Committee Interlocks and Insider Participation
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
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Related Party Transactions
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Review and Approval of Related Party Transactions
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Securities Authorized for Issuance under Equity Compensation
Plans
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PROPOSAL 4 – AMENDMENT TO THE ARTICLES OF INCORPORATION TO DECREASE
THE QUORUM REQUIREMENT FOR STOCKHOLDER MEETINGS
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PROPOSAL 5 – AMENDMENT TO THE BYLAWS TO CHANGE THE COMPOSITION OF
THE BOARD FROM A SET FIVE DIRECTORS TO A RANGE OF BETWEEN FIVE AND
NINE DIRECTORS
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PROPOSAL 6- NAME CHANGE AMENDMENT TO ARTICLES
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PROPOSAL 7- INDEPENDENT ACCOUNTANTS AND AUDITORS
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Ratification of Independent Auditors
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AUDIT COMMITTEE REPORT
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PROPOSAL 8 – NON-BINDING ADVISORY VOTE ON EXECUTIVE
COMPENSATION
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PROPOSAL 9 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY
VOTES ON EXECUTIVE COMPENSATION
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STOCKHOLDER PROPOSALS
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SPECIAL MEETING
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DUPLICATE ANNUAL REPORT AND PROXY STATEMENT
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OTHER MATTERS
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MISCELLANEOUS
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ANNEX A
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ANNEX B
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ANNEX C
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ANNEX D
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ANNEX E
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ANNEX F
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MCORPCX, INC.
GENERAL INFORMATION
This proxy statement (“Proxy Statement”) and the accompanying proxy
card are furnished in connection with the solicitation by the board
of directors (the “Board” or the “Board of Directors”) of McorpCX,
Inc. (the “Company” or “McorpCX”) of proxies to be used at the
special meeting of stockholders of the Company to be held in lieu
of an annual meeting of stockholders to be held at 2529 Detroit
Avenue, Cleveland, Ohio, 44113 at 1:00 p.m. Eastern Time on June
29, 2020 (the “Special Meeting”), and any adjournments or
postponements thereof. The Company’s mailing address is 201 Spear
Street, Suite 1100, San Francisco, California 94105.
If a proxy in the accompanying form (“Proxy”) is properly executed
and received by us prior to the Special Meeting or any adjournment,
postponement or rescheduling thereof, our shares of common stock,
no par value per share (“Shares”) represented by such Proxy will be
voted in the manner directed. In the absence of voting
instructions, the Shares will be voted for the proposals set out in
the accompanying Notice of Special Meeting of Stockholders. Please
see the Proxy for voting instructions.
A Proxy may be revoked at any time prior to its use by filing a
written notice of revocation of proxy or a later dated Proxy with
Computershare Investor Services, the Company's registrar and
transfer agent, at 250 Royall St, Canton, Massachusetts, 02021. A
Proxy may also be revoked by submitting another Proxy with a later
date over the Internet, to our registrar and transfer agent or by
voting in-person at the Special Meeting. Attending the Special
Meeting will not, in and of itself, constitute revocation of a
Proxy.
Proxies for the Special Meeting will be solicited by the Company
primarily by mail. Proxies may also be solicited personally by the
Company’s directors, officers or regular employees without
additional compensation. We may reimburse banks, broker-dealers or
other nominees for their reasonable expenses in forwarding the
proxy materials for the Special Meeting to beneficial owners of
Shares. The costs of this solicitation will be borne by the
Company.
Section 602(a) of the California Corporations Code provides that a
majority of the shares entitled to vote shall constitute a quorum
at a meeting of stockholders. Abstentions, withheld votes and
Shares held of record by a broker or its nominee that are voted on
any matter are included in determining the number of votes
present.
The approximate date on which this Proxy Statement, our annual
report on Form 10-K for the fiscal year ended December 31, 2019 and
the enclosed Proxy are first being given or sent to stockholders is
May 26, 2020.
Your vote is important — we urge you to vote by
Proxy even if you plan to attend the Special
Meeting.
SUMMARY TERM Sheet
This summary together with the question and answer
section that follows highlight selected information
from this Proxy Statement and may not contain
all of the information that is important to you. We urge you to
carefully read the entire Proxy Statement,
including the appendices, for a more complete description of
the transactions contemplated under the Unit Purchase Agreement
dated April 15, 2020 (the “Unit Purchase Agreement”) between
the Company and mfifty, LLC. Each item in this summary
refers to the page of this Proxy Statement
on which that subject is discussed in more detail.
Parties to the Unit Purchase Agreement
(page 29)
McorpCX, Inc.
McorpCX, Inc.
201 Spear Street, Suite 1100,
San Francisco, California 94105
McorpCX, Inc. is a California corporation, incorporated on December
14, 2001, and headquartered in San Francisco,
California. McorpCX is a customer experience (CX) management
solutions company dedicated to helping organizations improve
customer experiences, increase customer loyalty, reduce costs and
increase revenue.
McorpCX’s consulting and professional services business is
currently operated exclusively through its wholly-owned subsidiary
McorpCX, LLC.
McopCX’s principal executive office is located a 201 Spear Street,
Suite 1100, San Francisco, CA 94105 and its telephone number is
(415) 526-2655. McorpCX’s website can be accessed at
www.mcorp.cx. Information contained in McorpCX’s website does not
constitute part of, and is not incorporated into, this proxy
statement.
mfifty, LLC.
mfifty, LLC.
525 San Anselmo Ave., Suite 147
San Anselmo, California 94960
Mfifty, LLC. is a limited liability company formed under the laws
of the State of California and is controlled by Michael Hinshaw,
who is its manager.
The Unit Purchase Agreement (page 30 and
Annex A)
On April 15, 2020, the Company entered into the Unit Purchase
Agreement with mfifty, LLC, pursuant to which the Company agreed,
subject to certain conditions, including the authorization and
approval of the Unit Purchase Agreement by our stockholders at the
Special Meeting, to sell all of the membership units of the
Company’s wholly-owned subsidiary, McorpCX, LLC, to mifity, LLC, a
company controlled by Michael Hinshaw, the current President of
McorpCX, LLC (the “Purchaser”), who has beneficial ownership over
5,200,000 Shares, representing approximately 25% of the total
outstanding Shares, for aggregate consideration of $1,108,000
consisting of a $100,000 cash payment received upon signing of the
Unit Purchase Agreement as well as $252,000 in cash and a $756,000
promissory note to be received by the Company upon the closing of
the sale of McorpCX, LLC to the Purchaser.
A copy of the Unit Purchase Agreement is attached as Annex A
to this Proxy Statement. You are encouraged to read the Unit
Purchase Agreement carefully and in its entirety.
Conditions That Must Be Satisfied or Waived for the sale of
McorpCX, LLC to occur (page 31)
Currently, the Company expects to complete the sale of McorpCX, LLC
pursuant to the terms of the Unit Purchase Agreement by June 2020.
As more fully described in this Proxy Statement and in the Unit
Purchase Agreement, the completion of the sale of all the
outstanding limited liability company membership units of McorpCX,
LLC depends on a number of conditions being satisfied or, where
legally permissible, waived. These conditions include, among
others, approval of the sale of all of the outstanding limited
liability company membership units of McorpCX, LLC pursuant to the
terms of the Unit Purchase Agreement being approved by a majority
of the outstanding Shares held by disinterested stockholders on the
Record Date (defined below), TSX Venture Exchange approval of the
transactions outlined in the Unit Purchase Agreement, Michael
Hinshaw selling all of his Shares to third parties pursuant to the
terms of the Unit Purchase Agreement, and certain other customary
closing deliverables from each party to the Unit Purchase
Agreement.
The Company cannot be certain when, or if, the conditions to the
closing of the sale of all of the outstanding limited liability
membership units of McorpCX, LLC pursuant to the terms of the Unit
Purchase Agreement (the “LLC Sale Transaction”) will be satisfied
or waived, or that the LLC Sale Transaction will be completed.
Termination of the Unit Purchase Agreement (page
31)
The Unit Purchase Agreement contains certain termination rights for
the Company and the Purchaser, as the case may be, applicable
upon:
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the parties mutual agreement to terminate the Unit Purchase
Agreement in writing;
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September 1, 2020, if the LLC Sale Transaction has not been
completed by that date;
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any court of competent jurisdiction prohibits the transactions
contemplated by the Unit Purchase Agreement, or a new legal
requirement makes such transaction illegal; or
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the election by one party when representations and warranties of
the other party have become inaccurate in any material respect or
the other party has failed to comply with its covenants in any
material respect.
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Indemnification Obligations under the Unit Purchase
Agreement (page 32)
In addition to customary indemnification protections to both
parties, since Michael Hinshaw is expected to continue to act as
President of McorpCX, LLC until up to the closing of the LLC Sale
Transaction, the Purchaser has also agreed to indemnify the Company
from any liability arising from, or related to, the conduct of the
business of McorpCX, LLC prior to the closing of LLC Sale
Transaction, excluding any liability related to conduct that was
explicitly approved by the Board or any Undisclosed Liability (as
defined in the Unit Purchase Agreement).
Regulatory Approvals required for the LLC Sale
Transaction (page 32)
The Company has agreed to use reasonable best efforts to obtain all
regulatory approvals required to complete the transactions
contemplated by the Unit Purchase Agreement, which include approval
from the TSX Venture Exchange. The Company has filed, or is in the
process of filing, applications and notifications to obtain the
required regulatory approval from the TSX Venture Exchange.
Although the Company does not know of any reason the Company cannot
obtain approval from the TSX Venture Exchange in a timely manner,
the Company cannot be certain when or if it will obtain them.
Special Meeting (page 19)
Date, Time and Place
The Special Meeting will be at 1:00 p.m. Eastern Time on June 29,
2020 at 2529 Detroit Avenue, Cleveland, Ohio 44113.
Purpose
The Special Meeting is being held to consider and vote on:
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a proposal to approve the sale of all of the outstanding limited
liability company membership units of McorpCX, LLC pursuant to the
terms of the Unit Purchase Agreement (the “LLC Sale Proposal”);
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a proposal to approve the Company’s application for delisting of
its shares of common stock from the TSX Venture Exchange (the
“TSX-V Delisting Proposal”);
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a proposal to elect five directors nominated by the Board to serve
until the next annual meeting of stockholders;
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a proposal to amend the Company’s articles of incorporation to
establish a quorum threshold of one-third of the total outstanding
Shares for future stockholder meetings;
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a proposal to amend the Company’s bylaws to change the composition
of the Board from five (5) directors to a range of between five (5)
and nine (9) directors, with the specific number to be determined
by the Board in their discretion from time-to-time;
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a proposal to amend the Company’s articles of incorporation to
change the name of the corporation from McorpCX, Inc. to MCX
Technologies Corporation;
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a proposal to ratify the selection of MaloneBailey LLP as the
independent auditor for the Company to conduct the audit of the
year ended December 31, 2020;
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a proposal to approve, on a non-binding advisory basis, the
compensation of the Company’s named executive officers as disclosed
in the enclosed proxy statement;
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a proposal to conduct a non-binding advisory vote on the
frequency of future advisory votes on executive compensation;
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a proposal to adjourn the Special Meeting, if necessary and
appropriate, to permit the solicitation of additional proxies if
there are not sufficient votes at the time of the Special Meeting
to approve the LLC Sale Proposal; and
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to transact any other business properly brought before the
meeting.
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Record Date, Stockholders Entitled to Vote and Voting
Power
Only holders of our Shares as of the close of business on May 19,
2020, the record date for the Special Meeting (the “Record Date”),
will be entitled to receive notice of, and vote at, the Special
Meeting or any adjournments or postponements of the Special
Meeting, unless a new record date is fixed in connection with any
such adjournment or postponement. At the close of business on the
Record Date, there were 20,426,158 Shares, outstanding and entitled
to vote at the Special Meeting.
Each holder of the Company’s common stock will be entitled to one
vote for each Share held by such holder as of the close of business
on the record date.
Quorum
The presence at the Special Meeting, in person or by proxy, of at
least a majority of the issued and outstanding Shares entitled to
vote at the Special Meeting is necessary to constitute a quorum for
transacting business at the Special Meeting. Failure of a quorum to
be represented at the Special Meeting will necessitate an
adjournment or postponement of the Special Meeting and will subject
the Company to additional cost and expense.
Required Vote
Under the California Corporations Code, the LLC Sale Proposal will
require the affirmative vote of holders of a majority of the
outstanding Shares entitled to vote. Under the policies of the TSX
Venture Exchange, the LLC Sale Proposal will require the
affirmative vote of a majority of the Shares that are held by
disinterested stockholders as of the Record Date in person or by
proxy at the Special Meeting. Disinterested stockholders for the
purposes of this vote includes all stockholders who do not have an
interest in the LLC Sale Transaction as of the Record Date. Votes
by stockholders who are not disinterested stockholders will not be
counted for the purposes of approving the LLC Sale Proposal under
the policies of TSX Venture Exchange. In particular, for the
purposes of this vote, any Shares held by Michael Hinshaw, or
Luckfound.org, as of the Record Date will not be counted for the
purposes of approving this proposal.
The approval of the TSX-V Delisting Proposal will require the
affirmative vote of a majority of the Shares that are voted by
stockholders as of the Record Date in person or by proxy at the
Special Meeting, excluding for the purposes of this vote promoters,
directors or officers of the Company, stockholders who have direct
or indirect beneficial ownership or control, directly or
indirectly, of 10% or more of the outstanding Shares as of the
Record Date and any other insiders of the Company, in accordance
with the requirements of the TSX Venture Exchange.
The approval of the ratification of the appointment of MaloneBailey
LLP and the approval of the compensation of the Company’s named
executive officers, will each require the affirmative vote of a
majority of the Shares represented at the Special Meeting and
entitled to vote thereon. The approval of the amendments to our
articles of incorporation and our bylaws will require the
affirmative vote of the majority of Shares outstanding on the
Record Date. With respect to the proposal to provide an advisory
vote on the frequency of the advisory vote on executive
compensation, the option that receives the greatest number of votes
cast shall be considered the frequency for the advisory vote on
executive compensation selected by the Company’s stockholders.
Voting
If your Shares are registered directly in your name with the
Company’s transfer agent, you are considered a “stockholder of
record” and you may vote your Shares in person at the Special
Meeting through the use of the ballot given to you at the Special
Meeting or you may vote your Shares by proxy by mail, over the
Internet or by telephone using the instructions provided elsewhere
in this Proxy Statement and on the proxy card provided with this
Proxy Statement.
If you hold Shares in “street name” through your broker, bank or
other nominee, you are considered the beneficial owner of these
Shares and, in order to vote, will need to instruct your broker,
bank or other nominee on how to vote your Shares using the
instructions provided to you by your broker, bank or other
nominee.
Your vote is very important, regardless of the number of Shares
that you own. Accordingly, whether or not you plan to attend the
Special Meeting, we encourage you to vote as soon as possible:
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by proxy over the Internet or by telephone or by completing and
mailing the proxy card provided with this proxy statement, if you
are a stockholder of record; or
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by providing proper instructions to your broker, bank or other
nominee if you hold your shares in “street name.”
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Solicitation of Proxies
The Company is soliciting proxies on behalf of the Board and will
be bearing the entire costs of soliciting proxies. The solicitation
of proxies will initially be made by mail or e-mail, if applicable.
Forms of proxies and proxy materials may also be distributed
through brokers, banks and other nominees to the beneficial owners
of our Shares, in which case such parties will be reimbursed for
their reasonable out-of-pocket expenses. Proxies may also be
solicited in person or by telephone, facsimile, electronic mail or
other electronic medium by certain of the Company’s directors,
officers or employees. Any of the Company’s directors, officers or
employees participating in the solicitation will not receive
additional compensation for their efforts.
Recommendation of the Board (page 20)
The Board determined that the LLC Sale Transaction is advisable and
in the best interests of the Company and its stockholders and has
unanimously approved the Unit Purchase Agreement and the
transactions contemplated thereunder. The Board unanimously
recommends that the Company’s stockholders vote “FOR” the LLC Sale
Proposal.
Additionally, as further described in this Proxy Statement, the
Board recommends stockholders vote “FOR” the TSX-V Delisting
Proposal, “FOR” each of the nominees to the Board of Directors,
“FOR” each of the proposed amendments to the Company’s articles of
incorporation and bylaws, “FOR” the ratification of MaloneBailey
LLP as the Company’s independent auditors for the 2020 fiscal year,
“FOR” the compensation of the Company’s named executive officers as
disclosed in the Proxy Statement, and to hold future advisory votes
on executive compensation every year.
Reasons for the LLC Sale Transaction and Valuation
Report (page 25 and Annex F)
In evaluating the potential sale of McorpCX LLC, the Board
consulted with the Company’s management, outside legal advisors,
and received a comprehensive valuation report (the “Valuation
Report”) of McorpCX, LLC dated March 18, 2020 prepared by Evans
& Evans, Inc. (“Evans & Evans”). The Valuation Report is
attached as Annex F to this Proxy Statement. The Valuation
Report, determined the fair market value of all of the issued and
outstanding membership units of McorpCX, LLC to be in the range of
$870,000 to $1,030,000, below the value of the total consideration
to be received by the Company for McorpCX, LLC pursuant to the
terms of the Unit Purchase Agreement.
The full text of the Valuation Report is attached as Annex F
to this Proxy Statement. You should read the Valuation Report in
its entirety for a discussion of the assumptions made, procedures
followed, factors considered and limitations upon the review
undertaken by Evans & Evans in rendering its estimated fair
market value of McorpCX LLC.
For further information, please see the discussion under the
caption “Proposal 1 —The Approval of the Sale of McorpCX LLC –
Reasons for LLC Sale Transaction” and the “Valuation Report”
commencing on page 26.
Expected timing of the sale of McorpCX, LLC
(page 32)
The Company expects to complete the LLC Sale Transaction in June
2020, promptly following the Special Meeting, if the LLC Sale
Proposal is approved by disinterested stockholders in accordance
with the requirements of the California Corporations Code and the
policies of the TSX Venture Exchange and the various other
conditions to closing contained in the Unit Purchase Agreement are
satisfied or waived. However, there can be no assurance that the
LLC Sale Transaction will be completed as currently anticipated.
Certain factors, including factors outside of the control of
Company could result in the LLC Sale Transaction being delayed or
not occurring at all.
Use of Proceeds and Future Operations
(page 32)
If the LLC Sale Proposal is passed by disinterested stockholders in
accordance with the requirements of the California Corporations
Code and the policies of the TSX Venture Exchange, and the closing
conditions outlined in the Unit Purchase Agreement are satisfied or
waived then the LLC Sale Transaction will be completed. Following
the completion of the LLC Sale Transaction, the Company intends to
use the transaction proceeds for the purpose of growing the
Company’s software development and technology services business.
Currently, the Company’s business mostly consists of providing
professional and related consulting services through McorpCX,
LLC. Upon the completion of the sale of McorpCX, LLC, the Company
intends to change its focus from a consulting business to a
business focused on providing technology services to clients.
If the LLC Sale Proposal is not approved by disinterested
stockholders in accordance with the requirements of the California
Corporations Code and the policies of the TSX Venture Exchange, or
if the other conditions outlined in the Unit Purchase Agreement are
not satisfied or waived, then either the Company or the Purchaser
may terminate the Unit Purchase Agreements and the Board, along
with the Company’s management, will reassess the Company’s options
in light of the Company’s strategic goals and any alternatives that
may be available to the Company.
Certain U.S. Federal and State Income Tax Consequences of the
Sale of McorpCX, LLC (page 33)
The Company anticipates that the LLC Sale Transaction will not
result in any material U.S. federal or state income tax
consequences to the Company’s disinterested United States
stockholders. The LLC Sale Transaction will be a taxable event for
the Company for U.S. federal, state and foreign income tax
purposes. Management of the Company anticipates that the LLC Sale
Transaction could result primarily in losses but also some taxable
gain to the Company in an amount equal to the difference between
the purchase price received and the Company’s adjusted tax basis in
the membership units being sold. Any gain recognized by the Company
for U.S. federal income tax purposes as a result of LLC Sale
Transaction is expected to be fully offset by available net
operating loss carryovers. Any gain recognized by the Company for
U.S. state income tax purposes may not be fully offset by net
operating loss carryovers, but is not expected to be material.
The United States federal income tax consequences described
above may not apply to all holders of Shares. Your tax consequences
will depend on your individual situation. Accordingly, the
Company strongly urges you to consult your tax
advisor for a full understanding of the particular tax consequences
of the LLC Sale Transaction to you.
No Dissenters’ Rights (page
33)
No dissenters’ rights are available to our stockholders under the
California Corporations Code or the Company’s articles of
incorporation or bylaws in connection with the LLC Sale
Transaction.
Interests of the Company’s Directors and Executive Officers in
the Sale of McorpCX, LLC (page 33)
In considering the recommendation of the Board to vote for the LLC
Sale Proposal, you should be aware that some of our directors and
executive officers may have personal interests in this transaction
that are, or may be, different from, or in addition to, your
interests.
The Purchaser is an entity controlled by Michael Hinshaw, the
current president of McorpCX, LLC. As a consequence. Michael
Hinshaw, who it is anticipated will no longer be affiliated with
the Company at the conclusion of the LLC Sale Transaction, will
have effective control over McorpCX, LLC after the conclusion of
the LLC Sale Transaction. Additionally, the terms of the Unit
Purchase Agreement provide that the Company will find one or more
third party purchasers to acquire all 5,200,000 Shares beneficially
held by Mr. Hinshaw for aggregate gross proceeds of $52,000
With the exception of Stephen Shay, all of the Company’s directors
and executive officers own Shares and/or options to purchase
Shares, and to that extent, their interests in the sale of MCorpCX,
LLC are the same as that of other holders of our outstanding
Shares. See “Security Ownership of Certain Beneficial Owners and
Management,” beginning on page 55.
Security Ownership of Certain Beneficial
Owners and Management (page 54)
As of May 8, 2020, the Company’s directors and executive officers
collectively beneficially owned in the aggregate 5,245,001 Shares,
representing approximately 25.68% of the Shares outstanding and
entitled to vote at the Special Meeting.
Risk Factors (page 16)
In evaluating the LLC Sale Proposal, in addition to the other
information provided elsewhere in this Proxy Statement and the
annexes hereto, you should carefully consider the risk factors
relating to the LLC Sale Transaction and the Company’s future
operations that are discussed beginning on page 16 below.
COMMONLY ASKED QUESTIONS AND ANSWERS
Q:
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Why am I receiving this Proxy Statement and Proxy?
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A:
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This Proxy Statement describes the proposals upon which you, as a
stockholder, will vote. It also gives you information on the
proposals, as well as other information so that you can make an
informed decision.
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A:
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The Proxy enables you to appoint Matthew Kruchko as your
representative at the Special Meeting. By completing and returning
the Proxy, you are authorizing Mr. Kruchko to vote your Shares at
the Special Meeting as you have instructed on the Proxy. This way
your Shares will be voted whether or not you attend the Special
Meeting. Even if you plan to attend the Special Meeting, it is a
good idea to complete and return your Proxy before the date of the
Special Meeting just in case your plans change.
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Q:
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What happens if you do not indicate how your Shares are to be
voted?
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A:
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If you submit your executed Proxy designating Mr. Kruchko as the
individual authorized to vote your Shares, but you do not indicate
how your Shares are to be voted, then your Shares will be voted by
Mr. Kruchko in accordance with the Board’s recommendations, which
are described in this Proxy Statement. In addition, if any other
matters are properly brought up at the Special Meeting (other than
the proposals contained in this Proxy Statement), then Mr. Kruchko
will have the authority to vote your Shares on those other matters
in accordance with his discretion and judgment. The Board currently
does not know of any matters to be raised at the Special Meeting
other than the proposals contained in this Proxy Statement.
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Q:
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Who can vote at the Meeting?
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A:
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Registered stockholders who own our Shares on the Record Date may
attend and vote in person at the Special Meeting. Each Share is
entitled to one vote. There were 20,426,158 Shares outstanding on
the Record Date. If you own your Shares through a brokerage account
or in another nominee form, you must provide instructions to the
broker or nominee as to how your Shares should be voted. Your
broker or nominee will generally provide you with the appropriate
forms at the time you receive this Proxy Statement.
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The list of stockholders entitled to vote at the Special Meeting
will be open for the examination by any stockholder for any purpose
relevant to the Special Meeting during normal business hours for
10 days before the Special Meeting at the Company’s registered
office in our statutory registered agent's office at Computershare
Investor Services, 250 Royall St, Canton, Massachusetts, 02021. The
list will also be available during the Special Meeting for
inspection by stockholders.
You are entitled to attend the Special Meeting only if you are a
stockholder of record or a beneficial owner (in which case you must
hold a valid proxy from the record holder, if you are not the
record holder) as of the close of business on the Record Date.
Q:
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How can Shares held through a brokerage account be
voted?
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A:
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If your shares are not registered in your name but in the “street
name” of a bank, broker or other holder of record, then your name
will not appear in the Company’s register of stockholders. Those
Shares are held in your nominee’s name, on your behalf, and your
nominee will be entitled to vote your Shares. Your nominee is
required to vote your Shares in accordance with your instructions.
If you do not give instructions to your nominee, your nominee will
be entitled to vote your Shares with respect to “discretionary”
items. On non-routine items, nominees cannot vote without
instructions from the beneficial owner, which if such instructions
are not given result in “broker non-votes”. For the purposes of the
Special Meeting, brokers are able to vote on the ratification of
MaloneBailey LLP as our independent auditors without instructions
from the beneficial owner of the Shares being voted, while all of
the other matters to be voted on require voting instructions from
the underlying beneficial owner of such Shares or will be
considered broker non-votes.
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A:
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We are asking you to: (i) approve the LLC Sale Proposal; (ii)
approve the TSX-V Delisting Proposal; (iii) vote for the election
of the Company's directors for the ensuing year; (iv) approve an
amendment to the Company’s articles of incorporation to establish a
quorum threshold of one-third of the total outstanding Shares for
future stockholder meetings; (v) approve an amendment to the
Company’s bylaws to change the composition of the Board from a set
five (5) directors to a range of between five (5) and nine (9)
directors, with the specific number to be determined by the Board,
at the Board’s discretion within this range, from time-to-time,
(vi) approve an amendment to the Company’s articles of
incorporation to change the name of the Company to MCX Technologies
Corporation (vii) ratify the selection of MaloneBailey LLP as
the Company’s independent auditor; (viii) approve, on a non-binding
advisory basis, the compensation of the Company’s executive
officers as disclosed in this Proxy Statement, (ix) vote for a
frequency of future advisory votes on the compensation of the
Company’s executive officers, and (x) consider and vote on a
proposal to adjourn or postpone the Special Meeting, if necessary
or appropriate, for the purpose of soliciting additional votes for
the approval of the LLC Sale Proposal if there are not sufficient
votes at the time of the Special Meeting to approve the LLC Sale
Proposal.
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OUR BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH OF
THESE PROPOSALS.
A:
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Registered stockholders may vote online at the Special Meeting, by
mail, by phone, or on the Internet.
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Voting in Person. If you attend the
Special Meeting, you may vote as instructed at the Special
Meeting. However, if you hold your Shares in street name
(that is, through a broker/dealer or other nominee), you will need
to bring to the Special Meeting a Proxy delivered to you by such
nominee reflecting your Share ownership as of the Record Date
Voting by Mail. Complete, date, sign and mail
the Proxy in the enclosed postage pre-paid envelope. If you mark
your voting instructions on the Proxy, your Shares will be voted as
you instruct. Please see the Proxy for voting instructions. In
order for your Proxy to be validly submitted and for your Shares to
be voted in accordance with your instructions, we must
receive your mailed proxy card by 12:00 p.m. Eastern
Time on June 29, 2020.
Voting by Telephone. Call the toll-free number listed
on the Proxy from any touch-tone telephone and follow the
instructions. You should have your Proxy in hand when you call.
Voting on the Internet. Go to
www.investorvote.com/MCCX and follow the instructions. You should
have your Proxy in hand when you access the website.
If you own your Shares through a brokerage account or in other
nominee form, you should follow the instructions you receive from
the record holder to see which voting methods are available.
Your vote is very important to us. If you do not plan to attend
the Special Meeting, we encourage you to read this
Proxy Statement and submit your completed Proxy prior
to the Special Meeting in accordance with the
above instructions so that your Shares will be
represented and voted in accordance with your instructions.
Even if you plan to attend the Special Meeting in
person, we recommend that you vote your Shares in
advance as described above so that your vote will be counted if you
later decide not to attend the Special
Meeting.
Q:
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What does it mean if I receive more than one Proxy?
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A:
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It means that you hold Shares in multiple accounts. Please complete
and return all Proxies to ensure that all your Shares are voted in
accordance with your instructions.
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Q:
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What if I change my mind after returning my Proxy?
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A:
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If you are a registered stockholder, you may revoke your Proxy and
change your vote at any time before it is voted at the Special
Meeting. You may do this by:
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sending a signed notice of revocation of proxy to Computershare
Investor Services, our registrar and transfer agent, at 250 Royall
St, Canton, Massachusetts, 02021, stating that the Proxy is
revoked; or
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submitting another Proxy with a later date over the Internet, by
telephone, or to our registrar and transfer agent at the address
set out above; or
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voting at the Special Meeting.
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If you wish to revoke your submitted Proxy and submit new voting
instructions by mail or by telephone then we must receive a
new Proxy with your new voting instructions by 12:00 p.m.
Eastern Time on June 29, 2020.
Your Proxy will not be revoked if you attend the Special Meeting
but do not vote.
If you own your Shares through a broker or other nominee and wish
to change your vote, you must send those instructions to your
broker or nominee.
Q:
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Will my Shares be voted if I do not sign and return my
Proxy?
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A:
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If your Shares are registered in your name, they will not be voted
unless you submit your Proxy or vote in person at the Special
Meeting. If your Shares are held in street name, your broker/dealer
or other nominee will not have the authority to vote your Shares
unless you provide instructions.
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Q:
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Who will count the votes?
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A:
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Agents of the Company will tabulate the Proxies. Additionally,
votes cast by stockholders voting in person at the Special Meeting
are tabulated by a person who is appointed by our management before
the Special Meeting.
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Q:
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How many Shares must be present to hold the Meeting?
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A:
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Section 602(a) of the California Corporations Code provides that a
majority of the Shares entitled to vote shall constitute a quorum
at a meeting of stockholders. Consequently, to hold the Special
Meeting and conduct business, at least a majority of the
outstanding Shares entitled to vote at the Special Meeting must be
present at the Special Meeting. This is called a quorum.
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Votes are counted as present at the Special Meeting if a
stockholder either:
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is present and votes in person at the Meeting; or
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has properly submitted a Proxy.
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Abstentions and broker non-votes (Shares held by a broker/dealer or
other nominee that are not voted because the broker/dealer or other
nominee does not have the authority to vote on a particular matter)
will be counted for the purposes of establishing a quorum.
Q:
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How many votes are required to elect directors?
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A:
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To be elected, a director nominee must receive a plurality of the
votes cast at the Special Meeting. Only votes cast FOR a
nominee will be counted. Votes withheld and broker non-votes will
be excluded entirely from the vote.
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Q:
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What is the LLC Sale Proposal?
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A:
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The LLC Sale Proposal is the proposal for stockholders to approve
the sale of all of the outstanding limited liability company
membership interests in McorpCX, LLC to the Purchaser pursuant to
the terms of the Unit Purchase Agreement.
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Q:
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How many votes are required to approve the LLC Sale
Proposal?
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A:
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Under the California Corporations Code, the LLC Sale Proposal will
require the affirmative vote of holders of a majority of the
outstanding Shares entitled to vote. Under the policies of the TSX
Venture Exchange, the LLC Sale Proposal will require the
affirmative vote of a majority of the Shares that are held by
disinterested stockholders as of the Record Date in person or by
proxy at the Special Meeting. Disinterested stockholders for the
purposes of this vote includes all stockholders who do not have an
interest in the LLC Sale Transaction as of the Record Date. Votes
by stockholders who are not disinterested stockholders will not be
counted for the purposes of approving the LLC Sale Proposal under
the policies of TSX Venture Exchange. In particular, for the
purposes of this vote, any Shares held by Michael Hinshaw, or
Luckfound.org, as of the Record Date will not be counted for the
purposes of approving this proposal.
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Q:
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Am I entitled to appraisal or dissenter’s rights in connection
with LLC Sale Transaction?
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A:
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No. Holders of outstanding Shares will not have appraisal or
dissenter’s rights in connection with LLC Sale Transaction.
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Q:
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When is the LLC Sale Transaction expected to be
consummated?
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A:
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If the LLC Sale Proposal is approved by disinterested stockholders
in accordance with the requirements of the California Corporations
Code and the policies of the TSX Venture Exchange and the various
other conditions to closing contained in the Unit Purchase
Agreement are satisfied or waived, the Company expects to complete
the LLC Sale Transaction in June 2020 promptly following the
Special Meeting,
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Q:
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Will the Company continue to file periodic reports with
the SEC following the LLC Sale Transaction?
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A:
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The Company will continue to be subject to the reporting
requirements under the United States Securities Exchange Act of
1934, as amended whether or not the LLC Sale Transaction closes.
Additionally, the Company will also continue to be a reporting
issuer in the provinces of British Columbia and Alberta and will be
subject to all of the reporting requirements under the applicable
Canadian securities laws regardless of whether the LLC Sale
Transaction is completed or not.
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Q:
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How does the Company plan to use the cash proceeds from the LLC
Sale Transaction?
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A:
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Following the completion of the LLC Sale Transaction, the Company
intends to use the transaction proceeds for the purpose of growing
the Company’s software development and technology services
business. Currently, the Company’s business mostly consists of
providing professional and related consulting services through
McorpCX, LLC. Upon the completion of the sale of McorpCX, LLC, the
Company intends to change its focus from a consulting business to a
business focused on providing technology services to clients.
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Q:
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What are the U.S. federal income tax consequences of the
LLC Sale Transaction to U.S. Stockholders?
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A:
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The LLC Sale Transaction is a corporate action. The Company’s
United States. stockholders will not realize any gain or loss for
United States federal income tax purposes as a result of the LLC
Sale Transaction.
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Q:
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What if the LLC Sale Proposal is not
adopted?
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A:
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If the LLC Sale Proposal is not approved by stockholders in
accordance with the requirements of the California Corporations
Code and the policies of the TSX Venture Exchange, or if the other
conditions outlined in the Unit Purchase Agreement are not
satisfied or waived, then either the Company or the Purchaser may
terminate the Unit Purchase Agreements and the Board, along with
the Company’s management, will reassess the Company’s options in
light of the Company’s strategic goals and any alternatives that
may be available to the Company.
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Q:
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How many votes are required to adopt the other
proposals?
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A:
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The approval of the TSX-V Delisting Proposal will require the
affirmative approval of the majority of Shares that are voted by
stockholders as of the Record Date in person or by proxy at the
Special Meeting, excluding for the purposes of this vote promoters,
directors or officers of the Company, stockholders who have direct
or indirect beneficial ownership or control, directly or
indirectly, of 10% or more of the outstanding Shares as of the
Record Date and any other insiders of the Company, in accordance
with the requirements of the TSX Venture Exchange. The approval of
the ratification of the appointment of MaloneBailey LLP, and the
approval of the compensation of the Company’s named executive
officers, will all require the affirmative vote of a majority of
the Shares represented at the Special Meeting and entitled to vote
thereon. The approval of the amendments to our articles of
incorporation and our bylaws will require the affirmative vote of
the majority of outstanding Shares outstanding on the Record Date.
With respect to the proposal to provide an advisory vote on the
frequency of the advisory vote on executive compensation, the
option that receives the greatest number of votes cast shall be
considered the frequency for the advisory vote on executive
compensation selected by the Company’s stockholders.
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Q:
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What is the effect of withholding votes or
“abstaining”?
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A:
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You can withhold your vote for any nominee in the election of
directors. Withheld votes will be excluded entirely from the vote
and will have no effect on the outcome. On other proposals, you can
“Abstain”. If you abstain, your Shares will be counted as present
at the Special Meeting for purposes of that proposal and your
abstention will have the effect of a vote against the proposal.
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Q:
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How are votes counted?
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A:
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You may vote "For" or "Withhold" your vote on the proposal to elect
directors. You may vote "For" or "Against" or "Abstain" on the
proposals concerning the LLC Sale Proposal, TSX-V Delisting
Proposal, the ratification of the appointment of MaloneBailey LLP,
the compensation of our named executive officers, and the
amendments to our articles of incorporation and our bylaws, each as
outlined in this Proxy Statement. If you abstain from voting on any
of these proposals, it will have the practical effect of voting
against such proposal.
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You may vote for “1 year”, “2 years”, “3 years” or “Abstain” in
regard to the frequency of the advisory vote on executive
compensation.
If you sign and return your Proxy without voting instructions, your
Shares will be voted in accordance with the Board’s recommendations
for the proposals described in this Proxy Statement.
Q:
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Could other matters be discussed at the Meeting?
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A:
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We do not know of any other matters to be brought before the
Special Meeting other than those referred to in this Proxy
Statement. If other matters are properly presented at the Special
Meeting for consideration, the person named in the Proxy will have
the discretion to vote on those matters on your behalf.
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Q:
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Where and when will I be able to find the voting
results?
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A:
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You can find the official results of voting at the Special Meeting
in a current report on Form 8-K to be filed with the Securities and
Exchange Commission (the “SEC”) within four business days of the
Special Meeting.
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Additionally, we will disclose how we are implementing the results
of the advisory vote on the frequency of the advisory vote on
executive compensation in a current report
on Form 8-K filed with the SEC within 150 days
of the date of the Special Meeting.
Q:
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Who do I contact if I have any further questions?
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A:
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If you have questions or require any assistance with voting your
Shares, please contact Matthew Kruchko at McorpCX, Inc., 201 Spear
Street, Suite 1100, San Francisco, California 94105, Telephone
(415) 526-2655. Mr. Kruchko is also the Company’s President and
Chief Executive Officer.
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RISK FACTORS
You should carefully consider the risk factors described below
as well as other information provided to you or referenced in
this Proxy Statement in deciding whether to vote to
adopt the LLC Sale Proposal. The risk factors
described below are not the only ones facing us. For a discussion
of additional risk considerations, we refer you to the documents we
file from time to time with the SEC, particularly our
Form 10-K for the year ended December 31, 2019.
Additional considerations not presently known to the Company
or that the Company currently believes are
immaterial may also adversely affect the Company’s
business operations. If any of the following risk factors
actually occur, the Company’s business, financial condition
or results of operations could be materially adversely
affected, and the value of the Shares
could decline.
While the LLC Sale Transaction is
pending, it creates uncertainty about the
Company’s future that could have a
material adverse effect the Company’s our business,
financial condition and results of operations.
While the LLC Sale Transaction is pending, it creates uncertainty
about the Company’s future. As a result of this uncertainty, the
Company’s current or potential business partners and clients may
decide to delay, defer or cancel entering into new business
arrangements with the Company pending closing or termination of the
LLC Sale Transaction. In addition, while the LLC Sale Transaction
is pending, the Company is subject to a number of risks,
including:
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the diversion of management and employee attention from our
day-to-day business;
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the potential disruption to business partners and clients; and
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the possible inability to respond effectively to competitive
pressures, industry developments and future opportunities.
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The occurrence of any of these events individually or in
combination could have a material adverse effect on the Company’s
business, financial condition and results of operation.
You are not guaranteed any of the proceeds from the
LLC Sale Transaction.
The consideration for McorpCX, LLC is expected to be paid by the
Purchaser directly to the Company. The Company could spend or
invest the net proceeds from the LLC Sale Transaction in ways with
which our stockholders may not agree. The investment of these
proceeds may not yield a favorable return.
The Company will be a very small public
company.
Once the LLC Sale Transaction is completed, the Company is expected
to continue to file periodic annual, quarterly and current reports,
as well as proxy statements with the SEC. As a result, the Company
will continue to incur additional ongoing operating expenses and
the Company cannot assure how much of the cash proceeds, if any,
will ultimately be distributed to stockholders or invested in
growing the Company’s technology services business.
The Company’s ability to execute its strategy following the
LLC Sale Transaction depends on the Company’s ability to retain and
recruit qualified management and/or advisors.
The Company’s ability to execute its strategy following the closing
of the LLC Sale Transaction requires that the Company retain and
recruit personnel with technology services experience. There are no
assurances that the Company will be able to find and/or be able to
recruit qualified personnel required to build the Company’s
technology services business, and if the Company is not able to
recruit such personnel the Company may not be able to successfully
grow its technology services business and consequently may not
develop a revenue generating business after the completion of the
LLC Sale Transaction.
Following the LLC Sale
Transaction, the Company’s
profitability and growth will depend on the success
of the Company’s planned development of its
technology services business, which is subject to a
variety of business risks and uncertainties.
After completion of the LLC Sale Transaction, the Company is
expected to be focused on growing its technology services business.
Any evaluation of our technology services business and our
prospects following the LLC Sale Transaction must be considered in
light of the risks and uncertainties stated above, as well as the
following:
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the ability to maintain our relationships with our existing
clients;
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the ability to attract new clients; and
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potential capital costs used for investment in the technology
services business;
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If the Company is unable to address these risks, the Company’s
business, results of operations and prospects following the closing
of the LLC Sale Transaction could suffer and the company may not be
able to successfully able to develop a revenue generating
business.
The Company will incur significant expenses in
connection with the LLC Sale
Transaction, regardless of whether the LLC Sale
Transaction is completed.
The Company expects to incur significant expenses related to the
LLC Sale Transaction. These expenses include, but are not limited
to, financial advisory fees and expenses, legal fees, accounting
fees and expenses, filing fees, printing expenses and other related
fees and expenses. Many of these expenses will be payable by the
Company regardless of whether the LLC Sale Transaction is
completed.
If the Company fails to complete the LLC Sale Transaction,
the Company’s business may be harmed.
The Company cannot assure you that the LLC Sale Transaction will be
completed. The closing of the LLC Sale Transaction is subject to
the satisfaction of a number of conditions, including, among
others, the requirement that stockholders adopt the LLC Sale
Proposal and that the Company receives approval of the TSX Venture
Exchange. The Company cannot guarantee that it will be able to meet
all of the closing conditions in the Unit Purchase Agreement. The
Company also cannot be sure that other circumstances will not arise
that would allow the Purchaser to terminate the Unit Purchase
Agreement prior to the closing of the LLC Sale Transaction. If the
LLC Sale Proposal is not adopted or the LLC Sale Transaction does
not close, the Board will be forced to evaluate other alternatives,
which may be less favorable to the Company than the proposed LLC
Sale Transaction.
In addition, if the LLC Sale Transaction is not consummated, the
Company’s directors, executive officers and other employees will
have expended extensive time and effort and will have experienced
significant distractions from their work during the pendency of the
LLC Sale Transaction and the Company will have incurred significant
transaction costs, in each case, without any commensurate benefit,
which may have a material and adverse effect on the Company’s stock
price and results of operations.
If the proposed LLC Sale Transaction is not
completed, the Company may explore other potential
transactions, but alternatives may be less favorable to
us.
If the proposed LLC Sale Transaction is not completed, the Company
may explore other strategic alternatives. An alternative
transaction may have terms that are less favorable to the Company
than the terms of the proposed LLC Sale Transaction, or the Company
may be unable to reach agreement with any third party on an
alternate transaction that the Company would consider to be
reasonable.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This Proxy Statement and the attached annexes contain
“forward-looking statements” within the meaning of United States
federal securities laws as well as applicable Canadian securities
legislation. These forward-looking statements include statements
concerning the Company’s outlook for the future, as well as other
statements of beliefs, future plans and strategies or anticipated
events, and similar expressions concerning matters that are not
historical facts. These statements can be identified by the use of
forward-looking terminology such as “believes,” “estimates,”
“expects,” “may,” “will,” “should,” “could,” or “anticipates,” or
the negative thereof or other variations thereon or other
comparable terminology. The forward-looking statements included in
this Proxy Statement or the attached annexes are based on
management’s current expectations and assumptions about future
events, which are inherently subject to uncertainties, risks and
changes in circumstances that are difficult to predict and could
cause actual results to differ materially from those expressed in,
or implied by, the forward-looking statement. These risks and
uncertainties include, but are not limited to:
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the Company’s stockholders failing to approve the LLC Sale
Proposal;
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the failure of one or more conditions to the closing of the LLC
Sale Transaction to be satisfied or waived by the applicable
party;
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an increase in the amount of costs, fees, expenses and other
charges related to the Unit Purchase Agreement or LLC Sale
Transaction;
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the occurrence of any event, change or other circumstances that
could give rise to the termination of the Unit Purchase
Agreement;
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risks arising from the diversion of management’s attention from the
Company’s ongoing business operations;
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risks associated with the Company’s ability to identify and realize
business opportunities following the LLC Sale Transaction;
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fluctuations in demand for products and services of the Company and
its subsidiaries;
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risks of losing key personnel or customers;
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protection of the Company’s intellectual property and government
policies and regulations, including, but not limited to those
affecting the Company’s industry; and
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the other factors discussed under the heading “Risk Factors” in
this Proxy Statement.
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Readers are cautioned not to place undue reliance on
forward-looking statements. Any forward-looking statement speaks
only as of the date that it was made and the Company undertakes no
obligation to update any forward-looking statement, whether as a
result of new information or otherwise.
THE SPECIAL MEETING
The Company is providing this Proxy
Statement to its stockholders in connection with the
solicitation of proxies to be voted at the Special
Meeting (or any adjournment or postponement thereof)
that the Company has called to consider and vote on the
proposals described below.
Date, Time and Place
The Special Meeting will be held at 2529 Detroit Avenue, Cleveland,
Ohio 44113, 1:00 p.m. Eastern Time on June 29, 2020.
Purpose
The Special Meeting is being held to consider and vote on:
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the TSX-V Delisting Proposal
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a proposal to elect five directors nominated by the Board of
Directors to serve until the next annual meeting of
stockholders;
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a proposal to amend the Company’s articles of incorporation to
establish a quorum threshold of one-third of the total outstanding
Shares for future stockholder meetings;
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a proposal to amend the Company’s bylaws to change the composition
of the Board of Directors from five (5) directors to a range of
between five (5) and nine (9) directors, with the specific number
to be determined by the Board of the Directors in their discretion
from time-to-time;
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a proposal to amend the Company’s articles of incorporation to
change the name of the corporation from McorpCX, Inc. to MCX
Technologies Corporation;
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a proposal to ratify the selection of MaloneBailey LLP as the
independent auditor for the Company to conduct the audit of the
year ended December 31, 2020;
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a proposal to approve, on a non-binding advisory basis, the
compensation of the Company’s named executive officers as disclosed
in the enclosed proxy statement;
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a proposal to adjourn the Special Meeting, if necessary and
appropriate, to permit the solicitation of additional proxies if
there are not sufficient votes at the time of the Special Meeting
to approve the LLC Sale Proposal; and
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a proposal to conduct a non-binding advisory vote on the
frequency of future advisory votes on executive compensation.
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Recommendation of the Board
The Board determined that the sale of all of the membership
interests in McorpCX, LLC pursuant to the terms of the Unit
Purchase Agreement is advisable and in the best interests of the
Company and its stockholders and has unanimously approved the Unit
Purchase Agreement and the transactions contemplated thereunder.
The Board unanimously recommends that the Company’s stockholders
vote “FOR” the LLC Sale Proposal.
Additionally, as further described in this Proxy Statement, the
Board recommends stockholders vote “FOR” each of the nominees to
the Board of Directors, “FOR” each of the proposed amendments to
the Company’s articles of incorporation and bylaws, “FOR” the
ratification of MaloneBailey LLP as the Company’s independent
auditors for the 2020 fiscal year, “FOR” the compensation of the
Company’s named executive officers as disclosed in the Proxy
Statement, “FOR” the TSX-V Delisting Proposal and to hold future
advisory votes on executive compensation every year.
Record Date, Stockholders Entitled to Vote and Voting
Power
Only holders of our Shares as of the close of business on the
Record Date, will be entitled to receive notice of, and vote at,
the Special Meeting or any adjournments or postponements of the
Special Meeting, unless a new record date is fixed in connection
with any such adjournment or postponement. At the close of business
on the Record Date, there were 20,426,158 Shares, outstanding and
entitled to vote at the Special Meeting.
Each holder of our common stock will be entitled to one vote for
each Share held by such holder as of the close of business on the
record date.
Quorum
The presence at the Special Meeting, in person or by proxy, of at
least a majority of the issued and outstanding Shares entitled to
vote at the Special Meeting is necessary to constitute a quorum for
transacting business at the Special Meeting. Failure of a quorum to
be represented at the Special Meeting will necessitate an
adjournment or postponement of the Special Meeting and will subject
the Company to additional cost and expense.
Required Vote
Under the California Corporations Code, the LLC Sale Proposal will
require the affirmative vote of holders of a majority of the
outstanding Shares entitled to vote. Under the policies of the TSX
Venture Exchange, the LLC Sale Proposal will require the
affirmative vote of a majority of the Shares that are held by
disinterested stockholders as of the Record Date in person or by
proxy at the Special Meeting. Disinterested stockholders for the
purposes of this vote includes all stockholders who do not have an
interest in the LLC Sale Transaction as of the Record Date. Votes
by stockholders who are not disinterested stockholders will not be
counted for the purposes of approving the LLC Sale Proposal under
the policies of TSX Venture Exchange. In particular, for the
purposes of this vote, any Shares held by Michael Hinshaw, or
Luckfound.org, as of the Record Date will not be counted for the
purposes of approving this proposal.
The approval of the TSX-V Delisting Proposal will require the
affirmative vote of a majority of the Shares that are voted by
stockholders as of the Record Date in person or by proxy at the
Special Meeting, excluding for the purposes of this vote promoters,
directors or officers of the Company, stockholders who have direct
or indirect beneficial ownership or control, directly or
indirectly, of 10% or more of the outstanding Shares as of the
Record Date and any other insiders of the Company, in accordance
with the requirements of the TSX Venture Exchange.
The approval of the ratification of the appointment of MaloneBailey
LLP and the approval of the compensation of the Company’s named
executive officers, will all require the affirmative vote of a
majority of the Shares represented at the Special Meeting and
entitled to vote thereon. The approval of the amendments to our
articles of incorporation and our bylaws will require the
affirmative vote of the majority of outstanding Shares outstanding
on the Record Date. With respect to the proposal to provide an
advisory vote on the frequency of the advisory vote on executive
compensation, the option that receives the greatest number of votes
cast shall be considered the frequency for the advisory vote on
executive compensation selected by the Company’s stockholders.
Voting
If your Shares are registered directly in your name with the
Company’s transfer agent, you are considered a “stockholder of
record” and you may vote your Shares in person at the Special
Meeting through the use of the ballot given to you at the Special
Meeting or you may vote your Shares by proxy by mail, over the
Internet or by telephone using the instructions provided elsewhere
in this Proxy Statement and on the proxy card provided with this
Proxy Statement.
If you hold Shares in “street name” through your broker, bank or
other nominee, you are considered the beneficial owner of these
Shares and, in order to vote, will need to instruct your broker,
bank or other nominee on how to vote your Shares using the
instructions provided to you by your broker, bank or other nominee.
If you are a beneficial owner of Shares held by a broker, bank or
other nominee and would like to vote in person at the Special
Meeting, you must bring to the Special Meeting a proxy from the
broker, bank or other nominee that holds your Shares authorizing
you to vote in person at the Special Meeting.
Your vote is very important, regardless of the number of Shares
that you own. Accordingly, whether or not you plan to attend the
special meeting, we encourage you to vote as soon as possible:
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by proxy over the Internet or by telephone or by completing and
mailing the proxy card provided with this proxy statement, if you
are a stockholder of record; or
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by providing proper instructions to your broker, bank or other
nominee if you hold your shares in “street name.”
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Solicitation of Proxies
The Company is soliciting proxies on behalf of the Board and will
be bearing the entire costs of soliciting proxies. The solicitation
of proxies will initially be made by mail or e-mail, if applicable.
Forms of proxies and proxy materials may also be distributed
through brokers, banks and other nominees to the beneficial owners
of our Shares, in which case such parties will be reimbursed for
their reasonable out-of-pocket expenses. Proxies may also be
solicited in person or by telephone, facsimile, electronic mail or
other electronic medium by certain of the Company’s directors,
officers or employees. Any of the Company’s directors, officers or
employees participating in the solicitation will not receive
additional compensation for their efforts.
Revocability of Proxies
Any registered stockholder who executes and returns a proxy card
(or submits a proxy via telephone or the Internet) may revoke the
proxy at any time before it is voted in any one of the following
ways:
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submitting another properly completed proxy with a later date;
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attending and voting at the Special Meeting; or
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delivering to the Company’s principal offices (Attention: Corporate
Secretary) a written instrument that revokes the proxy.
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Simply attending the Special Meeting will not constitute revocation
of a proxy. If you have instructed your broker to vote your Shares,
the above-described options for revoking your proxy do not apply
and instead you must follow the directions provided by your broker
to change your instructions.
Communicating with Members of the Board of Directors
You may communicate with the Board by writing to the
Company’s Corporate Secretary at McorpCX, Inc., c/o the Board
of Directors (or, at your option, c/o a specific director), 201
Spear Street, Suite 1100, San Francisco, California 94105. The
Corporate Secretary will deliver this communication to the Board or
the specified director, as the case may be.
PROPOSAL 1– Approval of THE SALE of McorpCX LLC Membership
Interests
The following is a description of the material aspects of the LLC
Sale Proposal and the LLC Sale Transaction, including background
information relating to the proposed LLC Sale Transaction. While
the Company believes that the following description covers the
material terms of the LLC Sale Transaction, the description may not
contain all of the information that is important to you. In
particular, please see a copy of the Unit Purchase Agreement
attached as Annex A to this Proxy Statement and
incorporated by reference herein. You should carefully read this
Proxy Statement and the other documents to which we refer,
including the Unit Purchase Agreement, for a complete understanding
of the terms of the LLC Sale Transaction.
Background of the LLC Sale Transaction
Overview
The Company which was incorporated in the State of California on
December 14, 2001, is a customer experience services company,
delivering consulting and technology solutions to customer-centric
organizations in order to help such organizations improve their
customer experiences, increase customer loyalty, reduce costs and
increase revenue. The Company’s professional and related services
include a range of customer experience management services such as
research, training, strategy consulting and process
optimization. Currently the Company is engaged in the business
of delivering consulting and professional services that are
designed to help corporations improve their customer listening and
customer experience management capabilities.
On August 16, 2018, the Company completed an internal
reorganization by entering into a contribution agreement with
McorpCX, LLC pursuant to which the Company transferred to McorpCX
LLC all of the Company’s assets and liabilities related to the
Company’s customer experience consulting business, excluding the
underlying technology and databases related thereto which remained
with the Company (the “Internal Reorganization”). In connection
with the Internal Reorganization, Michael Hinshaw, resigned as the
Company’s President and Chief Executive and was appointed President
of McorpCX LLC in order to be able to focus the majority of his
time and energies towards building the Company’s consulting
business now operated through McorpCX LLC.
The Company’s goal of the Internal Reorganization was to enhance
stockholder value by segregating the Company’s professional and
related consulting services, which was led by Mr. Hinshaw in
McorpCX LLC, thereby allowing the Company to focus on developing
and/or acquiring new technology solutions.
Since the Internal Reorganization, the Board has been exploring
various options in order to transform the Company’s operations from
a focus on professional and related consulting services towards
becoming a technology and service provider, which the Board
believes will enhance stockholder value.
The Board believes that by completing the LLC Sale Transaction, the
Company will be able to utilize the proceeds from the sale of
McorpCX LLC towards developing and/or acquiring new technology
solutions as part of its strategy to become a technology and
service provider.
Discussion
On January 23, 2020, in connection with the Board’s desire to seek
potential buyers for McorpCX, LLC, Michael Hinshaw resigned both as
Chairman and director on the Board, but continued to serve as
President of McorpCX, LLC.
Between January 24, 2020 and February 5, 2020, members of the
Company’s management had several informal discussions with Mr.
Hinshaw about the possibility of Mr. Hinshaw acquiring McorpCX,
LLC.
On February 5, 2020, Company’s management discussed with members of
the Board the potential terms of a potential sale of McorpCX, LLC
to the Purchaser.
On February 6, 2020, the Company executed a nonbinding term sheet
with the Purchaser concerning the sale of McorpCX, LLC.
Between February 10, 2020 and February 18, 2020, Company’s
management had discussions with numerous financial advisor firms
and discussed the results of such meetings with members of the
Board on February 18, 2020.
On February 11, 2020 the Company’s management had discussions with
the Company’s legal counsel Davis Wright Tremaine LLP, concerning
the structure and timing of the proposed transaction and the
required steps needed to complete the transaction.
On February 16, 2020, an initial draft of the Unit Purchase
Agreement prepared by the Company’s legal counsel was distributed
to the Board for their consideration.
On February 19, 2020, the Company formally engaged Evans &
Evans, to prepare a valuation report on McorpCX, LLC.
On February 25, 2020, the Board discussed with Canadian counsel to
the Company the TSX Venture Exchange approval process for the LLC
Sale Transaction and various other Canadian securities law issues
concerning the LLC Sale Transaction.
On March 4, 2020, a revised copy of the Unit Purchase Agreement was
distributed by Company counsel to the Board for review and comment.
Members of management discuss the Unit Purchase Agreement
negotiations with Company counsel and the progress of valuation
report being prepared by Evans & Evans.
On March 9, 2020, the Company’s management discusses several
transaction issues with the Company’s legal counsel.
From March 16, 2020 to March 26, 2020, the Company’s management
engaged in negotiations with the Purchaser to modify the terms of
the LLC Sale Transaction as a result of the impact of the
Coronavirus crisis.
On March 26, 2020, the Company’s Chief Financial Officer
distributed to the Board the Comprehensive Valuation Report of
McorpCX, LLC, prepared by Evans & Evans, dated March 18, 2020,
for review consideration by the Board.
On March 31, 2020, the Company’s legal counsel distributed to the
Board a revised draft of the Unit Purchase Agreement for review and
discussion.
From April 1, 2020 to April 8, 2020, members of the Board and
Company’s management conducted several discussions with the
Company’s legal counsel and representatives of the Purchaser to
finalize the terms of the Unit Purchase Agreement.
On April 9, 2020, the Company’s legal counsel provided to the Board
a substantially final draft of the Unit Purchase Agreement for
review and approval.
On April 13, 2020, the Board determined that selling all of the
membership units of McorpCX, LLC to the Purchaser pursuant to the
term of the Unit Purchase Agreement was in the best interests of
the Company and its stockholders and approved the Unit Purchase
Agreement substantially as presented to the Board.
On April 15, the Unit Purchase Agreement was executed by the
Company and the Purchaser.
Reasons for the LLC Sale Transaction and the Valuation
Report
Reasons for the LLC Sale Transaction
In evaluating the LLC Sale Transaction, the Board consulted with
the Company’s management and outside legal and financial advisors.
In recommending that the Company’s stockholders vote their Shares
to adopt the LLC Sale Proposal, the Board considered a number of
factors including the following (not necessarily in order of
relative importance):
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The Company’s business and operations, and its current and
historical financial condition and results of operations;
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The current corporate structure and ongoing challenges of the
Company to develop its technological services and software
development operations;
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The decrease in revenues of the Company’s professional services and
consulting business and the failure of the Company to generate
profits from its operations;
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The Company’s business plan and strategic priorities;
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The Company’s inability to raise funds in the capital markets;
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The instability of the Company’s management team, including a
relatively high turnover rate of executive officers with the
Company;
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The fact that the consideration to be received for the sale of
McorpCX, LLC exceeded the financial valuation of McorpCX, LLC in
the Valuation Report prepared by Evans & Evans;
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The fact that the Unit Purchase Agreement was the product of
arms-length negotiations and contained terms and conditions that
were, in the Board’s view favorable to the Company and the
Company’s stockholders; and
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The ability of the Company to use the proceeds from the LLC Sale
Transaction to develop the Company’s technology services business
and to focus the Company’s entire energies towards developing that
business after the conclusion of the LLC Sale Transaction.
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After taking into account all of the factors set forth above, as
well as other factors, including the “risk factors” outlined
elsewhere in this Proxy Statement, the Board agreed that the
benefits of the Unit Purchase Agreement and the transactions
contemplated thereunder, outweigh the risks and uncertainties
associated with the LLC Sale Transaction. In view of the wide
variety of factors considered by the Board, and the complexity of
these matters, the Board did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual members of the Board may have assigned
different weights to various factors. The Board unanimously
approved the Unit Purchase Agreements and recommends that the
Company’s stockholders approve the LLC Sale Proposal based upon the
totality of the information presented to and considered by it.
Valuation Report of McorpCX, LLC
Overview
The Company retained Evans & Evans to act as the Company’s
financial advisor in connection with the LLC Sale Transaction and
to prepare a valuation report to be used by the Board in
determining the fairness of the consideration being offered by the
Purchaser for McorpCX, LLC pursuant to the terms of the Unit
Purchase Agreement.
On March 18, 2020, Evans & Evans delivered to the Board its
written Valuation Report that in its opinion, given the scope of
its engagement, the fair market value of 100% of the outstanding
limited liability membership units of McorpCX, LLC is in the range
of between $870,000 to $1,030,000. Evans &
Evans provided the Valuation Report to the Board
for the information and assistance of the Board in
connection with and for the purpose of the Board’s
evaluation of the transactions contemplated by the Unit
Purchase Agreement. While the Valuation Report was
considered by the Board and management in the course of the
negotiations between the Company and the Purchaser,
the decision to approve and recommend the LLC Sale
Transaction and the Unit Purchase Agreement was made
independently by the Board. Other than its opinion as to the fair
market value of McorpCX, LLC as of the date of the Valuation
Report, the Valuation Report does not address any
other aspect of the LLC Sale Transaction, or any related
transaction, and does not constitute a recommendation to any
stockholder of the Company as to how that stockholder should vote
or act on any matter relating to the LLC Sale
Transaction. The Valuation Report does not
express any opinion as to the value of the Shares or
the prices at which the Shares will actually trade at
any time.
The complete text of the Valuation Report, dated March 18, 2020,
which sets forth the assumptions made, procedures followed, matters
considered, and qualifications and limitations on and scope of the
review undertaken by Evans & Evans is attached as Annex
F to this Proxy Statement. The summary of the Valuation Report
set forth below is qualified in its entirety by reference to the
full text of the Valuation Report.
In preparing the Valuation Report, Evans & Evans, among
other things:
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Interviewed representatives of the Company to gain an understanding
of the history of the Company and insight into the Company’s
current and future plans;
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Reviewed the Company’s website and news releases for the previous
18 months;
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Reviewed the Company’s audited financial statements for the years
ended 2011-2018 as well as the Company’s Form 10-K for the years
ended December 31, 2016, 2017 and 2018, and the Company’s Form 10-Q
for the three and nine months ended September 30, 2019;
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Reviewed the McorpCX LLC’s unconsolidated management-prepared trial
balance sheet and the for the 12 months ended December 31, 2019 as
well as McorpCX, LLC ‘s unconsolidated management prepared monthly
income statement for the 12 months ended December 31, 2018;
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Reviewed the Company’s management-prepared statement of profits and
loss for the Company’s consulting business for the years ended
December 31, 2015 to 2017, prior to the formation of McorpCX,
LLC.
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Reviewed details on the breakdown of revenues from new and existing
customers of the Company from 2017 to 2019;
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Reviewed information concerning McorpCX, LLC ‘s staff
compensation;
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Reviewed a template of McorpCX LLC’s services agreement as well as
agreements between the Company and McorpCX, LLC;
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Reviewed information on McorpCX, LLC’s market from sources such as
Fortune Business Insights; Forbes; International Data Corporation;
MarketandMarkets, Allied Market Research, Reports and Data; and
TechSci Research;
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Reviewed financial and stock market trading date on the following
companies whose shares are listed for trading on North American
Stock exchanges: Huron Consulting Group Inc., FTI Consulting, Inc.,
March & McLennan Companies, Inc., Resources Connection, Inc.,
Genpact Limited, Exponent, Inc., Cynergistek, Inc., and The Hackett
Group, Inc.
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In connection with its review and in arriving at its
valuation of McorpCX, LLC in the Valuation Report, Evans &
Evans assumed and relied on the accuracy and completeness of all of
the financial, accounting, legal, tax and other information
discussed with or reviewed by it for purposes of the Valuation
Report and neither attempted to verify independently nor assumed
responsibility for verifying any of such information. Evans &
Evans further relied upon the assurance of representatives of the
management of the Company that they are unaware of any facts that
would make the information provided to Evans & Evans incomplete
or misleading in any material respect.
The Company imposed no limitations on Evans & Evans with
respect to the investigations made or procedures followed by
Evans & Evans in preparing the Valuation Report.
The Valuation Report defined “fair market value” as the highest
price, expressed in terms of cash equivalents, at which property
would change hands between a hypothetical willing and able buyer
and a hypothetical willing and able seller, acting at arms-length
in an open and unrestricted market, when neither is under
compulsion to buy or sell and when both have reasonable knowledge
of relevant facts. Although in the Valuation Report Evans &
Evans considered a variety of valuation methodologies, given the
nature and status of McorpCX, LLC, Evans & Evans determined
that the Guideline Public Company (“GPC”) Method and the Net Asset
Method were the most appropriate valuation methodologies to
determine the fair market value of McorpCX, LLC.
GPC Method
The objective of the GPC Method is to derive multiples to apply to
the fundamental financial variables of McorpCX, LLC. As part of
this analysis the following eight companies: Huron Consulting Group
Inc., FTI Consulting, Inc., March & McLennan Companies, Inc.,
Resources Connection, Inc., Genpact Limited, Exponent, Inc.,
Cynergistek, Inc. and The Hackett Group, Inc. Of these companies,
one outliner was removed as was those companies with revenues in
excess of $800 million, resulting in Resources Connection, Inc.,
Cynergistek, Inc. and The Hackett Group, Inc. being used in the
analysis. Although none of these companies are direct competitors
of McorpCX, LLC, Evan & Evans believes they do offer many
similar products and/or services to their target markets and embody
similar business, technical and financial risk/reward
characteristics that a notional investor would consider as being
comparable.
Evans & Evans used a multiple enterprise value (“EV”) to
trailing 12-month (“TTM”) revenues as a means of deriving the fair
market value of McopCX, LLC, the three companies outlined in the
following table utilized in the analysis had EV to TTM revenue
multiples in the range of 0.4x to 1.7x, with an average of 0.9x and
a median of 0.7x
Company Name
|
Ticker
|
Exchange
|
Market
Capitalization
|
Enterprise
Value
|
TTM
REVNUE
|
TTM
EBITDA
|
EV/
Revenue
|
EV/
EBITDA
|
|
|
|
|
|
|
|
|
|
Resources Connection, Inc.
|
RECN
|
NASDAQ
|
489
|
500
|
718
|
61
|
0.7 x
|
8.3 x
|
CynergisTek, Inc.
|
CTEK
|
NYSE (America)
|
40
|
30
|
72
|
7
|
0.4 x
|
4.6 x
|
The Hackett Group, Inc.
|
HCKT
|
NASDAQ
|
462
|
448
|
261
|
40
|
1.7 x
|
11.3 x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
0.9 x
|
8.1 x
|
|
|
|
|
|
Median
|
|
0.7 x
|
8.3 x
|
|
|
|
|
Coefficient of Variance
|
|
0.7
|
0.4
|
Source: Company filings, Yahoo Finance.
Evans & Evans selected a multiple of 0.5x, below the average
and the median, reflecting McorpCX, LLC’s size and reliance on key
individuals. A discount to the EV/TTM revenue multiple was applied
to reflect that McorpCX, LLC as a private company is less liquid
and that the size of McorpCX LLC is smaller than the publicly
traded companies used in the analysis.
McorpCS LLC
|
|
|
|
|
|
|
|
EV/TTM Revenue multiple (1)
|
Discount Range (2)
|
Adjusted EV/Revenue multiple
|
|
0.5 x
|
35.0%
|
0.33 x
|
|
0.5 x
|
30.0%
|
0.35 x
|
|
(United States Dollars)
|
Low
|
High
|
|
Revenue
|
3,045,591
|
3,045,591
|
(Excluding Reimbursable Expenses & SaaS sales
|
Multiple
|
0.33 x
|
0.35 x
|
|
Enterprise Value
|
989,817
|
1,065,957
|
|
Less: Debt
|
0
|
0
|
|
Plus: Cash (4)
|
0
|
0
|
|
Fair Market Value of Equity
|
989,817
|
1,065,957
|
|
|
|
|
|
FMV of equity – Midpoint
|
|
1,030,000
|
|
(1) Evans & Evans selected a revenue multiple of 0.5x below the
median of the range between 0.4x – 1.7x of revenue multiples of the
guideline public companies due to the quantum of the revenues
relative to the selected companies. The revenue multiple was also
supported by the mergers & acquisitions analysis outlined in
Exhibit 9.0 of the Valuation Report.
(2) Support for the discount applied to the selected revenue
multiple.
Evans & Evans applied the 0.5x multiple to McorpCX, LLC’s 2019
revenues of approximately $3 million, which resulted in a fair
market value of $1,030,000.
Net Asset Value Method
Under the Net Asset Value Method, McorpCX, LLC’s net assets
represent the aggregate value of all tangible and identifiable
assets, where the latter have value that can be separately
determined minus all liabilities.
In connection with this analysis, Evans & Evans utilized a
Multi-Period Excess Earnings or “MPEE” Method to arrive at a fair
market value for McorpCX, LLC’s customer intangibles. In the MPEE
Method the prospective earnings of a single intangible asset must
be separated from those of the group of assets by identifying and
deducting portions of total earnings that are attributable to the
contributory assets to estimate the excess the remaining or “excess
earnings” attributable to the subject intangible asset. The MPEE
Method resulted in a fair market value of McorpCX, LLC’s customer
intangibles in the range of between $504,000 to $529,000.
In applying the Net Asset Value Method, Evans & Evans: i)
adjusted McorpCX, LLC’s deferred revenues and included an
adjustment for a stub period net income to account for difference
between the date of the most recent financial statements and the
valuation date, ii) adjusted for certain amounts that will be paid
to the Company prior to the completion of the LLC Sale Transaction,
and iii) adjusted the book value of McorpCX, LLC’s customer
intangibles to reflect the fair market value of such customer
intangibles discussed above. Under the Net Asset Method, the fair
market value of McorpCX, LLC was determined to be $870,000.
Assumptions, Qualifications and Fees
The summary set forth above does not purport to be a complete
description of the analyses performed by Evans & Evans in
connection with the rendering of the Valuation Report. The
preparation of a valuation report is a complex analytical process
involving various determinations as to the most appropriate and
relevant quantitative and qualitative methods of financial analyses
and the application of those methods to the particular
circumstances and, therefore, such an report is not readily
susceptible to summary description. Accordingly, Evans &
Evans believes that its analyses must be considered as a whole and
that selecting portions of its analyses or the factors that it
considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying
its analyses and opinion. Evans & Evans did not attribute any
specific weight to any factor or analysis considered by it. The
fact that any specific analysis has been referred to in the summary
above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Evans & Evans made
numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which
are beyond the control of the Company. Any estimates contained in
or underlying these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may
be significantly more or less favorable than those estimates.
Additionally, analyses relating to the values of businesses or
assets do not necessarily reflect the prices at which businesses or
assets may actually be sold or the prices at which any securities
have traded or may trade at any time in the future. Accordingly,
these analyses and estimates are inherently subject to substantial
uncertainty. The Valuation Report was only one of many factors
considered by the Board in their evaluation of the LLC Sale
Transaction and should not be viewed as determinative of the views
of the Board or the Company’s management with respect to the
consideration to be received by the Company pursuant to the Unit
Purchase Agreement.
Evans & Evans is located in Canada and the United States, and
has been providing valuation studies for private and public
companies since 1998. Evans & Evans provides its services in
connection with a variety of transactions, including mergers and
acquisitions, private equity, valuation and corporate finance.
The Board selected Evans & Evans to prepare the Valuation
Report on the basis of Evans & Evans’ considerable experience
in working with small to medium sized clients, its experience in
preparing valuations for public companies and its reputation among
its peers. There is no material relationship that existed during
the past two years or is mutually understood to be contemplated and
no compensation received or to be received as a result of the
relationship between Evans & Evans or its affiliates and the
Company.
Under the terms of its engagement with the Company, Evans &
Evans received a fee of $7,750, plus out-of-pocket expenses in
connection with rendering the Valuation Report, none of which was
contingent upon consummation of LLC Sale Transaction. The terms of
the Company’s fee arrangement with Evans & Evans which is
customary in transactions of this nature, was negotiated on
arms-length basis and the Board was aware of the arrangement.
Parties to the Unit Purchase Agreement
McorpCX, Inc.
McorpCX, Inc.
201 Spear Street, Suite 1100,
San Francisco, California 94105
McorpCX, Inc. is a California corporation, incorporated on December
14, 2001, and headquartered in San Francisco, California.
McorpCX is a customer experience (CX) management solutions company
dedicated to helping organizations improve customer experiences,
increase customer loyalty, reduce costs and increase revenue.
McorpCX’s consulting and professional services business is
currently operated exclusively through its wholly-owned subsidiary
McorpCX, LLC.
McopCX’s principal executive office is located a 201 Spear Street,
Suite 1100, San Francisco, CA 94105 and its telephone number is
(415) 526-2655. McorpCX’s website can be accessed at
www.mcorp.cx. Information contained in McorpCX’s website does not
constitute part of, and is not incorporated into, this proxy
statement.
mfifty, LLC.
mfifty, LLC.
525 San Anselmo Ave., Suite 147
San Anselmo, California 94960
Mfifty, LLC. is a limited liability company formed under the laws
of the State of California and is controlled by Michael Hinshaw,
who is its manager.
The Unit Purchase Agreement
Overview
On April 15, 2020, the Company entered into the Unit Purchase
Agreement with the Purchaser pursuant to which the Company agreed,
subject to certain conditions, including the authorization and
approval of the Unit Purchase Agreement by our stockholders at the
Special Meeting, to sell all of the membership units in the
Company’s wholly-owned subsidiary, McorpCX, LLC to the Purchaser, a
company controlled by Michael Hinshaw, the current President of
McorpCX, LLC, who has beneficial ownership over 5,200,000 Shares,
representing approximately 25% of the total outstanding Shares, for
aggregate consideration of $1,108,000 consisting of a $100,000 cash
payment received upon signing of the Unit Purchase Agreement as
well as $252,000 in cash and a $756,000 promissory note (the
“Promissory Note”) to be received by the Company upon the closing
of the sale of McorpCX, LLC to the Purchaser.
A copy of the Unit Purchase Agreement is attached as Annex A
to this proxy statement. You are encouraged to read the Unit
Purchase Agreement carefully and in its entirety.
Representations and Warranties of the Parties
The Unit Purchase Agreement contains a number of customary
representations of the parties relating to organization and valid
existence, capacity and authority to execute and deliver the Unit
Purchase Agreement, and the fact that there are no legal
proceedings that would prevent entrance into, or compliance with,
the Unit Purchase Agreement.
The Company also gave representations to the Purchaser that it was
the record and beneficial owner of all of the outstanding
membership units in McorpCX, LLC, free and clear of all
encumbrances, and that except for the liabilities assigned by the
Company to McorpCX, LLC pursuant to the terms of the Contribution
Agreement dated August 16, 2018 between the Company and McorpCX,
LLC (the “Contribution Agreement”), the Company has not assigned to
McorpCX, LLC any liabilities outside of the ordinary course of
McorpCX, LLC’s business and that McorpCX, LLC will not be liable
upon completion of the LLC Sale Transaction for any liabilities
outside the ordinary course of McorpCX, LLC’s business that were
first incurred by the Company after the date of the Contribution
Agreement.
The Purchaser gave representations to the Company that the
Promissory Note will rank senior in right of payment with all of
the Purchaser’s existing and future indebtedness, and that the
Purchaser has access to sufficient funds to pay all of the cash
consideration to be paid to the Company under the terms of the Unit
Purchase Agreement. The Purchaser also represented to the Company
that it was an “accredited investor” as defined under the United
States Securities Act of 1933, as amended (the “Securities Act”)
and that it was acquiring the membership units of McorpCX, LLC for
its own account and not with a view to any public distribution of
such securities or with the intention of selling, distributing, or
otherwise disposing of such securities in a manner that would
violate the registration requirements of the Securities Act.
Covenants of the Parties
Each of the Company and the Purchaser agreed to cooperate and use
their collective best efforts to obtain all of the required
regulatory approvals for the LLC Sale Transaction, including but
not limited to, the approval of the TSX Venture Exchange. The
Company also agreed to hold a meeting of stockholders for the
purposes of approving the LLC Sale Proposal, to prepare this Proxy
Statement relating to such meeting, and for the Board to recommend
that the Company’s stockholders approve the LLC Sale Proposal at
such meeting.
The Purchaser also agreed to cause Michael Hinshaw to sell or
otherwise transfer all 5,200,000 Shares he beneficially owned on
the date of the Unit Purchase Agreement (the “Hinshaw Shares”) to
one or more third parties on terms approved by the Company, to
cause Lynn Davison, Stephen Shay and Graham Clark to terminate any
rights they have to purchase the Hinshaw Shares, and to cause
Luckfound.org to sell or otherwise transfer all 750,000 Shares it
beneficially owned on the date of the Unit Purchase Agreement (the
“Luckfound Shares”) to one or more third parties on terms approved
by the Company.
The Company also agreed to (i) use commercially reasonable efforts
to change the name of the Company to a name not bearing any
similarity to “McorpCX” as determined by the Company and approved
by the Company’s stockholders, (ii) find one or more third parties
to purchase the Hinshaw Shares for $52,000 and to purchase the
LuckFound Shares, and (iii) not approve or otherwise cause McorpCX,
LLC to incur any new liabilities outside of the ordinary course of
the McorpCX LLC’s business, or to authorize, vote in favor of, or
otherwise accept any distributions, dividends or other similar
payments from McorpCX, LLC not contemplated in the Unit Purchase
Agreement.
Conditions that must be satisfied
or waived for the sale of McorpCX, LLC to
occur
The Unit Purchase Agreement provides that the representations and
warranties of each of the Company and the Purchaser in the Unit
Purchase Agreement must be accurate as of the closing of the LLC
Sale Transaction and the obligations and covenants of each of the
Company and the Purchaser must be complied with and performed as of
such date.
Additional closing conditions of the Company in favor of the
Purchaser include: (i) stockholder approval of the LLC Sale
Proposal, (ii) TSX Venture Exchange approval of the LLC Sale
Transaction, (iii) delivery to the Purchaser of a closing
certificate signed by an officer of the Company and (iv) the
Company entering into an indemnity agreement with Michael
Hinshaw.
Additional closing conditions of the Purchaser in favor of the
Company include: (i) execution by the Purchaser of the Promissory
Note and related security agreement, (ii) sale of the Hinshaw
Shares to third parties on terms reasonably satisfactory to the
Company, (iii) each of Lynn Davison, Stephen Shay, and Graham Clark
having terminated their rights to receive any Hinshaw Shares, (iv)
sale of the LuckFound Shares to third parties on terms reasonably
satisfactory to the Company, and (v) delivery to the Company of the
cash consideration as well as a closing certificate executed by the
Purchaser.
Termination of the Unit Purchase Agreement
The Unit Purchase Agreement contains certain termination rights for
the Company and the Purchaser, as the case may be, applicable
upon:
|
●
|
the parties mutual agreement to terminate the Unit Purchase
Agreement in writing;
|
|
●
|
September 1, 2020, if the LLC Sale Transaction has not been
completed by that date;
|
|
●
|
any court of competent jurisdiction prohibits the transactions
contemplated by the Unit Purchase Agreement, or a new legal
requirement makes such transaction illegal; or
|
|
●
|
the election by one party when representations and warranties of
the other party have become inaccurate in any material respect or
the other party has failed to comply with its covenants in any
material respect.
|
In order to terminate the Unit Purchase Agreement pursuant to the
above provisions, the party wishing to terminate must deliver to
the other party written notice stating its desire to terminate the
Unit Purchase Agreement along with a brief description of the basis
on which such party is terminating such agreement. If the basis for
such termination is a breach of a representation, warranty or
covenant, then the party in breach shall have 10 business days to
cure the breach after receiving notification of the breach from the
non-breaching party.
If the Unit Purchase Agreement is terminated, all further
obligations of the parties under the Unit Purchase Agreement shall
terminate, provided that the parties shall not be relieved of any
obligation or liability arising from any prior material breach by
such party of a representation, warranty or covenant contained in
the Unit Purchase Agreement, and each of the parties will in all
events remain bound and continue to be subject to the
indemnification provisions contained in the Unit Purchase
Agreement.
Indemnification Obligations under the Unit Purchase
Agreement
In addition to customary indemnification protections to both
parties, since Michael Hinshaw is expected to continue to act as
President of McorpCX, LLC until up to the closing of the LLC Sale
Transaction, the Purchaser has also agreed to indemnify the Company
from any liability arising from or related to the conduct of the
business of McorpCX, LLC prior to the closing of LLC Sale
Transaction, excluding any liability related to conduct that was
explicitly approved by the Board or any Undisclosed Liability (as
defined in the Unit Purchase Agreement).
Regulatory Approvals required for the LLC Sale
Transaction
The Company has agreed to use reasonable best efforts to obtain all
regulatory approvals required to complete the transactions
contemplated by the Unit Purchase Agreement, which include approval
from the TSX Venture Exchange. The Company has filed, or is in the
process of filing, applications and notifications to obtain the
required regulatory approval from the TSX Venture Exchange.
Although the Company does not know of any reason the Company cannot
obtain approval from the TSX Venture Exchange in a timely manner,
the Company cannot be certain when or if it will obtain them.
The Company believes that the LLC Sale Transaction is not subject
to the Hart-Scott Rodino Antitrust Improvements Act of 1976 or the
reporting or waiting requirements of any other United States
antitrust law. Other than the approval of the TSX Venture Exchange,
the Company is not aware of any other material regulatory
approvals.
Expected Timing of the sale of McorpCX, LLC
The Company expects to complete the LLC Sale Transaction in June
2020, promptly following the Special Meeting, if the LLC Sale
Proposal is approved by stockholders in accordance with the
requirements of the California Corporations Code and the policies
of the TSX Venture Exchange and the various other conditions to
closing contained in the Unit Purchase Agreement are satisfied or
waived. However, there can be no assurance that the LLC Sale
Transaction will be completed as currently anticipated. Certain
factors, including factors outside of the control of Company could
result in the LLC Sale Transaction being delayed or not occurring
at all.
Use of Proceeds and Future Operations
If the LLC Sale Proposal is passed by stockholders in accordance
with the requirements of the California Corporations Code and the
policies of the TSX Venture Exchange, and the closing conditions
outlined in the Unit Purchase Agreement are satisfied or waived
then the LLC Sale Transaction will be completed. Following the
completion of the LLC Sale Transaction, the Company intends to use
the transaction proceeds for the purpose of growing the Company’s
software development and technology services business. Currently,
the Company’s business mostly consists of providing professional
and related consulting services through McorpCX, LLC. Upon the
completion of the sale of McorpCX, LLC, the Company intends to
change its focus from a consulting business to a business focused
on providing technology services to clients. As part of this
strategy, the Company’s management intends to: (i) invest in
software and technology development, (ii) pursue the possibility of
mergers, acquisitions or joint ventures with companies that provide
complimentary products and services, (iii) pursue possible software
licensing arrangements, and (v) invest in additional infrastructure
within our Company. Prior to implementation, each of these possible
actions will be thoroughly vetted by the Board to assess the
expected level of enterprise value creation for each action
compared to the various risks associated with each possible
scenario. In addition, the Company may require financing to pursue
these strategies that is beyond the Company’s financial resources.
Accordingly, there is no assurance that the Company we will be able
to pursue any strategies that are identified by Board.
If the LLC Sale Proposal is not approved by stockholders in
accordance with the requirements of the California Corporations
Code and the policies of the TSX Venture Exchange, or if the other
conditions outlined in the Unit Purchase Agreement are not
satisfied or waived, then either the Company or the Purchaser may
terminate the Unit Purchase Agreements and the Board, along with
the Company’s management, will reassess the Company’s options in
light of the Company’s strategic goals and any alternatives that
may be available to the Company.
Certain United States Federal and State Income Tax
Consequences of the Sale of McorpCX, LLC
The Company anticipates that the LLC Sale Transaction will not
result in any material United States federal or state income tax
consequences to the Company’s disinterested United States
stockholders. The LLC Sale Transaction will be a taxable event for
the Company for United States federal, state and foreign income tax
purposes. The Company’s management anticipates that the LLC Sale
Transaction could result primarily in losses but also some taxable
gain to the Company in an amount equal to the difference between
the purchase price received and the Company’s adjusted tax basis in
the membership units being sold. Any gain recognized by the Company
for U.S. federal income tax purposes as a result of LLC Sale
Transaction is expected to be fully offset by available net
operating loss carryovers. Any gain recognized by the Company for
U.S. state income tax purposes may not be fully offset by net
operating loss carryovers, but is not expected to be material.
The United States federal income tax consequences described
above may not apply to all holders of Shares. Your tax consequences
will depend on your individual situation. Accordingly, the Company
strongly urges you to consult your tax advisor for a full
understanding of the particular tax consequences of the LLC
Sale Transaction to you.
No Dissenters’ Rights
No dissenters’ rights are available to our stockholders under the
California Corporations Code or the Company’s articles of
incorporation or bylaws in connection with the LLC Sale
Transaction.
Interests of the Company’s Directors and Executive Officers in
the Sale of McorpCX, LLC
Although as of the date of this Proxy Statement Michael Hinshaw has
beneficial ownership of 5,200,000 Shares, representing
approximately 25% of the total outstanding Shares, the terms of the
Unit Purchase Agreement require Mr. Hinshaw to sell all of these
Shares to a third party as a closing condition to the LLC Sale
Transaction.
In considering the recommendation of the Board to vote for the LLC
Sale Proposal, you should be aware that some of the Company’s
directors and executive officers may have personal interests in
this transaction that are, or may be, different from, or in
addition to, your interests.
The intended purchaser of McorpCX, LLC is Mfifty, LLC, an
entity which is controlled by Michael Hinshaw, the current
president of McorpCX, LLC. As a consequence. Michael Hinshaw, who
it is anticipated will no longer be affiliated with the Company at
the conclusion of the LLC Sale Transaction, will have effective
control over McorpCX, LLC after the conclusion of the LLC Sale
Transaction. Additionally, the terms of the Unit Purchase Agreement
provide that the Company will find one or more third party
purchasers to acquire all 5,200,000 Shares beneficially held by Mr.
Hinshaw for aggregate gross proceeds of $52,000.
With the exception of Stephen Shay, all of the Company’s directors
and executive officers own Shares and/or options to purchase
Shares, and to that extent, their interests in the sale of MCorpCX,
LLC are the same as that of other holders of the Company’s
outstanding Shares.
Required Vote
Under the California Corporations Code, the LLC Sale Proposal will
require the affirmative vote of holders of a majority of the
outstanding Shares entitled to vote. Under the policies of the TSX
Venture Exchange, the LLC Sale Proposal will require the
affirmative vote of a majority of the Shares that are held by
disinterested stockholders as of the Record Date in person or by
proxy at the Special Meeting. Disinterested stockholders for the
purposes of this vote includes all stockholders who do not have an
interest in the LLC Sale Transaction as of the Record Date. Votes
by stockholders who are not disinterested stockholders will not be
counted for the purposes of approving the LLC Sale Proposal under
the policies of TSX Venture Exchange. In particular, for the
purposes of this vote, any Shares held by Michael Hinshaw, or
Luckfound.org, as of the Record Date will not be counted for the
purposes of approving this proposal.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
APPROVAL OF THE LLC SALE PROPOSAL.
PROPOSAL 2 – Delisiting from TSX-V
Background of Listing on the TSX Venture Exchange
The Shares became listed on the TSX Venture Exchange on February 3,
2016. The goal of the Company listing the Shares on the TSX Venture
Exchange was to build investor interest in the Shares in Canada,
and to be able to raise money from Canadian investors in the
future.
Rationale for the Proposed Delisting
The Board has evaluated, with the assistance of members of the
Company’s senior management and its advisors, the TSX-V Delisting
Proposal. In reaching its decision to approve the application for
delisting of its Shares from the TSX Venture Exchange, subject to
requisite stockholder approval being achieved, the Board considered
the following factors:
|
●
|
Lack of trading volume of the Shares on the TSX Venture
Exchange;
|
|
●
|
Compliance costs associated with listing the Shares on the TSX
Venture Exchange;
|
|
●
|
Failure of the Company to generate significant investor interest in
the either the Company or the Shares in Canada;
|
|
●
|
Failure of the Company to raise any money from the issuance of
Shares to Canadian investors since the listing of the Shares on the
TSX Venture Exchange; and
|
|
●
|
The Company’s business plan and strategic priorities, which
currently does not include a focus on the Canadian capital
markets.
|
Process to Delist the Shares
The Company intends to apply to the TSX Venture Exchange for a
voluntary delisting of the Shares following the completion of the
LLC Sale Transaction. Where the TSX Venture Exchange does not
consider that a satisfactory alternative market exists for the
Shares, the Company is required to obtain majority of the minority
stockholder approval of the delisting. Accordingly, the Company is
seeking approval of the TSX-V Delisting Proposal at the Special
Meeting. In addition, TSX Venture Exchange approval of delisting is
subject to the TSX Venture Exchange being satisfied that the
Company’s public stockholders and the investing public generally
will not be prejudiced by the delisting. In most cases, the TSX
Venture Exchange will issue a bulletin days before the voluntary
delisting becomes effective.
Consequences of the Proposed Delisting
If the Company’s stockholders approve the TSX-V Delisting Proposal
in accordance with the requirements of the TSX Venture Exchange,
and such delisting is approved by the TSX Venture Exchange, then
the Shares will no longer be listed for trading on the TSX Venture
Exchange and the Company’s stockholders will no longer be able to
trade the Shares on the TSX Venture Exchange. However, the Company
will remain a reporting issuer in the provinces of British Columbia
and Alberta and will still be required to file periodic reports
with Canadian securities regulators.
Determination and Recommendation by the Board
The Board, after considering all factors that the Board deemed
relevant and after consulting with management and the Company’s
advisors, unanimously approved the application to the TSX Venture
Exchange for delisting the Company’s Shares from the TSX Venture
Exchange, subject to approval of the Company’s stockholders at the
Special Meeting. In connection therewith, the Board also
unanimously approved the delisting of the Shares from the TSX
Venture Exchange, to present the TSX-V Delisting Proposal to the
Company’s stockholders for approval at the Special Meeting and to
recommend that the Company’s stockholders approve such
resolution.
Required Vote
The approval of the TSX-V Delisting Proposal will require the
affirmative vote of a majority of the Shares that are voted by
stockholders as of the Record Date in person or by proxy at the
Annual Meeting, excluding for the purposes of this vote promoters,
directors or officers of the Company, stockholders who have direct
or indirect beneficial ownership or control, directly or
indirectly, of 10% or more of the outstanding Shares as of the
Record Date and any other insiders of the Company, in accordance
with the requirements of the TSX Venture Exchange.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
DELISTING OF THE COMPANY’S SHARES OF COMMON STOCK FROM THE TSX
VENTURE EXCHANGE
PROPOSAL 3 - ELECTION OF DIRECTORS
In the election of directors, every stockholder has the right to
vote each Share owned by such stockholder on the Record Date for as
many persons as there are directors to be elected. Five directors
are to be elected at the Special Meeting to serve until the next
annual meeting of stockholders and until their successors are duly
elected and qualified. Cumulative voting is not permitted. To be
elected, a nominee must receive a plurality of the votes cast at
the Special Meeting. Only votes cast FOR a nominee will be
counted. Votes withheld and broker non-votes will be excluded
entirely from the vote.
NOMINEES
Gregg R Budoi
Matthew Kruchko
Barry MacNeil
Nii A. Quaye
Giuseppe (Pino) Perone
Each of our directors serves until his or her successor is elected
and qualified.
OUR BOARD RECOMMENDS A VOTE "FOR" EACH OF
THE NOMINEES LISTED ABOVE.
Set forth below is certain information furnished to us by the
director nominees. There are no family relationships among any of
our current directors, nominees or officers. Unless specifically
indicated, none of the corporations or other organizations
referenced in the biographical information below is a parent,
subsidiary or other affiliate of the Company.
We believe that our directors should satisfy a number of
qualifications, including demonstrated integrity, a record of
personal accomplishments, a commitment to participation in Board
activities and other traits discussed below in “Our Director
Nominations Process”. We also endeavor to have a Board representing
a range of skills and depth of experience in areas that are
relevant to and contribute to the Board’s oversight of our
operations.
The Board believes its current size is appropriate for the size and
scope of our business.
We believe that the following nominees represent a desirable mix of
backgrounds, skills and experiences. Additionally, we believe that
the specific leadership skills and other experiences of the
nominees described below, particularly in the areas of technology,
senior executive leadership, financial accounting/reporting,
provide us with the perspectives and judgment necessary to guide
our strategies and monitor their execution.
Nominees for Election as Directors
Matthew Kruchko, age 49, director since August 31, 2017, and
since February 3, 2020 is our President and Chief Executive
Officer. Mr. Kruchko is also, since March 2020, our Corporate
Secretary. Since 2016, Mr. Kruchko has been a principal and the
Chief Strategy Officer of Connect Brands, Inc., a San Francisco
based marketing and advertising company. He has also been a member
of the board of directors of that company since 2016. Previously,
from 2007 to 2015 he was a Managing Director and a member of the
board of directors of Applied Storytelling, a brand
consultancy/strategy firm, and was previously Executive Vice
President of Strategy and Global Marketing for the UK-based SaaS
software company Kalibrate Technologies PLC from 2007 to
2015. Mr. Kruchko studied finance and marketing at the
University of Southern Maine and is currently an advisory board
member for the Detroit Creative Corridor Center (DC3).
Specific Qualifications, Attributes, Skills and
Experience. Mr. Kruchko brings to the Board extensive
knowledge of global marketing and marketing strategy, including in
the SaaS software industry, which the Board believes will important
as the Company continues to develop and market its customer
experience services. Also, as the Company’s President and Chief
Executive Officer, Mr. Kruchko provides the Board with exposure to
the Company’s executive team and insight into our specific
strategic and operational challenges and opportunities.
Gregg Budoi, age 55, Mr. Budoi has been a director on the
Board since August 2018, the Chairman of the Board since March
2020, and was our Interim President and Chief Executive Officer
from September 30, 2019 to February 3, 2020. Mr. Budoi previously
served as the Company’s Interim President and Chief Executive
Officer from August 16, 2018 to June 7, 2019, and the Company’s
Interim Chief Financial Officer from September 26, 2017 to November
6, 2018. Prior to becoming the Company’s Interim Chief
Financial Officer, Mr. Budoi was from 2014 to 2017 the Chief
Financial Officer and member of the Board of Directors of Kalibrate
Technologies Plc, a London Stock Exchange (AIM) listed SaaS
software and consulting company. Prior to that, from 2007 to 2014
he was a co-founder and former President and CEO of EZ Energy USA,
Inc. an Israeli company that operated 69 gas &
convenience stores. Mr. Budoi has also been Managing Director at
Barnes Wendling Corporate Finance, LLC, a financial advisory firm
where from 2006 to 2007 he established a corporate finance advisory
services platform and completed several corporate restructurings as
well as M&A and capital raising transactions. Prior to that, he
was Chief Executive Officer of his own financial advisory firm,
Budoi & Company, Inc. from 2003 to 2006 and was from 1999 to
2003 the Chief Financial Officer, Vice President Finance and
Treasurer of Dairy Mart Convenience Stores, Inc., where he led the
strategic evaluation and recapitalization process for this publicly
traded chain of over 850 convenience stores. Mr. Budoi holds a
BS in Business Administration/Finance from Ohio State University,
and a Masters of Business Administration from Cleveland State
University.
Specific Qualifications, Attributes, Skills and
Experience. Mr. Budoi brings to the Board extensive
executive management experience from several public and private
companies, as well as significant experience in the SaaS software
industry.
Nii Quaye, age 46, director since August 31, 2017.
From 2015 to 2016, Mr. Quaye was the Senior Vice President of
Global Head of Service Quality for the Abu Dhabi based First Gulf
Bank (FGB). Previously, from 2013 to 2014, Mr. Quaye was Vice
President, Group Head of Customer Service for Ecobank Transnational
Incorporated. Mr. Quaye also was General Manager and Head of
Service and Quality for the Saudi Investment Bank from 2010 to
2012, and was a Senior Vice President at CitiGroup where he was
responsible for administering that company’s Global Contact Center.
A GE-trained Six Sigma Black Belt, Mr. Quay holds a B.A. from
Ottawa University, a J.D. from the University of Maryland Law
School, and an MBA in Finance & Investments from The George
Washington University in Washington, DC.
Specific Qualifications, Attributes, Skills and
Experience. Mr. Quay brings to the Board significant
global finance and technology experience with several large global
organizations.
Barry MacNeil, age 59, director and our Chief Financial
Officer since February 3, 2020. Mr. MacNeil previously served as
the Company’s Chief Financial Officer from November 20, 2015
through September 26, 2017. Mr. MacNeil has more than 30 years of
accounting experience in public and private practice. Since April
2016, Mr. MacNeil has served as Chief Financial Officer for TAG Oil
Ltd., an oil and gas exploration and production company
headquartered in Vancouver British Columbia. Mr. MacNeil was
previously the Controller of TAG Oil Ltd. from March 2015 through
April 2016. Since August 2012, Mr. MacNeil has served as Chief
Financial Officer of Interlapse Technologies Corp. (formerly
Coronado Resources Ltd.), a Canadian-based fintech applications
public company. From October 2004 through March 2008, Mr.
MacNeil served as a member of the board of directors, CFO and
Secretary for Trans-Orient Petroleum Ltd., a company that invests
in early-stage resource and technology companies. Mr. MacNeil
is a Chartered Public Accountant and earned a diploma in Financial
Management from the British Columbia Institute of Technology.
Specific Qualifications, Attributes, Skills and
Experience. Mr. MacNeil brings to the Board significant
accounting and finance experience from a variety of public and
private companies.
Giuseppe (Pino) Perone, age 40, director since October 3,
2019. Mr. Perone is a Canadian lawyer serving as an executive and
director for various public and private companies in the resource
and technology sectors. He has served as a director and executive
officer of Interlapse Technologies Corp., formerly Coronado
Resources Ltd. since August 2012. Mr. Perone has also served as the
Corporate Secretary and General Counsel
of TAG Oil Ltd. since December 2010 and was
a member of the board of directors from July 2007 to December 2009.
Specific Qualifications, Attributes, Skills and Experience.
Mr. Perone brings to the Board experience practicing as a corporate
lawyer, and his legal experience in a variety of corporate and
commercial matters.
EXECUTIVE OFFICERS
Each of our officers is appointed by the Board to a term of one (1)
year and serves until his or her successor is duly appointed and
qualified, or until he or she is removed from office. None of our
current executive officers were selected to serve as an executive
officer as a result of any arrangement or understanding with
any other person.
The names, ages and positions of our officers are set forth below:
The address of our officers is the same as the Company’s address at
201 Spear Street, Suite 1100, San Francisco, California 94105.
Name and Address
|
Age
|
Position(s)
|
|
|
|
Matthew Kruchko
201 Spear Street, Suite 1100
San Francisco, CA 94105
|
49
|
President, Chief Executive Officer, Corporate Secretary and a
member of the Board of Directors
|
|
|
|
Lynn Davison
201 Spear Street, Suite 1100
San Francisco, CA 94105
|
56
|
Chief Operating Officer
|
|
|
|
Barry MacNeil
201 Spear Street, Suite 1100
San Francisco, CA 94105
|
59 |
Chief
Financial Officer |
|
|
|
Stephen Shay
201 Spear Street, Suite 1100
San Francisco, CA 94105
|
59
|
Vice President
|
|
|
|
|
Michael Hinshaw
201 Spear Street, Suite 1100
San Francisco, CA 94105
|
58
|
President, McorpCX, LLC
|
|
The people named above are expected to hold their offices/positions
until the next annual meeting of our stockholders to be held in
early 2021.
There are no family relationships between any of the Company’s
directors, director nominees and executive officers.
Background of Officers
The following provides certain background information about each of
our officers other than Matthew Kruchko and Barry MacNeil, whose
information appears above under "Nominees for Election as
Directors":
Michael Hinshaw – President of McorpCX,
LLC
Since August 2018 Mr. Hinshaw has been the President of our
wholly-owned operating subsidiary, McorpCX, LLC. From March 2006
through January 23, 2020 he served as a director on the Board and
from March 2006 to August 2018, Mr. Hinshaw served our President
and Chief Executive Officer and from December 2011 to August 2018
as our Treasurer and Principal Accounting Officer. From December 7,
2011 until November 20, 2015, Mr. Hinshaw was our Chief Financial
Officer. Mr. Hinshaw founded the Company in 2001. From 1999
until 2002, Mr. Hinshaw served as President and Chief Executive
Officer of Verida Internet Corp. Prior to its sale in 1999,
Mr. Hinshaw served as President of Triad Inc., a brand strategy and
management consulting firm. Mr. Hinshaw holds a MFA in Design and
Communication and a BFA in Graphic Design from the Academy of Art
University in San Francisco.
Lynn Davison – Chief Operating Officer
Since October 9, 2013, Ms. Davison has been our Chief Operating
Officer, and has served as our Secretary from February 3, 2012
until November 20, 2015. Ms. Davison served as our
Vice-President from February 7, 2011 to October 9, 2013. From
April 2004 to February 2011, Ms. Davison worked as a management
consultant to a range of start-up, mid-sized and Fortune 500
clients providing strategic business consulting services. From 1994
through April, 2004, Ms. Davison was a co-founder of C-Change,
Inc., a management consulting firm working with Fortune 500
companies. Ms. Davison has a BA in economics from Whitman College
in Walla Walla, Washington and is a certified Project Management
Professional (PMP) by the Project Management Institute.
Stephen Shay – Vice President
On May 16, 2015, Stephen Shay was appointed as our Vice President.
Prior to joining McorpCX, Mr. Shay enjoyed a nearly 21-year career
with Microsoft Corporation, where he served as an executive leader
in Sales, Operations, and IT. From November 2010 to September 2014,
he was General Manager, Customer Experience, responsible for
conceptualizing and driving initiatives designed to transform the
customer centricity of the organization and delivering simplified,
seamless, and successful interactions across the customer and
partner lifecycle at Microsoft. From August 2005 to November 2010,
Mr. Shay was General Manager, Strategy & Business Development,
were he supported Microsoft's acquisition growth strategy.
Mr. Shay earned a Bachelor of Science Degree in Management &
Computer Information Systems, from Park University, Kansas City,
Missouri and completed additional undergraduate studies in
architecture at the University of Kansas.
Involvement in Certain Legal Proceedings
During the past ten years, none of our directors, director nominees
or officers have been the subject of any of the following
events:
1.
|
A petition under the United States federal bankruptcy laws or any
state insolvency law filed by or against, or a receiver, fiscal
agent or similar officer appointed by a court for the business or
property of such person, or any partnership in which he/she was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he/she
was an executive officer at or within two years before the time of
such filing;
|
2.
|
Convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
3.
|
The subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him/her from, or
otherwise limiting, the following activities;
|
|
i)
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection
with such activity; or
|
|
ii)
|
Engaging in any type of business practice; or
|
|
iii)
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
United States federal or state securities laws or United States
federal commodities laws.
|
4.
|
The subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any United States federal or
state authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in paragraph 3.i in the preceding paragraph or to be
associated with persons engaged in any such activity;
|
5.
|
Found by a court of competent jurisdiction in a civil action or by
the SEC to have violated any United States federal or state
securities law, and the judgment in such civil action or finding by
the SEC has not been subsequently reversed, suspended, or
vacated;
|
6.
|
Found by a court of competent jurisdiction in a civil action or by
the United States Commodity Futures Trading Commission to have
violated any United States federal commodities law, and the
judgment in such civil action or finding by the United States
Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;
|
7.
|
The subject of, or a party to, any United States federal or state
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
|
|
i)
|
Any United States federal or state securities or commodities law or
regulation; or
|
|
ii)
|
Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order, or
|
|
iii)
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
8. Was the subject of, or a
party to, any sanction or order, not subsequently reversed,
suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Securities Exchange Act of 1934,
as amended, (15 U.S.C. 78c(a)(26))), any registered entity (as
defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
CORPORATE GOVERNANCE AND BOARD MATTERS
Board Meetings and Attendance
The Board met 10 times during fiscal 2019. Each member of the Board
attended at least 75% of all meetings of our Board and of the
committees of the Board on which they served in 2019 that took
place since each such director’s appointment to the Board. Although
we do not have a formal policy with respect to attendance of
directors at our stockholder meetings, all directors are encouraged
and expected to attend such meetings if possible. All of our
directors who were currently serving on the Board at the time the
annual meeting was held in February 2019 attended such meeting.
Independence of Directors
Our Shares are not listed on a national securities exchange or an
inter-dealer quotation system that requires that a majority of our
Board of Directors consist of independent directors. Under these
circumstances, the rules of the SEC require that we identify which
of our directors is independent using a definition for independence
for directors of a national securities exchange or inter-dealer
quotation system which has requirements that a majority of the
board of directors be independent. Based upon information requested
from and provided by each director concerning his background,
employment and affiliations, including family relationships, with
us, our senior management and our independent registered public
accounting firm, our Board of Directors has determined that two of
our five current directors, Messrs. Quaye and Perone are
independent directors under standards established by the NASDAQ
Stock Market. Given the current size of both the Company and the
Board the Board has determined that it is not necessary to have a
lead independent director.
Board Leadership Structure
Our Board is responsible for overseeing the exercise of corporate
power and seeing that our business and affairs are managed to meet
our own stated goals and objectives and that the long-term
interests of our stockholders are served.
The Board believes that it should maintain flexibility to select
our Chairman and our Board leadership structure from time-to-time
and policies do not preclude the Company’s Chief Executive Officer
from also serving as Chairman of the Board. The Board believes that
having a combined Chairman and Chief Executive Officer can, in
certain situations, enable the Company to speak with a unified
voice to the Company’s stockholders, employees, governmental and
regulatory agencies and other stakeholders. Our current Chairman,
Gregg Budoi previously served as our Interim President and
Chief Executive Officer. Given the Company’s size and
Mr. Budoi’s in-depth knowledge of the Company’s business, his
leadership in formulating and implementing strategic initiatives
and the market environment, the Board believed that having Mr.
Budoi serve as Chairman, while having Matthew Kruchko serve as the
Company's President and and Chief Executive Officer provides
the most decisive and effective leadership for the Company.
The Board believes that its current leadership structure,
consisting of having Mr. Kruchko serve as Chief Executive Officer
while having the Company’s former Interim Chief Executive Officer
serve as Chairman is optimal for the Company because it provides
the Company with strong, consistent leadership.
Risk Oversight
The Company’s officers are responsible for assessing and managing
our various exposures to risk on a day-to-day basis, including the
creation and implementation of appropriate risk management policies
and programs.
Our Board has overall responsibility for overseeing our officers in
the execution of these responsibilities and for assessing our
overall approach to risk management.
Additionally, while oversight of our risk management process is a
full Board responsibility, the responsibility for monitoring
financial risks has been delegated to the Board’s audit committee.
The audit committee meets periodically with management to review
our major financial risk exposures and the steps our management has
taken to monitor and control such exposures. Such risk exposures
and steps are reported by the audit committee to the full
Board.
The Board’s role in risk oversight has not had any effect on the
Board’s leadership structure.
Our Director Nominations Process
We do not have a standing nominating committee as because of our
size as well as the current size of our Board, the Board believes
that it is appropriate for the Board as a whole to perform the
functions of a nominating committee. Consequently, our Board is
responsible for approving candidates for Board membership.
Criteria for Directors
Our Board believes that certain criteria should be met by director
nominees to ensure effective corporate governance, support the
Company’s strategies and businesses, account for individual
director attributes and the effect of the overall mix of those
attributes on the Board’s effectiveness, and support the successful
recruitment of qualified candidates for the Board. Qualified
candidates are those who, in the judgment of the Board, possess
certain personal attributes and a sufficient mix of experience and
related attributes to assure effective service on the Board. The
personal attributes of director nominees that the Board considers
include:
|
•
|
Experience. Each candidate should possess professional and
personal experiences and expertise relevant to the Company’s
business operations.
|
|
• |
Integrity. Each candidate shall be an individual who has
demonstrated integrity and ethics in his or her personal and
professional life and has established a record of professional
accomplishment in his or her chosen field; |
|
•
|
Best Interests of All stockholders. Each candidate must be
prepared to represent the best interests of all stockholders and
not just one particular constituency;
|
|
•
|
Active Participation. Each candidate must be
prepared to participate fully in Board activities, including
attendance at, and active participation in, meetings of the Board
and the committee(s) of which he or she is a member, and not have
other personal or professional commitments that would, in the
Board’s sole judgment, interfere with or limit his or her ability
to do so;
|
|
•
|
Independence. No candidate, or family member or
affiliate or associate (as defined in federal securities laws) of a
candidate, shall have any material personal, financial or
professional interest in any present or potential competitor of the
Company;
|
|
•
|
Collegiality. Each candidate should contribute positively to
the existing chemistry and collegial culture among Board members;
and
|
|
•
|
Diversity. Each candidate should contribute to the Board’s
overall diversity – diversity being broadly construed to mean a
variety of viewpoints, perspectives, personal and professional
experiences and backgrounds, such as nationality, gender and
ethnicity differences.
|
Processes for Identifying Director Candidates
The Board has two principal methods for identifying potential Board
candidates (other than those proposed by stockholders, as discussed
below). First, the Board solicits ideas for possible candidates
from a number of sources, including other members of the Board,
senior executives, individuals personally known to Board members
and research.
The Board will also consider nominees recommended by the Company’s
stockholders as candidates for Board membership. A stockholder
wishing to nominate a candidate for Board membership should provide
written notice to the Board at the following address: 201 Spear
Street, Suite 1100, San Francisco, California 94105. To nominate a
candidate for election to the Board at a meeting of shareholders,
the notice must be received not less than 120 days before the first
anniversary of the date of the Company’s proxy statement released
to stockholders in connection with the annual meeting held in the
prior year. The notice should contain information about both the
nominee and the stockholder making the nomination, including such
information regarding each nominee required to be included in a
proxy statement filed pursuant to SEC rules and regulations and
such other information sufficient to allow the Board to determine
if the candidate meets the criteria for Board membership described
above. The Board may require that the proposed nominee furnish
additional information to determine that person’s eligibility to
serve as a director. All recommendations will be brought to the
attention of the Board.
Evaluation of Director Candidates
The Board will consider and evaluate all candidates identified
through the processes described above, including incumbents and
candidates proposed by stockholders.
If, based upon Board’s initial evaluation, the candidate continues
to be of interest, members of the Board may interview the candidate
and communicate their evaluation to the rest of the Board.
Additional meetings between the candidate and other members of the
Board may also be arranged. Ultimately, background and reference
checks may also be conducted by the Board.
The Committees of the Board
Due to the Company’s current size, the only committee of the Board
is an audit committee. The Board currently does not have a
nominating or compensation committee and the functions normally
performed by such committees are performed by the Board as a
whole.
Special Committee – Selection of President and Chief
Executive Officer
On May 6, 2019, the Board formed a special committee of the Board
consisting of Mr. Hinshaw, Mr. Budoi and Mr. Quaye (the “Special
Committee”), which was tasked with coordinating the search process
for a permanent Company President and Chief Executive Officer (Mr.
Budoi was serving as the Interim President and Chief Executive
Officer at the time the Special Committee was formed). The mandate
of the Special Committee was to review, interview, and evaluate all
candidates for such position and make a recommendation to the Board
as a whole as to which candidate should be appointed by the Board
as the Company’s next President and Chief Executive Officer.
After reviewing and analyzing several candidates, on June 7, 2019,
the Special Committee recommended to the Board that Rajesh Makhija
be appointed as the Company’s President and Chief Executive
Officer, which he subsequently was by the Board on that date. After
making such recommendation, the Special Committee was
disbanded.
Compensation Committee Functions
The Board believes that because of the limited number of executives
and employees currently employed by the Company and that the Board
is currently composed of only five directors, that having is
separate compensation committee is not necessary. Since the Company
currently does not have a compensation committee or other committee
of the Board performing similar functions, executive officer
compensation is determined by the entire Board. The Board
determines our compensation objectives, philosophy and forms of
compensation and benefits for executive officers The Board
continually reviews and considers best practices in executive
compensation and stockholder expectations, as well as the size and
financial results of the Company in making its decisions regarding
appropriate compensation levels. Mr. Hinshaw, the
Company’s former President and Chief Executive Officer and
current President of McorpCX, LLC, Mr. Makhija, the Company’s
former President and Chief Executive Officer, and Mr. Budoi, the
Company’s Interim President and Chief Executive Officer until
February 3, 2020, were the only officers or employees of the
Company who participated in deliberations of the Company’s Board
concerning executive officer compensation in 2019, as Mr. Kruchko,
the Company’s current President and Chief Executive Officer was not
an officer or employee of the Company during 2019. Each of Mr.
Budoi, and Mr. Malkhija excused themselves from the Board’s
discussions concerning the compensation of the Company’s President
and Chief Executive Officer when they were serving in such
capacity.
The Board currently does not delegate any of its authority to make
compensation decisions to any other person and neither the Board
nor Company’s management has ever used a compensation consultant to
determine or recommend the amount or form of executive or director
compensation.
Audit Committee and Charter
The Company has a separately-designated audit committee of the
Board that is comprised of the following directors: Gregg Budoi,
Nii Quaye and Matthew Kruchko of which Mr. Quaye and Mr. Kruchko
(until February 3, 2020) were determined to be independent
directors under the standards established by the NASDAQ Stock
Market. Although Mr. Kruchko was determined to be an
independent director on the Board under the standards established
by the NASDAQ Stock Market for the entire 2019 fiscal year, upon
his appointment as the Company’s President and Chief Executive
Officer on February 3, 2020, he is no longer considered to be an
independent director. The Board has decided to have Mr. Kruchko
remain on the audit committee because of his previous service on
the committee and his experience in financial matters with the
other public companies.
As the Company’s Interim President and Chief Executive Officer
until February 3, 2020, Mr. Budoi is determined not to be an
independent director under the standards established by the NASDAQ
Stock Market. Despite not being an independent director under the
standards established by the NASDAQ Stock Market, the Board decided
to appoint him to the audit committee because of his intimate
knowledge of both the operations of the Company and the financial
management of other public companies in which he was previously
associated with.
According to the Company’s audit committee charter, which is
available on our website at http://investors.mcorp.cx, our audit
committee is responsible for: (1) selection and oversight of our
independent accountant; (2) establishing procedures for the
receipt, retention and treatment of complaints regarding
accounting, internal controls and auditing matters; (3)
establishing procedures for the confidential, anonymous submission
by our employees of concerns regarding accounting and auditing
matters; (4) engaging outside advisors; and, (5) funding for the
outside auditory and any outside advisors engagement by the audit
committee.
Audit Committee Financial Expert
Our Board has also determined that Mr. Quaye (who is an independent
director under the standards established by the NASDAQ Stock
Market) qualifies as an "audit committee financial expert" as
defined in applicable SEC rules.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of
ethics is reasonably designed to deter wrongdoing and promote
honest and ethical conduct; provide full, fair, accurate, timely
and understandable disclosure in public reports; comply with
applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the
code.
Whistleblower Policy
We have adopted a whistleblower policy that provides for the
protection of our employees from our retaliation where an employee
believes that we are violating some law, rule or regulation and
wants to disclose the same to proper authorities or to the public
at large. This policy further provides a mechanism whereby
the employee may disclose the information to us in a confidential
manner and may possibly resolve the issue without the need of going
to third parties outside of our organization.
Stockholder Communications with Board
Stockholders who wish to communicate with the Board should send
written correspondence to the Board in the care of the Secretary,
McorpCX, Inc., 201 Spear Street, Suite 1100, San Francisco,
California 94105. The correspondence should indicate that the
person sending the correspondence is a stockholder and set out the
purpose of such communication. The secretary will: (i) forward
the correspondence to the director to whom it is addressed; or,
(ii) attempt to handle the inquiry directly where it is a
request for information about the Company or in the case of
correspondence addressed to the Board generally; or (iii) not
forward the correspondence if it is primarily commercial in nature
or if it relates to an improper topic. All such correspondence will
be summarized for the Board periodically, and each such
correspondence will be made available to any director upon
request.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”) requires our executive officers and directors, and
persons who beneficially own more than 10% of our equity
securities, to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based upon a review of
information available to us and a review of the information filed
with the SEC, with the exception of the following all officers,
directors and owners of 10% or more of our Shares have filed all
reports required by Section 16(a) of the Exchange Act for the year
ended December 31, 2019: 1) A Form 3 was filed late by Rajesh
Makhija, 2) one Form 4 was filed late by Michael Hinshaw to report
five separate transactions, which were each reported late, 3) one
Form 4 was filed late by Lynn Davison to report one transaction
late, 4) one Form 4 was filed late by Stephen Shay to report one
transaction late, and 5) one Form 4 was filed late by Rajesh
Makhija to report two transactions late.
EXECUTIVE COMPENSATION
On February 1, 2011, we entered into an employment agreement with
Lynn Davison, pursuant to which she agreed to serve as our Vice
President. This initial agreement provided for an annual base
salary of $132,000 but was subsequently increased to $162,000
effective August 22, 2014 and again increased to $202,500 effective
January 1, 2019. In addition, Ms. Davison is eligible for bonus
compensation as established by us from time to time. On February 7,
2011, we granted Ms. Davison 10-year options to purchase 300,000
Shares at an exercise price of $0.35 per Share. A Board resolution
dated December 17, 2015 later reset the exercise price of these
options to $0.05 per Share. On September 3, 2013, we granted Ms.
Davison an additional 10-year options to purchase 300,000 Shares at
an exercise price of $0.40 per Share. On May 15, 2015, we granted
Ms. Davison an additional 10-year options to purchase 100,000
Shares at an exercise price of $0.75 per Share.
All of the options granted to Ms. Davison have fully vested and are
exercisable pursuant to their respective terms. In August 2019, the
Board cancelled 300,000 stock options with an exercise price of
$0.40 per Share previously granted to Ms. Davison in connection
with Ms. Davison entering into a private stock purchase agreement
with Mr. Hinshaw to acquire shares currently owned by Mr.
Hinshaw.
On May 15, 2016, the Company entered into an employment agreement
with Stephen Shay pursuant to which he agreed to serve as our Vice
President. This initial agreement provided for an annual base
salary of $240,000. In addition, Mr. Shay is eligible for bonus
compensation as established by us from time to time.
On May 15, 2015, we granted Mr. Shay 10-year options to purchase
600,000 Shares with an exercise price of $0.75 per Share. These
stock options were subsequently cancelled by the Board in August of
2019 in connection with Mr. Shay entering into a private stock
purchase agreement with Mr. Hinshaw to acquire shares currently
owned by Mr. Hinshaw.
In connection with his original appointment as the Company’s
Interim President and Chief Executive Officer in August 2018, the
Company and Mr. Budoi entered into an executive employment
agreement dated August 16, 2018 (the “Budoi Employment Agreement”),
under which Mr. Budoi was to be paid a base salary of $204,000
subject to an adjustment to $300,000 upon the occurrence of any of
the following events: (i) the Company raises an aggregate of at
least $5.0 million in connection with the new issuance of any form
of equity securities, or (ii) the acquisition of another company
with annual revenues that when combined with the Company’s revenues
over that previous 12 calendar month period equals $5.0 million or
more on an annualized pro forma basis.
The Budoi Employment Agreement also provided that Mr. Budoi was
entitled to receive a one-time signing bonus of $100,000 contingent
upon the achievement of certain milestone events, including (i) the
completion of an equity financing in excess of $5.0 million, (ii)
the completion of an acquisition of a new business with annualized
revenues (which when combined with the Company’s annual revenues
over the previous 12 months) that are in excess of $5.0 million per
year, or (iii) the determination by the Board that Mr. Budoi has
successfully executed a strategic plan developed by the Board that
includes the acquisition and/or disposition of material assets or
business operations in a transaction approved by the Board and the
Company’s stockholders, if required, in each case to be achieved
prior to the one year anniversary of the effective date of Mr.
Budoi’s employment agreement.
In addition, Mr. Budoi was entitled to participate in the Company’s
employee benefit plans and receive stock options under the
Company’s Amended and Restated Stock Option Plan (the “Option
Plan”). Mr. Budoi’s employment as our Interim President and Chief
Executive Officer was for an initial term expiring October 31, 2018
with automatic renewals (subject to right of the Company and Mr.
Budoi to elect not to renew) for additional one month periods. Upon
the initial expiration of the Budoi Employment Agreement on October
31, 2018, Mr. Budoi and the Company agreed to amend the employment
agreement as follows:
|
(a)
|
For the months of November and December 2018 Mr. Budoi agreed to
not receive any compensation and effective January 1, 2019, Mr.
Budoi’s base salary shall be reduced to $60,000 subject to an
adjustment by the Board in connection with the determination by the
Board that Mr. Budoi has successfully executed a strategic plan
developed by the Board that may include the acquisition, joint
venture, licensing and/or merger of new business operations or
technology in a transaction approved by the Board and the Company’s
stockholders, if required, in each case to be achieved prior to the
one year anniversary of the effective date of Mr. Budoi’s
employment agreement.
|
|
(b)
|
Mr. Budoi’s one-time signing bonus shall be increased to an amount
of up to $200,000 contingent upon the determination by the Board
that Mr. Budoi has successfully executed a strategic plan developed
by the Board that may include the acquisition, joint venture,
licensing and/or merger of new business operations or technology in
a transaction approved by the Board and the Company’s stockholders,
if required, in each case to be achieved prior to the one year
anniversary of the effective date of Mr. Budoi’s employment
agreement.
|
The Board also granted Gregg Budoi 290,000 stock options with an
exercise price of $0.30(Canadian) per Share. The options vest
incrementally in three roughly equal installments on August 16,
2019, August 16, 2020 and August 16, 2021, respectively. The stock
options are subject to accelerated vesting in connection with a
change in control of the Company, pursuant to the terms of the
Option Plan.
The Budoi Employment Agreement, as amended, was terminated upon Mr.
Budoi’s resignation as our Interim President and Chief Executive
Officer on June 7, 2019. Mr. Budoi did not enter a new employment
agreement with the Company during his tenure as our Interim
President and Chief Executive Officer from September 30, 2019
through February 3, 2020.
While he was serving as our President and Chief Executive Officer,
Michael Hinshaw did not have a written employment agreement with
the Company. However, pursuant to the terms of a verbal agreement
between Mr. Hinshaw and the Company, Mr. Hinshaw received an annual
base salary of $300,000 for his executive services as the Company’s
President and Chief Executive Officer.
In connection with his appointment as President of McorpCX, LLC in
August 2018, Michael Hinshaw has entered into an executive
compensation agreement with McorpCX, LLC under which he will be
paid a base salary of $250,000 and will be entitled to receive the
following additional incentive remuneration (collectively,
“Variable Compensation”):
|
●
|
Quarterly payments equal to (i) 2.5% of all gross revenues
generated by McorpCX, LLC, plus (ii) an additional 2.5% (for a
total of 5%) of all gross revenues generated by McorpCX, LLC in
excess of $5.0 million per year, and
|
|
●
|
An amount up to 10% of the aggregate of all fees received by
McorpCX, LLC from existing clients of McorpCX, LLC for projects
that were not agreed to as of the effective date of Mr. Hinshaw’s
employment agreement (“New Projects”), and for all projects with
clients of the McorpCX, LLC that were not clients of the McorpCX,
LLC as of the effective date of Mr. Hinshaw’s employment agreement
(“New Clients”), where such New Projects or projects from New
Clients were originated by Mr. Hinshaw, provided that the aggregate
sales commission paid to both Mr. Hinshaw and to other persons
related to the same New Project or project from a New Client will
not exceed 15% of the total fees received by McorpCX, LLC on such
New Project or project from a New Client.
|
In addition, Mr. Hinshaw will be entitled to participate in any
deferred compensation plan that may be adopted by McorpCX, LLC
reflecting Mr. Hinshaw’s right to receive awards from a share of
the deferred compensation pool that will be comprised of up to 50%
of the annual cash flow of McorpCX, LLC, which will include net
income (i) plus depreciation and amortization expense, (ii) less
principal payments made on any indebtedness, and (iii) less any
capital expenditures paid in cash during a fiscal year.
The initial term of Mr. Hinshaw’s employment is six months from the
date of his employment agreement, with automatic renewals (subject
to right of McorpCX, LLC and Mr. Hinshaw to elect not to renew) for
additional three month periods. McorpCX, LLC may terminate Mr.
Hinshaw’s employment without cause (or Mr. Hinshaw can terminate
the agreement upon good reason) in which case Mr. Hinshaw is
entitled to payment of six months’ salary as severance plus all
Variable Compensation earned by Mr. Hinshaw during the previous
twelve months.
From June 7, 2019 until his resignation on September 30, 2019
Rajesh Makhija served as our President and Chief Executive Officer.
Mr. Makhija executed an executive employment agreement (the
“Makhija Employment Agreement”) with the Company dated June 7,
2019, which provided Mr. Makhija was to be paid an initial base
salary of $120,000. Additionally, Mr. Makhija was entitled to
receive a one-time performance bonus of $150,000, if prior to the
one year anniversary of the effective date of the Makhija
Employment Agreement, any two of the following events occur: (i)
the Company has “annualized revenue” (defined as recognized revenue
plus monthly contracted recurring revenue (multi-year contracts
with clients that have known amounts of annual net revenue) with a
term greater than twelve months as of the 12th month after the
effective date times 12) greater than $7,000,000 as of the
12th calendar month following the effective date of the
Makhija Employment Agreement plus (C) the annualized revenue of any
completed acquisition, merger or similar arrangement with another
company, and/or (ii) the Board determines that Mr. Makhija has
successfully executed a strategic plan approved by the Board, and
the stockholders if required, which may include the acquisition,
merger, joint venture, or other transaction and/or (iii) has raised
capital from new investors in an amount equaling $1,500,000 or more
that will enable the execution of a Board approved strategic plan,
in each case to be achieved prior to the one year anniversary of
the effective date of the Employment Agreement. If only one of the
above events occur, Mr. Makhija would have been entitled to a
performance bonus of $50,000.
Mr. Makhija was also eligible to receive an annual bonus based on
his achievement against specific criteria which was to be
determined jointly by the Board and Mr. Makhija within 90 days of
the effective date of the Makhija Employment Agreement. The amount
of bonus earned due to the Company meeting any target EBIDTA and/or
net revenue was capped at 75% of his base salary.
The Makhija Employment Agreement was terminated upon Mr. Makhija’s
resignation as our President and Chief Executive Officer on
September 30, 2019.
The Company has yet to enter an employment agreement with Matthew
Kruchko since his appointment as our President and Chief Executive
Officer in February 2020.
The following table sets forth information with respect to
compensation paid by us to our “named executive officers” (which
includes our principle executive officer or “PEO” and our two
highest compensated officers in 2019 outside of our PEO) for each
of the last two years as well as all persons who served as our PEO
during 2019, but were not serving in such position at the end of
such year.
Executive Officer Compensation Table
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Pension Value &
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
Non-Equity
|
Deferred
|
|
|
Name and
|
|
|
|
Stock
|
Option
|
Incentive Plan
|
Compensation
|
All Other
|
|
Principal
|
|
Salary
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Earnings
|
Compensation
|
Totals
|
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Michael Hinshaw
|
2019
|
344,192 [2]
|
0
|
0
|
0
|
0
|
0
|
183,941 [3]
|
528,133
|
President [1]
|
2018
|
348,314 [2]
|
0
|
0
|
0
|
0
|
0
|
23,442 [3]
|
371,756
|
|
|
|
|
|
|
|
|
|
|
Gregg Budoi
|
2019
|
25,923 [5]
|
0
|
0
|
0
|
0
|
0
|
0
|
25,923
|
President, CEO [4]
|
2018
|
42,500 [5]
|
0
|
0
|
77,699 [6]
|
0
|
0
|
58,578 [7]
|
178,777
|
|
|
|
|
|
|
|
|
|
|
Rajesh Makhija
|
2019
|
37,769
|
0
|
0
|
0
|
0
|
0
|
0
|
37,769
|
President, CEO [8]
|
2018
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
Stephen Shay
|
2019
|
240,000
|
7,133
|
0
|
0
|
0
|
0
|
6,000 [9]
|
253,133
|
Vice President
|
2018
|
240,000
|
0
|
0
|
0
|
0
|
0
|
6,000 [9]
|
246,000
|
[1]
|
Mr. Hinshaw resigned as the Company’s President and Chief Executive
Officer in August 2018 and was appointed the President of the
Company’s wholly owned subsidiary, McoprCX, LLC at such time.
|
[2]
|
In addition to Mr. Hinshaw’s salary of $250,000, his compensation
also includes variable compensation in the form of quarterly
payments equal to (i) 2.5% of all gross revenues generated by
McorpCX, LLC, plus (ii) an additional 2.5% (for a total of 5%) of
all gross revenues generated by McorpCX, LLC in excess of $5.0
million per year.
|
[3]
|
All other compensation for Michael Hinshaw for the year ended 2019
consisted of sales commissions of $156,681, and for each of the
years ended 2019 and 2018, payments for health insurance in the
amount of $25,260 and $23,442, respectively.
|
[4]
|
Mr. Budoi served as our Interim Chief Executive Officer from August
16, 2018 until June 7, 2019 and again from September 30, 2019 until
February 3, 2020.
|
[5]
|
In 2019, Mr. Budoi’s salary includes salary earned only for the
periods he served as Interim President and Chief Executive Officer.
In 2018, for the months of November and December, Budoi agreed to
not receive any compensation.
|
[6]
|
On August 16, 2018, the Company granted 290,000 stock options to
Mr. Budoi. These options had an exercise price of $0.30 (Canadian)
and are scheduled to vest incrementally in roughly equal amounts on
August 16, 2019, 2020 and 2021.
|
[7]
|
All other compensation for Mr. Budoi consisted of consulting fees
earned by Mr. Budoi pursuant to a consulting agreement dated
September 26, 2017, which terminated on August 16, 2018 in
connection with Mr. Budoi’s appointment as our Interim Chief
Executive Officer.
|
[8]
|
Mr. Makhija was appointed our President and Chief Executive Officer
on June 7, 2019 and resigned September 30, 2019. His salary
includes salary earned only for the period of employment.
|
[9]
|
All other compensation for Stephen Shay for each of the years ended
2019 and 2018 consisted of cash payments to Mr. Shay intended to
cover the cost of health insurance premiums.
|
The following table sets forth information with respect to
compensation paid by us to our non-employee directors (all
directors except for Mr. Hinshaw and Mr. Budoi) during the last
completed fiscal year ended December 31, 2019.
Director Compensation Table
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
Pension Value &
|
|
|
|
Fees
|
|
|
|
Nonqualified
|
|
|
|
Earned or
|
|
|
Non-Equity
|
Deferred
|
|
|
|
Paid in
|
Stock
|
Option
|
Incentive Plan
|
Compensation
|
All Other
|
|
|
Cash
|
Awards
|
Awards
|
Compensation
|
Earnings
|
Compensation
|
Total
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
Nii Quaye
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Matthew Kruchko
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Guiseppe Perone
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
(1)
|
The table above does not include Barry MacNeil as he was
appointed subsequent to year end on February 3, 2020.
|
Non-employee members of our board of directors may receive stock
options granted under the Company’s Amended and Restated Stock
Option Plan (the “Plan”) as consideration for their services on our
board of directors. Should any director be awarded option grants
the amount of those grants would be proportionate to their level of
involvement with the activities of the board of directors (meeting
attendance, service on committees, etc.). Additionally, in
August 2017, the Company decided to pay a $2,500 monthly fee to our
non-employee directors in consideration for their service on our
board of directors. As of January 1, 2019, Mr. Quaye and Mr.
Kruchko agreed that they would no long receive any monthly
compensation to participate on the Board and no fees were paid to
any of our non-employee directors during 2019.
There are no retirement, pension, or profit sharing plans for the
benefit of our officers and directors other than the Plan.
Securities offered under the Plan will consist exclusively of our
shares of common stock. The aggregate number of shares of common
stock reserved for issuance under the Plan is fixed at 10% of the
total number of issued and outstanding shares of common stock from
time to time, such that the shares of common stock reserved for
issuance under the Plan will increase automatically with increases
in the total number of shares of common stock issued and
outstanding.
If an option awarded under the Plan expires, is surrendered in
exchange for another option, or terminates for any reason during
the term of the Plan prior to its exercise in full, the shares of
common stock subject to but not delivered under such option will be
available for issuance pursuant to the exercise of future options
granted under the Plan.
The following table sets forth information with respect to
outstanding equity awards held by our named executive officers at
December 31, 2019.
Outstanding Equity Awards at December 31, 2019
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
Number of
|
|
Number of
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Shares
|
|
Number of
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Or Units of
|
|
Unearned
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock
|
|
Shares,
|
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
that have not
|
|
Units that
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options
|
|
Price
|
|
Date
|
|
Vested
|
|
have not vested
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Gregg Budoi
|
|
96,667
|
|
193,333
|
|
0
|
|
$
|
0.23
|
|
8/16/2023
|
|
0
|
|
0
|
|
Compensation Committee Interlocks and Insider
Participation
Since the Company currently does not have a compensation committee
or other committee of the Board performing similar functions,
executive officer compensation is determined by the entire Board.
Mr. Kruchko, our current President and Chief Executive Officer, Mr.
Budoi, our former Interim President and Chief Executive Officer,
Mr. Makhija, our former President and Chief Executive Officer, and
Mr. Hinshaw, our former President and Chief Executive Officer and
the current President of the Company’s wholly-owned subsidiary,
McorpCX, LLC are the only officers or employees of the Company who
participated in deliberations of the Board concerning executive
officer compensation. However, each of Mr. Kruchko, Mr. Makhija,
Mr. Hinshaw and Mr. Budoi excused themselves from our Board’s
discussions concerning the compensation of our President and Chief
Executive Officer when such person was serving in that capacity.
With the exception of each of Mr. Budoi, Mr. Makhija, and Mr.
Hinshaw, no member of our Board was, during the year ended December
31, 2019, an officer, former officer or employee of the Company or
any of its subsidiaries, or had any relationship requiring
disclosure by the Company under the SEC rules requiring disclosure
of certain relationships and related party transactions. No
executive officer of the Company served as a member of (i) the
compensation committee of another entity in which one of the
executive officers of such entity served on our Board, (ii) the
board of directors of another entity in which one of the executive
officers of such entity served on our Board, or (iii) the
compensation committee of another entity in which one of the
executive officers of such entity served as a member of our board
of directors, during the year ended December 31, 2019.
.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Related Party Transactions
The Company did not engage in any transactions with related parties
requiring disclosure under Item 404 of Regulation S-K under the
Securities Act of 1933, as amended since January 1, 2019 and other
than the transactions contemplated in the Unit Purchase
Agreement between the Company and mfifty, LLC (“mfifty”) a
company controlled by Michael Hinshaw, there are currently no such
transactions proposed.
As described further in this Proxy Statement, the Company is
planning to sell all of membership interests in the Company’s
wholly-owned subsidiary, McorpCX. LLC, to Mfifty which is
controlled by Michael Hinshaw, the current president of McorpCX,
LLC, who has beneficial ownership over 5,200,000 Shares,
representing approximately 25% of the total outstanding Shares, for
aggregate consideration of $1,108,000, consisting of $352,000 in
cash consisting of $100,000 received upon the signing of the Unit
Purchase Agreement and $252,000 to be received at the closing of
the transaction along with a $756,000 promissory note.
Although as of the date of this Proxy Statement Michael Hinshaw has
beneficial ownership of 5,200,000 Shares, representing
approximately 25% of the total outstanding Shares, the terms of the
Unit Purchase Agreement require Mr. Hinshaw to sell all of these
Shares to one or more third parties selected by the Company for
gross proceeds of $52,000 as a closing condition to the LLC
Sale Transaction.
Review and Approval of Related Party Transactions
The Board understands that related party transactions can present a
heightened risk of potential or actual conflicts of interest and
may create the appearance that Company decisions are based on
considerations other than the best interests of the Company and its
stockholders. As a result, the Board prefers to avoid related party
transactions. However, the Board recognizes that there are
situations where related party transactions may be in, but may not
be inconsistent with, the best interests of the Company and its
stockholders.
As a result, the Board is responsible for reviewing and approving
the terms and conditions of all proposed transactions between us,
any of our officers, directors or stockholders who beneficially own
more than 5% of our outstanding Shares, or relatives or affiliates
of any such officers, directors or stockholders, to ensure that
such related party transactions are fair and are in our overall
best interest and that of our stockholders.
The Board has not adopted any specific procedures for conduct of
reviews and considers each transaction in light of the facts and
circumstances. In the course of its review and approval of a
transaction, the Board considers, among other factors it deems
appropriate:
|
•
|
whether the transaction is fair and reasonable to us;
|
|
|
|
|
•
|
the business reasons for the transaction; and
|
|
|
|
|
•
|
whether the transaction is material, taking into account the
significance of the transaction.
|
Any member of the Board who is a related person with respect to a
transaction under review may not participate in the deliberations
or vote respecting approval or ratification of the transaction,
provided, however, that such director may be counted in determining
the presence of a quorum at a meeting of the Board that considers
the transaction.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 21, 2020 the total number
of shares owned beneficially by each of our directors, director
nominees and named executive officers, individually and directors
and all executive officers as a group, and the present owners of 5%
or more of our total outstanding Shares. Shares subject to
options and warrants exercisable within 60 days from the date of
this table are deemed to be outstanding and beneficially owned for
purposes of computing the number of shares held and the percentage
ownership of such each individual but are not treated as
outstanding for purposes of computing the percentage ownership of
others.
The information in this table reflects "beneficial ownership" as
defined in Rule 13d-3 of the Exchange Act. We have determined
beneficial ownership in accordance with the rules of the SEC or
other information we believe to be reliable. Except as indicated by
the footnotes below, we believe, based on the information furnished
to us, that the persons and entities named in the table below have
sole voting and investment power with respect to all shares that
they beneficially own, subject to applicable community property
laws where applicable.
Applicable percentage ownership is based on 20,426,158 shares of
common stock outstanding as of May 21, 2020.
|
Shares of Common Stock
|
|
Beneficially Owned
|
Name and Address of Beneficial Owner
|
Number
|
%
|
Michael Hinshaw
|
5,200,000
|
25.46%
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
Stephen Shay
|
0
|
*
|
201 Spear St. Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
Barry MacNeil
|
20,000
|
*
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
Guiseppe Perone
|
25,000
|
*
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
Gregg Budoi
|
96,667[1]
|
*
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
Matthew Kruchko
|
66,667[2]
|
*
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
Nii-Ayikwei Quaye
|
66,667[3]
|
*
|
201 Spear Street, Suite 1100
|
|
|
San Francisco, CA 94105
|
|
|
All officers and directors as a group (8 individuals)
|
5,505,001
|
25.82%
|
|
|
|
Alex Guidi
|
2,762,302[4]
|
13.77%
|
2040 – 885 West Georgia Street
|
|
|
Vancouver, British Columbia V6C 3E8
|
|
|
|
|
|
Eva Lundin
|
2,900,000[5]
|
14.20%
|
6 Rue de Rive
|
|
|
1204 Geneva, Switzerland
|
|
|
|
|
|
Peter Loretto
|
1,443,262[6]
|
7.07%
|
350-6165 HWY 17
|
|
|
Delta British Columbia V4K 5B8
|
|
|
*Represents beneficial ownership of less than 1%.
[1]
|
Includes 96,667 shares issuable pursuant to presently exercisable
stock option and options that become exercisable within 60 days of
May 21, 2020.
|
[2]
|
Includes 66,667 shares issuable pursuant to presently exercisable
stock option and options that become exercisable within 60 days of
May 21, 2020.
|
[3]
|
Includes 66,667 shares issuable pursuant to presently exercisable
stock option and options that become exercisable within 60 days of
May 21, 2020.
|
[4]
|
Based on Schedule 13D filed by the reporting person with the SEC on
February 24, 2016.
|
[5]
|
Based on Schedule 13G filed by the reporting person with the SEC on
February 18, 2016.
|
[6]
|
Based on Schedule 13G filed by the reporting person with the SEC on
February 11, 2016. Mr. Loretto has sole voting and dispositive
power over 1,425,000 shares of our common stock and has shared
voting and dispositive power over the remaining 18,262 shares of
our common stock he beneficially owns.
|
Securities Authorized for Issuance under Equity Compensation
Plans
The following table presents information as of December 31, 2019
with respect to compensation plans under which our Shares may be
issued.
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
Number of securities to
|
|
|
Weighted-average
|
|
|
remaining available for
|
|
|
|
be issued upon exercise
|
|
|
exercise price of
|
|
|
future issuance under
|
|
|
|
of outstanding options,
|
|
|
outstanding options,
|
|
|
equity compensation plans
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
(excluding securities
|
|
Plan category
|
|
(a)
|
|
|
(b)
|
|
|
in column (a)) (c)
|
|
|
|
|
|
|
|
|
|
[1]
|
|
Equity compensation plans approved by security holders
|
|
1,140,000
|
|
|
$0.35
|
|
|
902,616
|
|
Equity compensation plans not approved by securities holders
|
|
None
|
|
|
None
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
1,140,000
|
|
|
$0.35
|
|
|
902,616
|
|
[1] The aggregate number of Shares reserved for issuance under the
Plan is fixed at 10% of the total number of issued and outstanding
Shares from time to time, such that the Shares reserved for
issuance under the Plan will increase automatically with increases
in the total number of Shares issued and outstanding.
PROPOSAL 4 – AMENDMENT TO THE ARTICLES OF
INCORPORATION TO DECREASE THE QUORUM REQUIREMENT FOR
STOCKHOLDER MEETINGS
The Board has approved an amendment to the Company’s articles of
incorporation (the “Articles”) to establish a quorum threshold of
one-third of the total outstanding Shares for future stockholder
meetings.
Currently, the Articles do not establish a quorum requirement for
the Company’s meetings of stockholders. Section 602(a) of the
California Corporation Code (the “California Code”) provides that
“unless otherwise provided in the articles, a majority of the
shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders, but in no event
shall quorum consist of less than one-third (or in the case of a
mutual water company, 20 percent) of the shares entitled to vote at
the meeting”
The Board believes that a quorum consisting of a majority of the
issued and outstanding Shares entitled to vote at a meeting may at
times be impractical for the Company, as it may limit the Company’s
ability to properly convene a meeting of stockholders and hinder
and restrict the Company’s ability to take action at a meeting of
stockholders the Company’s experience over the last few years is
that a significant number of the Company’s stockholders do not,
either directly or through their brokerage accounts, complete their
proxies or otherwise deliver voting instructions. Accordingly,
securing a quorum at meetings of the Company’s stockholders has
become a challenge despite the Company’s best efforts to solicit
participation of the Company’s stockholders. For example, the 2018
annual meeting was to be held on February 1, 2019, but had to be
adjourned until February 8, 2019 due to a lack of quorum as holders
of only 41.9% of the then outstanding Shares were present either in
person or by proxy at the original meeting date. If the Company
again fails to achieve a quorum for any future stockholder meeting,
the Company will have to set a new time and location for the
meeting, and depending on the timing, the Company may be required
to prepare new proxy materials for such meeting. Preparing proxy
materials and the costs that accompany any proxy solicitation,
including costs related to printing and mailing proxy materials to
stockholders, is a large expense, and there is significant risk
that even if the Company delays a meeting of stockholders the
Company may still not be able to acquire quorum for such
stockholder meeting.
The Board believes that reducing the quorum requirement to
one-third of the Shares entitled to vote on a proposal will
markedly reduce, although not eliminate, the risk of failing to
achieve a quorum for any given matter. Consequently, the Board has
determined that it is in the best interest of the Company and its
stockholders to establish a quorum threshold of one-third of the
total number of Shares entitled to vote at a stockholder
meeting.
For the foregoing we reason, the Board proposes to amend the
Articles to provide that a quorum for any stockholder meeting be
one-third (1/3) of the total outstanding Shares entitled to
vote.
If this proposal is adopted by the Company’s stockholders, a new
Article EIGHT shall be added to the Articles. The text of the
amendment will read in full as follows:
“A quorum shall exist at any meeting of the shareholders if
one-third of the shares entitled to be cast are represented in
person or by proxy.”
The full text of the proposed certificate of amendment to the
Articles is attached to this Proxy Statement as Annex
B. The affirmative vote of a majority of the Shares
outstanding on the Record Date is required to approve this
amendment to the Articles. If the proposed amendment is adopted by
Company’s stockholders, it will be effective when the Company files
the certificate of amendment to the Articles with the Secretary of
State of the State of California.
Currently, Section 6 of Article II of the Company’s bylaws (the
“Bylaws”) provide that the presence in person or by proxy of the
holders of a majority of the Shares entitled to vote at any meeting
of stockholders shall constitute a quorum for the transaction of
business. If the proposed amendment to the Articles is adopted by
the Company’s stockholders at the Special Meeting, the Board
intends to approve conforming changes to the Bylaws by amending
Section 6 of Article II of the Bylaws to provide for a one-third
quorum threshold for future stockholder meetings.
THE BOARD RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE AMENDMENT TO THE
COMPANY’S ARTICLES OF INCORPORATION TO ESTABLISH A QUORUM THRESHOLD
OF ONE-THIRD OF THE TOTAL OUTSTANDING SHARES OF COMMON STOCK
FOR FUTURE STOCKHOLDER MEETINGS.
PROPOSAL 5 – AMENDMENT TO THE BYLAWS TO CHANGE THE COMPOSITION
OF THE BOARD FROM A SET FIVE DIRECTORS TO A RANGE OF BETWEEN FIVE
AND NINE DIRECTORS
The Board has approved an amendment to the Bylaws to change the
composition of the Board from a set five (5) directors to a range
of between five (5) and nine (9) directors with the specific number
to be determined by the Board in their discretion from
time-to-time, and to permit stockholders to make further amendments
to this section of the Bylaws through the approval of a majority of
Shares voting at a meeting of stockholders, as opposed to the
approval of stockholders holding a majority of all outstanding
Shares.
Currently our Section 2 of Article III of the Bylaws provide that
the authorized number of directors on the Board shall be five (5)
until changed by a duly adopted amendment to that bylaw adopted by
the vote or written consent of a majority of the outstanding Shares
entitled to vote.
Although the Board is not currently considering any particular
candidate to join the Board in the event this amendment is passed
by the Company’s stockholders, the Board believes that by having
the flexibility to increase the size of the Board to up to nine
directors will enable the Board to add additional diverse
perspectives to the Board as the Company looks to grow and develop
new business operations. The Board feels that the current limit of
five directors is insufficient for the Company’s governance needs,
and that as a result of this limitation, the Board is not able to
nominate qualified candidates to the Board.
Due to the previous issues the Company has had in soliciting a
majority of its stockholders to vote in stockholder meetings and
consistent with the Board’s desire to reduce the quorum requirement
for meetings of stockholders, the Board has deemed it to be in the
best interests of the Company to amend Section 2 of Article III of
the Bylaws to permit that section to be amended at a future meeting
of stockholders by stockholders holding a majority of Shares voting
at such stockholder meeting (if quorum is present at such meeting)
as opposed to a majority of all of the Shares outstanding at the
time of such stockholder meeting.
For the foregoing reason, we propose to amend the Bylaws to provide
that the composition of the Board should be a range of between five
(5) and nine (9) directors with the specific number to be
determined by the Board in their discretion from time-to-time, and
that any amendment to this section of the Bylaws should be given
effect by either the written consent of a majority of the
outstanding Shares entitled to vote or a majority of Shares voting
at a duly called meeting of stockholders where quorum is
present.
If this proposal is adopted by the Company’s stockholders at the
Special Meeting, Section 2 of Article III of the Bylaws will read
in full as follows:
“The authorized number of directors shall be not less than five (5)
nor more than nine (9), the specific number to be set by resolution
of the board of directors. This section 2 of Article III of these
bylaws may only be changed by a duly adopted amendment to this
section adopted by the written consent of a majority of the
outstanding shares entitled to vote or a majority of shares voting
at a duly called meeting of stockholders where quorum is present.
However, an amendment that would reduce the authorized number of
directors to a number fewer than five (5) cannot be adopted if the
votes cast against its adoption at a shareholders’ meeting or the
shares not consenting to an action by written consent are equal to
more than one-sixth (16-2/3 percent) of the outstanding shares
entitled to vote.”
The full text of the proposed amendment to the Bylaws is attached
to this Proxy Statement as Annex C. The affirmative
vote of a majority of the Shares outstanding on the Record Date is
required to approve this proposed amendment to the Bylaws.
THE BOARD RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE AMENDMENT TO THE COMPANY’S BYLAWS TO CHANGE
THE COMPOSITION OF THE BOARD FROM A SET FIVE DIRECTORS TO A RANGE
OF BETWEEN FIVE AND NINE DIRECTORS WITH THE SPECIFIC NUMBER TO BE
DETERMINED BY THE BOARD IN THEIR DISCRETION FROM
TIME-TO-TIME.
PROPOSAL 6- NAME CHANGE AMENDMENT TO ARTICLES
In connection with the transactions contemplated in the Unit
Purchase Agreement, the Board of Directors has approved an
amendment to the Articles to change the corporate name of the
Company from McorpCX, Inc. to MCX Technologies Corporation.
This is name change is consistent with both a covenant of the
Company in the Unit Purchase Agreement to change the name of the
Company to a name bearing no similarity to “McorpCX,” and with
planned strategic direction of the Company after the LLC Sale
Transaction is completed.
Since the Company’s current professional customer experience (CX)
and related consulting services business is conducted through
McorpCX, LLC, and the Company intends on focusing on becoming a
technology-centric company assuming the completion of the sale of
McorpCX, LLC, the Board believes that MCX Technologies Corporation
is a name that reflects the Company’s planned strategic business
focus.
The full text of the proposed certificate of amendment to the
Articles is attached to this Proxy Statement as Annex
D. The affirmative vote of a majority of the Shares
outstanding on the Record Date is required to approve this
amendment to the Articles. If the proposed amendment is adopted by
the Company’s stockholders, it will be effective when the Company
files the certificate of amendment to the Articles with the
Secretary of State of the State of California.
OUR BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT
TO THE ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY
FROM MCORPCX TO MCX
Technologies Corporation.
PROPOSAL 7- INDEPENDENT ACCOUNTANTS AND AUDITORS
Ratification of Independent Auditors
The Board requests that stockholders ratify the selection of
MaloneBailey LLP as our independent auditors as a matter of good
corporate practice.
Stockholder ratification of the selection of MaloneBailey LLP is
not required by the Bylaws or other applicable legal requirements.
However, the Board is submitting the selection of MaloneBailey LLP
to the Company’s stockholders for ratification as a matter of good
corporate practice. In the event that this selection of
MaloneBailey LLP as the Company’s independent registered public
accounting firm is not ratified by the Company’s stockholders at
the Special Meeting, the appointment of MaloneBailey LLP as the
Company’s independent registered public accounting firm will be
reconsidered by each of the Board and the Company’s audit
committee. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different accounting
firm at any time during the year if the Board determines that such
a change would be in the best interests of the Company and its
stockholders.
We do not anticipate that representatives of
MaloneBailey LLP will be present at the Special Meeting to respond
to questions about financial statements and related matters or to
make a statement (though they will have the opportunity to make a
statement at the meeting if they desire to do so).
The selection of MaloneBailey LLP must be ratified by a majority of
the votes cast at the Special Meeting, in person or by proxy, in
favor of such ratification.
OUR BOARD RECOMMENDS A VOTE “FOR”
THE RATIFICATION OF MALONEBAILEY LLP AS THE COMPANY’S
INDEPENDENT AUDITORS.
ACCOUNTANTS’ FEES
The following table presents fees for professional audit services
for the audit of the Company's annual financial statements for
fiscal year 2019 and 2018 and fees billed for other services
rendered during 2019 and 2087:
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
MaloneBailey LLP
|
|
|
|
2019
|
|
|
2018
|
|
Audit Fees(1)
|
|
$ |
56,500 |
|
|
$ |
47,500 |
|
Audit-Related Fees(2)
|
|
$ |
- |
|
|
$ |
- |
|
Tax Fees(3)
|
|
$ |
- |
|
|
$ |
- |
|
All Other Fees
|
|
$ |
- |
|
|
$ |
- |
|
|
|
$ |
56,500 |
|
|
$ |
47,500 |
|
(1)
|
Audit Fees consist of fees for professional services rendered for
the audit of the Company's consolidated financial statements
included in its Annual Report on Form 10-K, the review of the
interim financial statements included in its Quarterly Reports on
Form 10-Q, and for the services that are normally provided in
connection with regulatory filings or engagements.
|
(2)
|
Includes fees associated with assurance and related services that
are reasonably related to the performance of the audit or review of
the Company's financial statements. This category includes
fees related to consultation regarding generally accepted
accounting principles.
|
(3)
|
Tax Fees consist of fees for tax compliance, tax advice and tax
planning. The fee includes the preparation of the Company's
income tax returns, franchise tax reports, and other tax
filings.
|
Although the Company’s audit committee currently does not have a
formal policy in place to pre-approve all audit and non-audit
services provided by the Company’s independent auditor and the fees
for such non-audit services, the Company’s audit committee has
adopted a policy to review on an annual basis the performance,
objectivity and independence of our independent auditor.
AUDIT COMMITTEE REPORT
The Company’s audit committee monitors and oversees the Company's
financial reporting process on behalf of our Board. Management has
primary responsibility for the Company's financial statements and
the financial reporting process, including the Company's system of
internal controls.
The audit committee met five times in the fiscal year ended
December 31, 2019. Each member of the audit committee attended all
of the meetings of the committee from the date on which they became
a member of the audit committee.
The audit committee has reviewed and discussed the audited
financial statements of the Company for the year ended
December 31, 2019 with the Company’s management but did
not discuss with MaloneBailey LLP the matters required to be
discussed by Auditing Standard No. 16 (Communications with
Audit Committees). The audit committee also did not discuss with
MaloneBailey LLP the overall scope and plans for their audit. The
audit committee did not meet with MaloneBailey LLP without
management present during the year ended December 31, 2019, to
discuss the results of their examinations, the evaluations of the
Company’s internal controls, and the overall quality of the
Company’s financial reporting.
The audit committee has received the written disclosures and the
letter from MaloneBailey LLP required by applicable requirements of
the Public Company Accounting Oversight Board regarding
MaloneBailey LLP’s communications with the audit committee
concerning independence. The audit committee did not
discuss with MaloneBailey LLP their independence.
Based on the review and discussions referred to above, the audit
committee recommended to the Board that the audited financial
statements for the fiscal year ended December 31, 2019, be
included in the Company’s Annual Report on Form 10-K for that
year for filing with the Securities and Exchange Commission.
Respectfully submitted by:
Gregg Budoi
Nii A. Quaye
Matthew Kruchko
PROPOSAL 8 – NON-BINDING ADVISORY VOTE ON EXECUTIVE
COMPENSATION
The Company believes that the compensation policies for our named
executive officers are designed to attract, motivate and retain
talented executive officers and are aligned with the long-term
interests of the Company’s stockholders. This advisory stockholder
vote, commonly referred to as a “say-on-pay vote” gives you as a
stockholder the opportunity to approve or not approve the
compensation of the Company’s named executive officers that is
disclosed in this Proxy Statement. This advisory stockholder vote
occurs every year and is expected to next occur at the Company’s
next annual meeting of stockholders. This vote is not intended to
address any specific item of executive compensation, but rather the
overall compensation of the Company’s named executive officers and
the philosophy, policies and practices described in this Proxy
Statement. Accordingly, the Company asks that you indicate your
support for the Company’s executive compensation policies and
practices as described in this Proxy Statement by voting “FOR” the
following resolution:
RESOLVED that the Company’s stockholders approve, on an advisory
basis, the compensation of the Company’s executives named in the
Summary Compensation Table, as disclosed in the Company’s
2020 Proxy Statement pursuant to the executive compensation
disclosure rules of the Securities and Exchange Commission, which
disclosure includes the compensation tables, narrative disclosure
and other related tables and disclosure.
Since this say-on-pay vote is advisory, it will not be binding on
the Board. However, the Board values the opinions of the Company’s
stockholders and will review the voting results and take them into
consideration when making future decisions regarding executive
compensation. The affirmative vote of the holders of a majority of
the Shares represented in person or by proxy entitled to vote on
the proposal will be required for approval.
THE BOARD RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
PROPOSAL 9 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION
The Company is asking the Company’s stockholders to vote on whether
future advisory votes on executive compensation of the nature
reflected in Proposal 8 above should occur every year, every two
years or every three years. The Company has had annual votes on
executive compensation starting with the Company’s 2014 annual
meeting of stockholders.
While the Company’s executive compensation programs are designed to
promote a long-term connection between pay and performance, the
Board recognizes that executive compensation disclosures are made
annually. Holding an annual advisory vote on executive compensation
provides the Company with more direct and immediate feedback on our
compensation disclosures. However, stockholders should note that
because the advisory vote on executive compensation occurs well
after the beginning of the compensation year, and because the
different elements of our executive compensation programs are
designed to operate in an integrated manner and to complement one
another, in many cases it may not be appropriate or feasible to
change our executive compensation programs in consideration of any
one year’s advisory vote on executive compensation by the time of
the following year’s annual meeting of stockholders. The believes
that an annual advisory vote on executive compensation is
consistent with our practice of seeking input and engaging in
dialogue with our stockholders on corporate governance matters and
our executive compensation philosophy, policies and practices.
This advisory vote on the frequency of future advisory votes on
executive compensation is non-binding on the Board.
Stockholders will be able to specify one of four choices for this
proposal on the proxy card: one year, two years, three years or
abstain. Stockholders are not voting to approve or disapprove the
Board’s recommendation. Although non-binding, the Board
will carefully review the voting results. Notwithstanding the
Board’s recommendation and the outcome of the stockholder vote, the
Board may in the future decide to conduct advisory votes on a more
or less frequent basis and may vary its practice based on factors
such as discussions with Stockholders and the adoptions of material
changes to compensation programs.
THE BOARD RECOMMENDS A VOTE TO HOLD FUTURE ADVISORY VOTES ON
EXECUTIVE COMPENSATION EVERY YEAR.
STOCKHOLDER PROPOSALS
Any proposal which a Stockholder wishes to include in the proxy
statement and proxy relating to the next annual meeting of
stockholders must be received by the Company on or before January
22, 2021. The Company reserves the right to reject, rule out of
order, or take other appropriate action with respect to any
proposal that does not comply with Rule 14a-8 under the Exchange
Act and all other applicable requirements.
Stockholders wishing to bring any other item before the next annual
meeting, other than in accordance with the process of Rule 14a-8
under the Exchange Act, must submit written notice of such proposal
to the Company no later than April 7, 2021. If the Company receives
notice of a stockholder proposal after April 7, 2021, such notice
will be considered untimely and the Company’s management will have
discretionary authority to vote proxies received with respect to
such proposal.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SPECIAL MEETING
The Proxy Statement and the Company’s Form 10-K and all subsequent
reports filed with the SEC are available on the Company's website
at www.mcorpcx.com.
The Company makes available, free of charge, the Proxy
Statement, Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and amendments to these reports
filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act, as soon as reasonably practicable after these
documents are electronically filed with, or furnished to,
the SEC, to stockholders upon written request to Matthew
Kruchko, President and Chief Executive Officer
McorpCX, Inc., 201 Spear Street, Suite 1100, San
Francisco, California 94105.
DUPLICATE ANNUAL REPORT AND PROXY STATEMENT
If you are a stockholder of record and share an address with
another stockholder and have received only one copy of the Proxy
Statement, you may write or call the Company to request a separate
copy of these materials at no cost to you. In addition, if you are
a stockholder of record and share an address with another
stockholder and have received multiple copies of the Proxy
Statement, you may write or call the Company to request delivery of
a single copy of such materials in the future. You may write to the
Company at McorpCX, Inc., 201 Spear Street, Suite 1100, San
Francisco, California 94105.
OTHER MATTERS
As of the date of this Proxy Statement, management has not been
notified of any stockholder proposals intended to be raised at the
Special Meeting outside of the Company’s proxy solicitation process
nor does it know of any other matters, which will be presented for
consideration at the Special Meeting. However, if any other
stockholder proposals or other business should come before the
Special Meeting, the persons named in the enclosed Proxy (or their
substitutes) will have discretionary authority to take such action
as is in accordance with their best judgment.
MISCELLANEOUS
The Company will pay all solicitation expenses in connection with
this Proxy Statement and related Company proxy soliciting material,
including the expense of preparing, printing, assembling and
mailing this Proxy Statement and any other material used in the
Company’s solicitation of proxies. Proxies are being solicited
through the mail. Certain executive officers and other employees of
the Company, on behalf of the Company and without additional
compensation, may also solicit proxies personally, by telephone or
other electronic means.
/s/ Matthew Kruchko
President and Chief Executive Officer
May 22, 2020
ANNEX A
UNIT PURCHASE AGREEMENT
among:
McorpCX, Inc..
a California corporation
and
mfifty, LLC
a California limited liability company
__________________________________
Dated as of April 15, 2020
TABLE OF CONTENTS
1
|
Description of
Transaction.
|
1
|
|
|
|
|
1.1
|
Purchase and Sale of Acquired Units..
|
1
|
|
1.2
|
Purchase Price.
|
1
|
|
1.3
|
Method of Payment
|
1
|
|
1.4
|
Transactions to be Effected at Closing
|
2
|
|
1.5
|
Closing
|
2
|
|
|
|
|
2
|
Representations and
Warranties of the Seller Member
|
2
|
|
|
|
|
2.1
|
Organization and Standing
|
2
|
|
2.2
|
Authority; Binding Nature of Agreement
|
3
|
|
2.3
|
Non−Contravention / No Consents or Approvals
|
3
|
|
2.4
|
No Legal Proceedings.
|
3
|
|
2.5
|
Title and Ownership.
|
4
|
|
2.6
|
Undisclosed Liabilities..
|
4
|
|
2.7
|
Affiliate Agreements
|
4
|
|
2.8
|
Brokers
|
4
|
|
|
|
|
3
|
Representations and
Warranties of Purchaser
|
4
|
|
|
|
|
3.1
|
Organizational Matters
|
4
|
|
3.2
|
Authority; Binding Nature of Agreement
|
4
|
|
3.3
|
Non-Contravention; Consents.
|
5
|
|
3.4
|
No Legal Proceedings
|
5
|
|
3.5
|
Independent Investigation
|
5
|
|
3.6
|
Indebtedness
|
5
|
|
3.7
|
Investment Intention
|
5
|
|
3.8
|
Brokers
|
5
|
|
3.9
|
Financing
|
5
|
|
|
|
|
4
|
Certain Covenants of the
Parties
|
6
|
|
|
|
|
4.1
|
Filings and Consents.
|
6
|
|
4.2
|
Public Announcements
|
6
|
|
4.3
|
Seller Member Shareholder Meeting
|
6
|
|
4.4
|
Sale of Seller Member Securities by Purchaser Affiliates
|
6
|
|
4.5
|
Change of Company Name
|
7
|
|
4.6
|
Purchase of Stock
|
7
|
|
|
|
|
5
|
Tax Matters
|
7
|
|
|
|
|
5.1
|
Liability for Transfer Taxes
|
7
|
|
5.2
|
Survival
|
7
|
|
|
|
|
6
|
Conditions Precedent to
Obligations of Purchaser
|
7
|
|
|
|
|
6.1
|
Accuracy of Representations
|
7
|
|
6.2
|
Performance of Covenants
|
7
|
|
6.3
|
Agreements and Documents
|
8
|
|
6.4
|
Seller Member Shareholder Approval
|
8
|
|
6.5
|
TSX-V Approval
|
8
|
|
6.6
|
Indemnification Agreement
|
8
|
|
6.7
|
No Restraints
|
8
|
|
6.8
|
No Legal Proceedings
|
8
|
|
|
|
|
7
|
Conditions Precedent to
Obligations of the Seller Member
|
8
|
|
|
|
|
7.1
|
Accuracy of Representations
|
8
|
|
7.2
|
Performance of Covenants
|
9
|
|
7.3
|
Closing Certificate
|
9
|
|
7.4
|
Signing Cash Consideration
|
9
|
|
7.5
|
Closing Cash Consideration
|
9
|
|
7.6
|
Execution of Promissory Note
|
9
|
|
7.7
|
Execution of Security Agreement
|
9
|
|
7.8
|
Sale of Hinshaw Shares
|
9
|
|
7.9
|
Termination of Rights to Davison Shares
|
9
|
|
7.10
|
Termination of Rights to Shay Shares
|
9
|
|
7.11
|
Termination of Rights to Clark Shares..
|
9
|
|
7.12
|
Sale of LuckFound Shares
|
9
|
|
7.13
|
No Restraints
|
9
|
|
7.14
|
No Legal Proceedings
|
9
|
|
|
|
|
8
|
Termination
|
10
|
|
|
|
|
8.1
|
Termination Events
|
10
|
|
8.2
|
Termination Procedures
|
11
|
|
8.3
|
General Effect of Termination
|
11
|
|
|
|
|
9
|
Indemnification,
Etc.
|
11
|
|
|
|
|
9.1
|
Survival of Representations, Etc.
|
11
|
|
9.2
|
Indemnification.
|
12
|
|
9.3
|
Limitations.
|
12
|
|
9.4
|
Defense of Third Party Claims
|
13
|
|
9.5
|
Exercise of Remedies.
|
14
|
|
9.6
|
Exclusive Remedy
|
14
|
|
9.7
|
Tax Treatment of Indemnification Payments
|
15
|
|
|
|
|
10
|
Miscellaneous
Provisions
|
15
|
|
|
|
|
10.1
|
Further Assurances
|
15
|
|
10.2
|
Fees and Expenses
|
15
|
|
10.3
|
Notices
|
15
|
|
10.4
|
Headings
|
16
|
|
10.5
|
Counterparts and Exchanges by Electronic Transmission
|
16
|
|
10.6
|
Governing Law; Dispute Resolution
|
16
|
|
10.7
|
Successors and Assigns
|
18
|
|
10.8
|
Remedies Cumulative; Specific Performance
|
18
|
|
10.9
|
Waiver
|
19
|
|
10.10
|
Waiver of Jury Trial
|
19
|
|
10.11
|
Amendments
|
19
|
|
10.12
|
Severability
|
19
|
|
10.13
|
Parties in Interest
|
19
|
|
10.14
|
Entire Agreement
|
19
|
|
10.15
|
Construction
|
19
|
Exhibits and Schedules
Exhibit A Certain Definitions
Exhibit B Form of Unit Assignment
Exhibit C Form of Promissory Note
Exhibit D Form of Security and Pledge
Agreement
UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this “Agreement”) is
made and entered into as of April 15, 2020, by and among McorpCX,
Inc. an California corporation (“Seller Member”) and mfifty,
LLC, a California limited liability company (“Purchaser”).
Capitalized terms not defined herein have the meaning set forth in
Exhibit A, attached hereto.
Recitals
A. The Seller Member currently owns all
of the outstanding membership units of limited liability company
interest (the “Units”) in McorpCX, LLC, a Delaware limited
liability company (“McorpCX LLC” or the
“Company”).
B. Upon the terms and subject
to the conditions set forth in this Agreement, Purchaser desires to
acquire from the Seller Member all of the Units held by the Seller
Member (the “Acquired Units”), and the Seller Member desire
to sell to Purchaser all of the Units held by them.
C. In connection with the sale
of the Acquired Units, Michael Hinshaw, the sole member and manager
of the Purchaser, as well as several executives and other
employees/consultants of McorpCX LLC intend to sell an aggregate of
5,200,000 shares of common stock of the Seller Member.
D. Michael Hinshaw is also the
current President of McorpCX LLC and has been responsible for
managing McorpCX LLC’s operations since that company’s
inception.
Agreement
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Description of
Transaction.
1.1 Purchase and Sale of Acquired
Units. At the Closing, upon the terms and subject to the
conditions set forth in this Agreement, the Seller Member, shall
sell, assign, transfer and convey to Purchaser, and Purchaser shall
purchase and acquire from the Seller Member, all of such Seller
Member’s right, title and interest in and to all of the Acquired
Units free and clear from all Encumbrances, in consideration for
payment of the Purchase Price (as defined in Section 1.2).
1.2 Purchase Price.
(a) Upon the terms and subject to the
conditions set forth in this Agreement, the aggregate consideration
payable by Purchaser (or an Affiliate of Purchaser) in respect of
the Acquired Units shall be equal to one million one hundred and
eight thousand United States dollars ($1,108,000 USD) (the
“Purchase Price”). The parties agree and acknowledge that the
Purchase Price has been negotiated by the parties at arms-length
and represents their mutual agreement as to the purchase price for
the Acquired Units. The parties agree that no consideration is or
will be paid for the value of any referrals (direct or indirect) to
or from the Purchaser, the Seller, McorpCX LLC or any of their
respective Affiliates, and that no party hereto has promised or is
obligated to make any such referral in the future.
1.3 Method of
Payment(a) . The Purchase Price
shall be paid by the Purchaser as follows: (a) on or immediately
prior to the date of this Agreement, the Company shall authorize
and distribute a cash dividend to the Seller Member of one hundred
thousand United States dollars ($100,000 USD) (the “Signing Cash
Consideration”), and (b) at or prior to the Closing, the
Purchaser shall (i) pay to Seller Member two hundred and fifty two
thousand United States dollars ($252,000) in cash (the “Closing
Cash Consideration”) and (ii) execute a seven hundred and fifty
six thousand United States dollars ($756,000 USD) secured
promissory note issued to the Seller Member by the Purchaser,
substantially in the form attached hereto as Exhibit C (the
“Promissory Note”).
1.4 Transactions to be Effected at
Closing.
(a) At Closing, Purchaser shall
deliver to Seller Member:
(i) The Closing Cash
Consideration, by certified check or wire transfer of immediately
available funds to an account of the Seller Member designated in
writing by the Seller Member prior to the Closing Date;
(ii) The Promissory Note
executed by the Purchaser along with the corresponding security and
pledge agreement, substantially in the form attached hereto as
Exhibit D (the “Security
Agreement”) executed by the Purchaser; and
(iii) All other agreements,
documents instruments or certificates required to be delivered by
the Purchaser pursuant Section 7 of this Agreement.
(b) At the Closing, Seller
Member shall deliver to the Purchaser:
(i) A unit assignment agreement
in the form attached hereto as Exhibit B (the
“Unit Assignment Agreement”) and all other
documentation evidencing ownership of all of the Acquired Units
free and clear of all Encumbrances;
(ii) A written resignation from
each director or manager of McorpCX LLC, other than Michael
Hinshaw, with such resignation effective as of the Closing Date;
and
(iii) all other agreements,
documents instruments or certificates required to be delivered by
the Seller Member pursuant Section 6 of this Agreement.
1.5 Closing. The closing of the
sale and transfer of the Acquired Units from Seller Member to
Purchaser and the consummation of the other transactions
contemplated by this Agreement (the “Closing”) shall take
place at the offices of the Seller Member, 201 Spear Street, Suite
1100,
San Francisco, California 94105, at 12:00 p.m. (Pacific time) on a
date mutually agreed upon by Purchaser and the Seller Member, after
the satisfaction or waiver of the last to be satisfied or waived of
the conditions set forth in Sections 6 and 7 (other than those
conditions that are to be satisfied at the Closing, but subject to
the satisfaction or waiver of such conditions). The date on which
the Closing actually takes place is referred to in this Agreement
as the “Closing Date”.
2. Representations and
Warranties of the Seller Member
The Seller Member represents and warrants to Purchaser that the
following statements are true and correct as of the date of this
Agreement:
2.1 Organization and Standing.
The Seller Member and the Company have each been duly formed, and
is validly existing and in good standing (to the extent that the
laws of the jurisdiction of its formation recognize the concept of
good standing), under the laws of the State of California.
2.2 Authority; Binding Nature of
Agreement. The Seller Member has the right, power and authority
to enter into and to perform its obligations under this Agreement
and under each other agreement, document or instrument referred to
in or contemplated by this Agreement to which the Seller Member is
or will be a party. The execution and delivery of this Agreement
and the consummation of the transactions contemplated thereunder
have been duly and validly approved by the Seller Member’s board of
directors (the “Seller’s Board”) and the managers of the
Company. The Seller’s Board has determined that the sale of
the Acquired Units to the Purchaser, on the terms and conditions
set forth in this Agreement, is advisable and in the best interests
of the Seller Member and its shareholders and has directed that
this Agreement and the transactions contemplated hereby be
submitted to the Seller Member’s shareholders for approval at a
meeting of such shareholders and has adopted a resolution to the
foregoing effect. Except for the approval of this Agreement by the
affirmative vote of the holders of a majority of the outstanding
shares of the Seller Member’s common stock, excluding the Hinshaw
Shares, the Davison Shares, the Shay Shares, and the Clark Shares,
and the LuckFound Shares (each as defined below) (the
“Shareholder Approval”), no other corporate proceedings on
the part of the Seller Member necessary to approve this Agreement
or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed by the Seller Member
and (assuming due authorization, execution and delivery by the
Purchaser) constitutes a valid and binding obligation of the Seller
Member, enforceable against the Seller Member in accordance with
its terms, subject to: (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors; and
(ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.3 Non−Contravention / No Consents
or Approvals. Neither: (i) the execution, delivery or
performance by the Seller Member of this Agreement or any of the
other agreements, documents or instruments referred to in this
Agreement; nor (ii) the consummation by the Seller Member of any of
the transactions contemplated by this Agreement or any such other
agreement, document or instrument, will (with or without notice or
lapse of time):
(a) contravene, conflict with
or result in a violation of: (i) any provisions of any
organizational documents of the Seller Member or the Company; or
(ii) any resolution adopted by the directors of the Seller Member
or the Company;
(b) contravene, conflict with
or result in a violation of, or give any Governmental Entity the
right to challenge any of the transactions contemplated by this
Agreement or to exercise any remedy or obtain any relief under, any
Legal Requirement or any order, writ, injunction, judgment or
decree to which the Seller Member is subject; or
(c) contravene, conflict with
or result in a violation or breach of, or result in a default
under, any provision of any Contract to which the Seller Member or
the Company is a party or by which it is bound.
Except for the filing with the United States Securities and
Exchange Commission (the “SEC”) of a proxy statement in
definitive form relating to the meeting of the Seller Member’s
shareholders to be held in connection with this Agreement and the
transactions contemplated hereby (including any amendments or
supplements thereto, the “Proxy Statement”), the Seller
Member is not required to make any filing with or give any notice
to, or to obtain any Consent from, any Person in connection with
the performance of this Agreement, except for any filing,
notice or Consent which, if not made or obtained, would not
reasonably be expected to result in a material adverse effect on
the Seller Member’s ability to consummate the transactions
contemplated hereby.
2.4 No Legal Proceedings. No
Legal Proceedings are pending or, to the knowledge of the Seller
Member, threatened to restrain (or which would have the effect of
so restraining) the entry into, performance of, compliance with and
enforcement of any of the obligations of the Seller Member
hereunder.
2.5 Title and Ownership. The
Seller Member is the record and beneficial owner of the Acquired
Units, free and clear of all Encumbrances. Except for the rights
created pursuant to this Agreement, the Seller Member is not a
party to any option, warrant, purchase right or other Contract that
could require the Seller Member to sell, transfer or otherwise
dispose of any Acquired Units (other than this Agreement). The
Seller Member is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of the
Acquired Units. Upon Closing, Purchaser shall have good, valid and
marketable title to the Acquired Units, free and clear of all
Encumbrances.
2.6 Undisclosed Liabilities.
Except for the liabilities assigned to the Company by the Seller
Member pursuant to the terms of the Contribution Agreement dated
August 16, 2018 between the Seller Member and the Company (the
“Contribution Agreement”), the Seller Member has not
assigned to the Company any liabilities outside of the ordinary
course of the Company’s business, the Company will not be liable
upon the completion of the transactions contemplated herein for any
liabilities outside of the ordinary course of the Company’s
business that were first incurred by the Seller Member after the
date of the Contribution Agreement, and since January 1, 2020, the
Company has not authorized or paid any dividends, distributions or
similar payments to Seller Member other than as contemplated under
this Agreement (an “Undisclosed
Liability”).
2.7 Affiliate Agreements.
Except pursuant to the terms of this Agreement or the transactions
contemplated hereunder, or as set forth in Schedule
2.76, neither Seller Member nor to the Seller
Member’s knowledge, any of its Affiliates (excluding Michael
Hinshaw, Lynn Davison and Stephen Shay), (a) is a party to any
Contract or arrangement with the Company; (b) has any pending (or,
to the Company's knowledge, threatened) action, claim, suit or
proceeding against the Company; or (c) owes or is owed any
indebtedness to or by the Company.
2.8 Brokers. No broker, finder
or investment banker is entitled to any brokerage, finders or other
fee or commission in connection with the transactions contemplated
by this Agreement.
3. Representations and
Warranties of Purchaser
Purchaser represents and warrants to and for the benefit of the
Seller Members as follows:
3.1 Organizational Matters. The
Purchaser has been duly formed, and is validly existing and in good
standing (to the extent that the laws of the jurisdiction of its
formation recognize the concept of good standing), under the laws
of the State of California.
3.2 Authority; Binding Nature of
Agreement. Purchaser has the absolute and unrestricted right,
power and authority to enter into and perform its obligations under
this Agreement and under each other agreement, document and
instrument referred to in this Agreement to which he is a party;
and the execution, delivery and performance by the Purchaser of
this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary action on the
part of the Purchaser and its board of directors. This Agreement
and each other agreement, document or instrument referred to in
this Agreement to which Purchaser is a party constitutes the legal,
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to: (a) laws
of general application relating to bankruptcy, insolvency and the
relief of debtors; and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.3 Non-Contravention;
Consents.
(a) Non-Contravention.
Neither: (i) the execution, delivery or performance by
Purchaser of this Agreement or any of the other agreements,
documents or instruments referred to in this Agreement; nor
(ii) the consummation by Purchaser of the transactions
contemplated by this Agreement or any of such other agreements,
documents or instruments, will (with or without notice or lapse of
time) contravene, conflict with or result in a violation of: (A)
any provision of any material contract by which Purchaser is bound;
or (B) contravene, conflict with or result in a violation of, or
give any Governmental Entity or other Person the right to challenge
any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to
which Purchaser is subject.
(b) Consents. Purchaser
will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with:
(i) the execution, delivery or performance of this Agreement
or any of the other agreements referred to in this Agreement; or
(ii) the consummation of the transactions contemplated by this
Agreement.
3.4 No Legal
Proceedings. No Legal Proceedings are pending or, to the
actual knowledge of the Purchaser, threatened to restrain (or which
would have the effect of so restraining) the entry into,
performance of, compliance with and enforcement of any of the
obligations of the Purchaser hereunder.
3.5 Independent
Investigation. Purchaser acknowledges and agrees that
(i) in making its decision to enter this Agreement and consummate
the transactions contemplated hereby, Purchaser has relied solely
upon the express warranties of the Seller Member set forth in
Section 2 of this Agreement and (ii) neither the Seller Member nor
any other Person has made any representation or warranty as to the
Seller Member, the Acquired Units, McorpCX LLC or this Agreement,
except as expressly set forth in Section 2 of this Agreement.
3.6 Indebtedness. The
Promissory Note will rank senior in right of payment with all of
the Purchaser’s existing and future indebtedness.
3.7 Investment
Intention. The Purchaser is acquiring Acquired Units for
its own account, for investment purposes only and not with a view
to any public distribution thereof or with any intention of
selling, distributing or otherwise disposing of the Acquired Units
in a manner that would violate the registration or qualification
requirements of the United States Securities Act of 1933, as
amended (the “Securities Act”) or any applicable securities
laws. The Purchaser understands that the Acquired Units may not be
sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration or qualification under
the Securities Act and any applicable securities laws, except
pursuant to an exemption from such registration or qualification
under the Securities Act and such applicable securities laws. The
Purchaser is an “accredited investor” as defined under Rule 501(a)
of the Securities Act, is able to bear the economic risk of holding
the Acquired Units for an indefinite period (including total loss
of its investment) and (either alone or together with its
representatives) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Acquired Units.
3.8 Brokers. No broker,
finder or investment banker is entitled to any brokerage, finders
or other fee or commission in connection with the transactions
contemplated by this Agreement.
3.9 Financing. Purchaser
has access to funds sufficient to pay or fund the Signing Cash
Consideration and the Closing Cash Consideration, and as otherwise
needed to consummate the transactions contemplated by this
Agreement.
4. Certain Covenants of
the Parties
4.1 Filings and Consents.
(a) Regulatory Filing.
Purchaser and Seller Member shall cooperate and use their
respective reasonable best efforts to prepare all documentation, to
affect all filings and notices and to obtain all Permits, Consents,
approvals and authorizations of all third parties and Governmental
Entities, including but not limited to the TSX-V, necessary to
consummate the transactions contemplated by this Agreement. Each
party hereto agrees that it shall consult with the other parties
hereto with respect to the obtaining of all Permits, Consents,
approvals, waivers and authorizations of all third parties and
Governmental Entities, including but not limited to TSX-V,
necessary or advisable to consummate the transactions contemplated
by this Agreement and each party shall keep the other parties
apprised of the status of material matters relating to completion
of the transactions contemplated by this Agreement.
(b) Efforts. Purchaser
and the Seller Member shall use best efforts to take, or cause to
be taken, all actions necessary to consummate and make effective
the transactions contemplated by this Agreement on a timely basis.
Without limiting the generality of the foregoing, each party to
this Agreement: (i) shall make all filings (if any) and give
all notices (if any) required to be made and given by such party in
connection with the transactions contemplated by this Agreement;
and (ii) shall use reasonable efforts to obtain each Consent
(if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection
with the transactions contemplated by this Agreement.
4.2 Public Announcements. From
and after the date of this Agreement, none of the Purchaser or its
Representatives and Affiliates shall issue or make any press
release or public statement regarding this Agreement or any of the
transactions contemplated by this Agreement, without Seller
Member’s prior written consent. During the period prior to Closing,
none of Seller Member, the Company, nor the Purchaser shall issue
or make, on behalf of itself or any of its respective Affiliates,
any press release about this Agreement or any of the transactions
contemplated by this Agreement, until and unless the parties hereto
have approved the text of such press release, which approval shall
not be unreasonably withheld, conditioned or delayed.
4.3 Seller Member Shareholder
Meeting. The Seller’s Board shall duly and properly convene,
and thereafter shall cause to occur, a meeting of the holders of
the Seller Member’s common stock (the “Seller Member
Meeting”) for purposes of obtaining the Shareholder Approval,
and at such meeting shall submit to such shareholders a motion
contemplating the Shareholder Approval. The Seller’s Board shall
recommend that the holders of the Seller Member’s common stock
approve this Agreement, including the transactions described
hereunder, and shall not withdraw or modify in any manner adverse
to the Purchaser any such recommendation. In connection with the
Seller Member Meeting, the Seller’s Board shall (a) deliver
the Proxy Statement (or cause the Proxy Statement to be delivered)
to each holder of record of the Seller Member’s common stock as of
the applicable record date.
4.4 Sale of Seller Member
Securities by Purchaser Affiliates. Prior to the Closing the
Purchaser shall (a) cause Michael Hinshaw to sell or otherwise
transfer 5,200,000 shares of the Seller Member’s common stock (the
“Hinshaw Shares”) to one or more third parties on terms
approved by the Seller Member, (b) cause Lynn Davison to terminate
her right to purchase 300,000 shares of the Seller Member’s common
stock (the “Davison Shares”) under the terms of the stock
purchase agreement dated September 3, 2019 between Mr. Hinshaw and
Ms. Davison, (c) cause Stephen Shay to terminate his right to
purchase 300,000 shares of the Seller Member’s common stock (the
“Shay Shares”) under the terms of the stock purchase
agreement dated September 3, 2019 between Mr. Hinshaw and Mr. Shay,
and (d) cause Graham Clark to terminate all of his rights to
acquire 250,000 shares of the Seller Member’s common stock (the
“Clark Shares”) under the terms of the Agreement and
Acceptance of Gift dated September 3, 2019 between Mr. Hinshaw and
Mr. Clark. Additionally, Purchaser shall use best efforts,
which efforts will not include the payment of any funds, to cause
Luckfound.org to sell or otherwise transfer all 750,000 shares of
the Seller Member’s common stock currently owned by Luckfound.org
(the “LuckFound Shares”) to one or more third parties on
terms approved by the Seller Member.
4.5 Change of Company Name.
Seller Member shall use commercially reasonable efforts to cause
the company name of the Seller Member to be changed to a name
bearing no similarity to “McorpCX LLC”, as determined by the Seller
Member and approved by the Seller Member’s shareholders.
4.6 Purchase of Stock. On or
prior to Closing, the Seller Member will (a) find one or more third
parties to purchase the Hinshaw Shares held in the name of Michael
Hinshaw for USD $52,000 on a cash basis, free and clear of all
liens, and (b) find one or more third parties to purchase the
LuckFound Shares held in the name of LuckFound free and
clear of all liens, on terms approved by the Seller Member.
4.7 New Liabilities.
During the period between the date of this Agreement and the
Closing, the Seller Member’s board of directors will not (a)
approve or otherwise cause the Company to incur any new liabilities
outside of the ordinary course of the Company’s business or (b)
authorize, vote in favor of or otherwise accept any distributions,
dividends or other similar payments from the Company not
contemplated by this Agreement.
5. Tax Matters
5.1 Liability for Transfer
Taxes. Seller Member or Purchaser, as the case may be, shall be
responsible for any sales Tax, use Tax, real property transfer or
gains Tax, asset transfer Tax, documentary stamp Tax or similar Tax
attributable to the transactions contemplated hereby in accordance
with whether the primary legal liability for such Tax is imposed on
Seller Member or Purchaser under applicable Legal Requirements.
Seller Member and Purchaser agree to timely sign and deliver such
certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce), or file Tax
Returns with respect to, such Taxes.
5.2 Survival. Notwithstanding
anything to the contrary in this Agreement, the obligations of the
parties set forth in this Section 5 shall be unconditional and
absolute and shall survive the Closing until five (5) years after
the Closing Date.
6. Conditions Precedent
to Obligations of Purchaser
The obligations of Purchaser to cause the transactions contemplated
by this Agreement to be consummated are subject to the satisfaction
(or waiver by Purchaser), at or prior to the Closing, of each of
the following conditions:
6.1 Accuracy of
Representations. The Seller Member representations and
warranties in Section 2 of this shall have been accurate in all
respects as of the date of this Agreement and will be accurate in
all respects as of the Closing Date as if made as of the Closing
Date, except where inaccuracies in such representations and
warranties could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the ability of the
Seller Member to consummate the transactions contemplated by this
Agreement.
6.2 Performance of Covenants.
Each of the covenants and obligations that the Seller Member is
required to comply with or to perform at or prior to the Closing
shall have been complied with and performed.
6.3 Agreements and Documents.
Purchaser shall have received the following agreements and
documents, each of which, as applicable, shall be in full force and
effect:
(a) The Unit Assignment
Agreement, duly executed by the Seller Member and delivered to the
Purchaser;
(b) a certificate duly executed
by the Seller Member and containing the representation and warranty
of the Seller Member that the conditions set forth in Sections 6.1
and 6.2, in each case with respect to the Seller Member, have been
duly satisfied (each, a “Seller Member Closing
Certificate”);
(c) certificates of non-foreign
status, in form and substance reasonably satisfactory to Purchaser,
in accordance with Treasury Regulation § 1.1445-2(b), duly executed
by the Seller Member;
(d) an IRS Form W-9 duly
executed by the Seller Member; and
(e) certified resolutions or
minutes of the Seller Member evidencing votes adopted by the
directors of the Seller Member approving this Agreement and the
transactions contemplated hereby.
6.4 Seller Member Shareholder
Approval. The Shareholder Approval shall have been
obtained.
6.5 TSX-V Approval. The TSX-V
shall have approved the transactions contemplated under this
Agreement.
6.6 Indemnification Agreement.
The Seller Member shall have entered into an indemnification
agreement with Michael Hinshaw, on terms and conditions reasonably
satisfactory to both the Seller Member and Mr. Hinshaw.
6.7 No Restraints. No temporary
restraining order, preliminary or permanent injunction or other
Order preventing or otherwise impeding the consummation of the
transactions contemplated by this Agreement shall have been issued
by any court of competent jurisdiction or other Governmental Entity
and remain in effect, and there shall not be any applicable Legal
Requirement enacted or deemed applicable to the transactions
contemplated by this Agreement that makes consummation of such
transactions illegal.
6.8 No Legal Proceedings. No
Governmental Entity and no other Person shall have commenced, and
no Governmental Entity shall have threatened in writing to
commence, any Legal Proceeding: (a) challenging the
transactions contemplated by this Agreement or seeking the recovery
of damages in connection with the transactions contemplated by this
Agreement; (b) seeking to prohibit or limit the exercise by
Purchaser of any material right pertaining to its ownership of the
Acquired Units; or (c) that may have the effect of preventing,
delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.
7. Conditions Precedent
to Obligations of the Seller Member
The obligations of the Seller Member to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or
waiver), at or prior to the Closing, of the following
conditions:
7.1 Accuracy of
Representations. Each of the Purchaser’s representations and
warranties in Section 3 of this Agreement shall have been accurate
in all material respects as of the date of this Agreement and will
be accurate in all material respects as of the Closing Date as if
made as of the Closing Date.
7.2 Performance of Covenants.
Each of the covenants and obligations that Purchaser is required to
comply with or to perform at or prior to the Closing shall have
been complied with and performed.
7.3 Closing Certificate. The
Seller Member shall have received a certificate duly executed by
Purchaser and containing the representation and warranty of
Purchaser that the conditions set forth in Sections 7.1 and
7.2 have been satisfied.
7.4 Signing Cash Consideration.
The Seller Member shall have received from the Company the Signing
Cash Consideration.
7.5 Closing Cash Consideration.
The Seller Member shall have received from Purchaser the Closing
Cash Consideration, pursuant to Section 1.4(a)(i).
7.6 Execution of Promissory
Note. The Purchaser shall have properly executed and delivered
to the Seller Member the Promissory Note.
7.7 Execution of Security
Agreement. The Purchaser shall have properly executed and
delivered to the Seller Member the Security Agreement.
7.8 Sale of Hinshaw Shares.
Michael Hinshaw shall have completed the sale of all of the Hinshaw
Shares on terms reasonably satisfactory to the Seller Member, and
shall no longer be the registered or beneficial holder of any of
(i) the Hinshaw Shares, or (ii) any other shares of the Seller
Member’s common stock.
7.9 Termination of Rights to
Davison Shares. Prior to the Closing, Lynn Davison shall have
terminated all rights to purchase or otherwise acquire the Davison
Shares on terms reasonably satisfactory to the Seller Member.
7.10 Termination of Rights to Shay Shares.
Prior to the Closing, Stephen Shay shall have terminated all rights
to purchase or otherwise acquire the Shay Shares on terms
reasonably satisfactory to the Seller Member.
7.11 Termination of Rights to Clark Shares.
Prior to the Closing, Graham Clark shall have terminated all rights
to acquire the Clark Shares on terms reasonably satisfactory to the
Seller Member.
7.12 Sale of LuckFound Shares. Prior to the
Closing, all of the LuckFound Shares shall have been sold to third
parties on terms reasonably satisfactory to the Seller Member and
Luckfound.org shall no longer be a registered or beneficial holder
of the LuckFound Shares.
7.13 No Restraints. No temporary
restraining order, preliminary or permanent injunction or other
Order preventing the consummation of the transactions contemplated
by this Agreement shall have been issued by any court of competent
jurisdiction or other Governmental Entity and remain in effect, and
there shall not be any applicable Legal Requirement enacted or
deemed applicable to the transactions contemplated by this
Agreement by any Governmental Entity that makes consummation of
such transactions illegal.
7.14 No Legal Proceedings. No Governmental
Entity and no other Person shall have commenced, and no
Governmental Entity shall have threatened in writing to commence,
any Legal Proceeding: any Legal Proceeding: (a) challenging
the transactions contemplated by this Agreement or seeking the
recovery of damages in connection with the transactions
contemplated by this Agreement; or (b) that may have the
effect of preventing, delaying, making illegal or otherwise
interfering with the transactions contemplated by this
Agreement.
8. Termination
8.1 Termination Events. This
Agreement may be terminated prior to the Closing:
(a) by the mutual written
consent of Purchaser and the Seller Member;
(b) by Purchaser if the Closing
has not taken place on or before 5:00 p.m. (San Francisco
time) on September 1, 2020 (the “End Date”) and any
condition set forth in Section 6 has not been satisfied or
waived as of the time of termination (in each case other than as a
result of any failure on the part of Purchaser to comply with or
perform any covenant or obligation of Purchaser set forth in this
Agreement);
(c) by the Seller Member if the
Closing has not taken place on or before 5:00 p.m. (San
Francisco time) on the End Date and any condition set forth in
Section 7 has not been satisfied or waived as of the time of
termination (in each case other than as a result of any failure on
the part of the Seller Member to comply with or perform any
covenant or obligation set forth in this Agreement);
(d) by Purchaser or the Seller
Member if: (i) a court of competent jurisdiction or other
Governmental Entity shall have issued a final and nonappealable
Order, or shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement; or (ii) there
shall be any applicable Legal Requirement enacted, promulgated,
issued or deemed applicable to the transactions contemplated by
this Agreement by any Governmental Entity that would make
consummation of such transactions illegal;
(e) by Purchaser if:
(i) any of the representations and warranties of the Seller
Member contained in this Agreement shall be inaccurate as of the
date of this Agreement, or shall have become inaccurate as of a
date subsequent to the date of this Agreement, such that the
condition set forth in Section 6.1 would not be satisfied; or
(ii) any of the covenants of the Seller Member contained in
this Agreement shall have been breached such that the condition set
forth in Section 6.2 would not be satisfied; provided,
however, that if an inaccuracy in any of the representations
and warranties of the Seller Member as of a date subsequent to the
date of this Agreement or a breach of a covenant by the Seller
Member is curable by the Seller Member through the use of
commercially reasonable efforts within ten (10) Business Days after
Purchaser notifies the Seller Member in writing of the existence of
such inaccuracy or breach (the “Seller Cure Period”), then
Purchaser may not terminate this Agreement under this
Section 8.1(e) as a result of such inaccuracy or breach prior
to the expiration of the Seller Cure Period, provided the Seller
Member, during the Seller Cure Period, continues to exercise
commercially reasonable efforts to cure such inaccuracy or breach
(it being understood that Purchaser may not terminate this
Agreement pursuant to this Section 8.1(e) with respect to such
inaccuracy or breach if such inaccuracy or breach is cured prior to
the expiration of the Seller Cure Period); or
(f) by the Seller Member if:
(i) any of Purchaser’s representations and warranties
contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Agreement, such that the condition
set forth in Section 7.1 would not be satisfied; or
(ii) if any of Purchaser’s covenants contained in this
Agreement shall have been breached such that the condition set
forth in Section 7.2 would not be satisfied; provided,
however, that if an inaccuracy in any of Purchaser’s
representations and warranties as of a date subsequent to the date
of this Agreement or a breach of a covenant by Purchaser is curable
by Purchaser through the use of commercially reasonable efforts
within ten (10) Business Days after the Seller Member notifies
Purchaser in writing of the existence of such inaccuracy or breach
(the “Purchaser Cure Period”), then the Seller Member may
not terminate this Agreement under this Section 8.1(f) as a
result of such inaccuracy or breach prior to the expiration of the
Purchaser Cure Period, provided Purchaser, during the Purchaser
Cure Period, continues to exercise commercially reasonable efforts
to cure such inaccuracy or breach (it being understood that the
Seller Member may not terminate this Agreement pursuant to this
Section 8.1(f) with respect to such inaccuracy or breach if
such inaccuracy or breach is cured prior to the expiration of the
Purchaser Cure Period).
8.2 Termination Procedures. If
Purchaser wishes to terminate this Agreement pursuant to
Section 8.1, Purchaser shall deliver to the Seller Member a
written notice stating that Purchaser is terminating this Agreement
and setting forth a brief description of the basis on which
Purchaser is terminating this Agreement. If the Seller Member
wishes to terminate this Agreement pursuant to Section 8.1,
the Seller Member shall deliver to Purchaser a written notice
stating that the Seller Member is terminating this Agreement and
setting forth a brief description of the basis on which the Seller
Member is terminating this Agreement.
8.3 General Effect of
Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this
Agreement shall terminate; provided, however, that:
(a) neither of Purchaser or the Seller Member shall be
relieved of any obligation or liability arising from any prior
material breach by such party of any representation and warranty,
or any willful breach by such party of any covenant or obligation,
contained in this Agreement; (b) the parties shall, in all
events, remain bound by and continue to be subject to the
provisions set forth in Section 9; and (c) the parties
shall, in all events, remain bound by and continue to be subject to
Section 4.2.
9. Indemnification,
Etc.
9.1 Survival of Representations,
Etc.
(a) Seller Member
Representations. All representations and warranties made by
the Seller Member in Section 2 of this Agreement shall survive the
Closing until the date that is three (3) years following the
Closing Date; provided, however, that if, at any time on or
prior to the expiration date referred to in this sentence, any
Purchaser Indemnitee delivers to the Seller Member a written notice
alleging the existence of an inaccuracy in or a breach of any of
the Seller Member’s representations and warranties in Section 2 of
this Agreement and asserting a claim for recovery under
Section 9.2 based on such alleged inaccuracy or breach, then
the claim asserted in such notice shall survive until such time as
such claim is fully and finally resolved.
(b) Purchaser
Representations. All representations and warranties made by
Purchaser in Section 3 of this Agreement shall survive the Closing
until the date that is three (3) years following the Closing Date;
provided, however, that if, at any time on or prior to the
expiration date referred to in this sentence, the Seller Member
Indemnitee delivers to Purchaser a written notice alleging the
existence of an inaccuracy in or a breach of any of the Purchaser’s
representations and warranties in Section 3 of this Agreement and
asserting a claim for recovery under Section 9.2 based on such
alleged inaccuracy or breach, then the claim asserted in such
notice shall survive until such time as such claim is fully and
finally resolved.
(c) Intentional
Misrepresentation; Fraud; Willful Misconduct. Notwithstanding
anything to the contrary contained in Section 9.1, in the event of
any intentional misrepresentation, fraud or willful misconduct of
the Purchaser or the Seller Member, the limitations set forth in
Sections 9.1, shall not apply to such Person.
9.2 Indemnification.
(a) Indemnification.
From and after the Closing (but subject to Section 9.1),
(i) Subject to Section 9.3, the
Seller Member shall hold harmless and indemnify each of the
Purchaser Indemnitees from and against, and shall compensate and
reimburse each of the Purchaser Indemnitees for, any Damages which
are suffered or incurred at any time by any of the Purchaser
Indemnitees (regardless of whether or not such Damages relate to
any third party claim) and which arise from or as a result of or
are related to:
(A) any inaccuracy in or breach
of any representation or warranty made by the Seller Member in
Section 2 of this Agreement as of the date of this Agreement or as
if such representation or warranty was made on and as of the
Closing, or in the Seller Member Closing Certificate (in each case
without giving effect to any materiality or similar qualifications
limiting the scope of such representation or warranty); or
(B) any breach of any covenant
or obligation of the Seller Member in this Agreement required to be
performed prior to, or at the Closing Date.
(ii) Purchaser shall hold
harmless and indemnify the Seller Member Indemnitees from and
against, and shall compensate and reimburse the Seller Member
Indemnitees for, any Damages which are suffered or incurred at any
time by the Seller Member Indemnitees (regardless of whether or not
such Damages relate to any third party claim) and which arise from
or as a result of or are related to:
(A) any inaccuracy in or breach
of any representation or warranty made by Purchaser in Section 3 as
of the date of this Agreement or as if such representation or
warranty was made on and as of the Closing, or in the certificate
delivered pursuant to Section 7.3 (in each case, without giving
effect to any materiality or similar qualifications limiting the
scope of such representation or warranty); or
(B) any breach of any covenant
or obligation of Purchaser in this Agreement required to be
performed prior to, or at the Closing Date; or
(C) any liability arising from
or related to the conduct of the business of McorpCX LLC prior to
the Closing Date, excluding any liability related to conduct that
was explicitly approved by the Seller Member’s board of director or
any Undisclosed Liability as described in Section 2.6; or
(D) any liability arising from
or related to the conduct of the business of McorpCX LLC on or
after the Closing Date.
9.3 Limitations.
(a) Damages. In no event
shall any party hereto be liable to any other party hereto or such
other party’s Affiliates, directors, employees, attorneys or agents
for any punitive damages or indirect damages that are not
reasonably foreseeable in respect of any breach of this Agreement
(excluding any such damages payable to a third party).
(b) Insurance Proceeds.
The amount of any Damages for which indemnification is provided
under this Section 9 shall be net of any proceeds actually
recovered by the Indemnified Party in respect of such matter (A)
under any insurance policies, or under any insurance policies held
by Purchaser at or prior to the Closing, or (B) from any third
party, in each case less any costs and expenses and any premiums
incurred by such Indemnified Party or its Affiliates in connection
with the pursuit or recovery of such amounts, including any
increase in insurance premiums, retroactive premiums, costs
associated with any loss of insurance and replacement thereof or
self-insured component of such insurance coverage, and in each
case, no right of subrogation shall accrue to any insurer or third
party hereunder. If any proceeds to be netted hereunder with
respect to such Damages are actually received by the Indemnified
Party after payment by the Indemnifying Party of any amounts
otherwise required to be paid to an Indemnified Party pursuant to
this Section 9 with respect to such Damages, then the Indemnified
Party shall pay to the Indemnifying Party, promptly after such
receipt, any amount that the Indemnifying Party would not have been
required to pay pursuant to this Section 9 with respect to such
Damages had such proceeds been received at the time of such
payment. Notwithstanding the fact that the Indemnified Party has
recourse against any third party (other than under insurance
policies held by Purchaser prior to Closing covering the action,
omission or other fact giving rise to Damages for which
indemnification may be sought under this Section 9 and that remain
in effect after the Closing), such Indemnified Party shall not be
obligated to pursue such recourse from any third party.
9.4 Defense of Third Party
Claims. The party making a claim for indemnification under this
Section 9 is referred to as the “Indemnified Party,” and the
party against whom such claim for indemnification is asserted under
this Section 9 is referred to as the “Indemnifying
Party.”
(a) Third Party Claims.
If any Indemnified Party receives notice of the assertion or
commencement of any claim or Legal Proceeding (whether against the
Seller Member, Purchaser or any other Person) made or brought by
any Person who is not a party to this Agreement or an Affiliate of
a party to this Agreement or a Representative of the foregoing (a
“Third Party Claim”) against such Indemnified Party with
respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall
give the Indemnifying Party reasonably prompt written notice
thereof. The failure to promptly give such written notice shall
not, however, relieve the Indemnifying Party of its indemnification
obligations, except and only to the extent that the Indemnifying
Party is actually and materially prejudiced thereby. Such notice by
the Indemnified Party shall describe the Third Party Claim in
reasonable detail, shall include copies of all material written
evidence thereof and shall indicate the estimated amount, if
reasonably practicable, of the Damages that have been or may be
sustained by the Indemnified Party. The Indemnifying Party shall
have the right to participate in or, upon providing written notice
to the Indemnified Party within fifteen (15) days of receipt of
such notice of such Third Party Claim in which the Indemnifying
Party acknowledges without qualification its indemnification
obligation hereunder (subject only to the applicable limitations
set forth in this Section 9), to assume the defense of any Third
Party Claim at the Indemnifying Party’s expense and by the
Indemnifying Party’s own counsel. In the event that the
Indemnifying Party assumes the defense of any Third Party Claim,
subject to Section 9.4(b), it shall have the right to take such
reasonable action as it deems necessary to avoid, dispute, defend,
appeal or make counterclaims pertaining to any such Third Party
Claim in the name and on behalf of the Indemnified Party. The
Indemnified Party shall have the right to participate in the
defense of any Third Party Claim with counsel selected by it,
subject to the Indemnifying Party’s right to control the defense
thereof. The fees and disbursements of such counsel shall be at the
expense of the Indemnified Party, provided, that if in the
reasonable opinion of counsel to the Indemnified Party, there are
legal defenses available to an Indemnified Party that are different
from or additional to those available to the Indemnifying Party,
then the Indemnifying Party shall be responsible for the fees and
expenses of the Indemnified Party; provided, however, in such case,
if there are multiple Indemnified Parties, the Indemnifying Party
shall only be liable for one counsel to the Indemnified Parties, as
well as one local counsel in each jurisdiction for which the
Indemnified Parties reasonably determine such local counsel is
required. If the Indemnifying Party elects not to compromise or
defend such Third Party Claim, fails to give timely and sufficient
notification to the Indemnified Party in writing of its election to
defend as provided in this Agreement, or loses its right to defend
such Third Party Claim by failing to diligently defend such Third
Party Claim, the Indemnified Party may, subject to Section 9.4(b),
without prejudice to its right to indemnification hereunder, pay,
compromise and defend such Third Party Claim and seek
indemnification for any and all Damages based upon, arising from or
relating to such Third Party Claim subject to the limitations in
this Section 9. Notwithstanding anything to the contrary contained
in this Section 9.4, the Indemnifying Party shall not be entitled
to assume control of a Third Party Claim if (i) the Third Party
Claim relates to or arises in connection with any criminal
proceeding, action, indictment, investigation or allegation, (ii)
the Third Party Claim seeks injunctive or other equitable relief or
relief other than for monetary Damages against the Indemnified
Party, (iii) the Indemnified Party reasonably believes that the
Third Party Claim, if adversely determined, would impair in any
material respect the financial condition, business, operations,
reputation or prospects of the Indemnified Party or any of its
Affiliates, or (iv) an actual or readily apparent conflict of
interest (as determined by the Indemnified Party after obtaining
advice of counsel) exists between the Indemnifying Party and the
Indemnified Party with respect to the Third Party Claim that
precludes effective joint representation. If, pursuant to this
Section 9.4(a), the Indemnified Party so contests, defends,
litigates or settles a Third Party Claim for which it is entitled
to indemnification hereunder, the Indemnified Party shall be
reimbursed by the Indemnifying Party for the reasonable attorneys’
fees and other expenses of defending the Third Party Claim which
are incurred from time to time, promptly following the presentation
to the Indemnifying Party of itemized bills for such attorneys’
fees and other expenses, subject, however, to any applicable
limitations set forth in this Section 9. Subject to any applicable
limitations set forth in this Section 9, all expenses (including
attorneys’ fees) incurred by the Indemnifying Party in connection
with the foregoing shall be paid by the Indemnifying Party.
(b) Settlement of Third
Party Claims. Notwithstanding any other provision of this
Agreement, the Indemnifying Party shall not enter into settlement
of any Third Party Claim without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld
or delayed). If the Indemnified Party has assumed the defense
pursuant to Section 9.4(a), it shall not agree to any settlement
without the written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld or delayed).
(c) Cooperation. The
Indemnifying Party and the Indemnified Party shall each use
commercially reasonable efforts in good faith to cooperate with
each other in all reasonable respects in connection with the
defense of any Third Party Claim, including, upon the reasonable
request of the defending party, providing copies of records within
the non-defending party’s possession or control relating to such
Third Party Claim and making available, without expense (other than
reimbursement of actual out-of-pocket expenses), Representatives of
the non-defending party as may be reasonably necessary for the
preparation of the defense of such Third Party Claim.
9.5 Exercise of Remedies.
(a) Purchaser shall have the
exclusive right to assert any indemnification claim against Seller
Member and to exercise any other remedy of any Purchaser Indemnitee
under this Agreement.
(b) The Seller Member shall
have the exclusive right to assert any indemnification claim
against Purchaser or its Affiliates, and to exercise any other
remedy of the Seller Member under this Agreement.
9.6 Exclusive Remedy. Except
(a) in the event of fraud, willful misconduct or intentional
misrepresentation and (b) for nonmonetary equitable remedies, from
and after the Closing, the rights to indemnification, compensation
and reimbursement set forth in this Section 9 shall be the sole and
exclusive monetary remedy of the Purchaser Indemnitees and the
Seller Member Indemnitees with respect to any breach of any
representation, warranty or covenant set forth in this Agreement or
in any certificate delivered pursuant to this Agreement.
9.7 Tax Treatment of
Indemnification Payments. Purchaser and the Seller Member agree
to treat any payment of an indemnification amount as an adjustment
to the Purchase Price to the extent permissible under applicable
Legal Requirements.
10. Miscellaneous
Provisions
10.1 Further Assurances. From
time to time following the Closing, the Seller Member shall execute
and deliver, or cause to be executed and delivered, to Purchaser
such other instruments of conveyance and transfer as Purchaser may
reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, Purchaser in the
Acquired Units.
10.2 Fees and Expenses. Except
as otherwise expressly required by this Agreement, each party to
this Agreement shall bear and pay all fees, costs and expenses that
have been incurred or that are incurred in the future by such party
in connection with the transactions contemplated by this Agreement,
including all fees, costs and expenses incurred by such party in
connection with or by virtue of: (a) the negotiation,
preparation and review of this Agreement and all agreements,
certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the transactions
contemplated by this Agreement; (b) the preparation and
submission of any filing or notice required to be made or given in
connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained
in connection with any of such transactions; and (c) the
consummation of the transactions contemplated by this
Agreement.
10.3 Notices. Any notice or
other communication required or permitted to be delivered to any
party under this Agreement shall be in writing and shall be deemed
properly delivered, given and received: (a) if delivered by
hand, when delivered; (b) if sent on a Business Day by e-mail
before 5:00 p.m. (San Francisco time) on the day sent by
e-mail and receipt is confirmed, when transmitted; (c) if sent
by email on a day other than a Business Day and receipt is
confirmed, or if sent by e-mail after 5:00 p.m. (San Francisco
time) on the day sent by facsimile or e-mail and receipt is
confirmed, on the Business Day following the date on which receipt
is confirmed; (d) if sent by registered, certified or first
class mail, the third Business Day after being sent; and
(e) if sent by overnight delivery via a national courier
service, one Business Day after being sent, in each case to the
address or email address set forth beneath the name of such party
below (or to such other address or facsimile telephone number as
such party shall have specified in a written notice given to the
other parties hereto):
If to Seller Member:
McorpCX, Inc.
201 Spear Street, Suite 1100,
San Francisco, California 94105
Attention: Barry MacNeil
Telephone: (604) 609-3358
Email: macneil@iremco.com
with a copy (which shall not constitute notice) to:
Davis Wright Tremaine LLP
865 South Figueroa, Suite 2400
Los Angeles, California 90017
Attention: Andrew J. Bond
Telephone: (213) 633-8666
Email: Andrewbond@dwt.com
If to Purchaser:
mfifty, LLC
524 San Anselmo Ave., Suite 147
San Anselmo California 94960
Attention: Michael Hinshaw
Telephone: (415) 517-5727
Email: mhinshaw@mfifty.com
with a copy (which shall not constitute notice) to
Koley Jessen P.C., L.L.O.
1125 S. 103rd St., Suite 800
Omaha, Nebraska 68124
Attention: Brian L. Harr
Telephone: (402) 343-3750
Email: brian.harr@koleyjessen.com
10.4 Headings. The bold-faced
headings and the underlined headings contained in this Agreement
are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement.
10.5 Counterparts and Exchanges by
Electronic Transmission. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument. Counterparts may be delivered via electronic mail
(including pdf or any electronic signature complying with the U.S.
federal ESIGN Act of 2000, e.g., www.docusign.com) or other
transmission method and any counterpart so delivered shall be
deemed to have been duly and validly delivered and be valid and
effective for all purposes..
10.6 Governing Law; Dispute
Resolution.
(a) Governing Law. This
Agreement shall be construed in accordance with, and governed in
all respects by, the internal laws of the State of Delaware
(without giving effect to principles of conflicts of laws).
(b) Venue. Except as
otherwise provided in Section 10.6(c), any action, suit or other
Legal Proceeding relating to this Agreement or the enforcement of
any provision of this Agreement (including an action, suit or other
Legal Proceeding based upon intentional misrepresentation, willful
misconduct or fraud) shall be brought or otherwise commenced
exclusively in any state or federal court located in San Francisco,
California. Each party to this Agreement: (i) expressly and
irrevocably consents and submits to the exclusive jurisdiction of
each state and federal court located in San Francisco, California
(and, in each case, each appellate court located in such city) in
connection with any such action, suit or Legal Proceeding; (ii)
agrees that each state and federal court located in San Francisco,
California, shall be deemed to be a convenient forum; and (iii)
agrees not to assert (by way of motion, as a defense or otherwise),
in any such action, suit or Legal Proceeding commenced in any state
or federal court located in the State of California, any claim that
such party is not subject personally to the jurisdiction of such
court, that such action, suit or Legal Proceeding has been brought
in an inconvenient forum, that the venue of such action, suit or
Legal Proceeding is improper or that this Agreement or the subject
matter of this Agreement may not be enforced in or by such
court.
(c) Indemnification
Claims. Any claim for indemnification, compensation or
reimbursement pursuant to Section 9 shall be brought and resolved
exclusively in accordance with this Section 10.6(c) (it being
understood that, for the avoidance of doubt and without limiting
any portion of Section 10.6(c): (i) at the option of any
party, any claim based upon intentional misrepresentation, willful
misconduct or fraud may be brought and resolved in accordance with
Section 10.6(c) rather than in accordance with this Section
10.6(c); and (ii) nothing in this Section 10.6(c) shall
prevent any Purchaser Indemnitee or Seller Member Indemnitee from
seeking preliminary injunctive relief or any other equitable remedy
from a court of competent jurisdiction).
(i) If any Purchaser Indemnitee
or Seller Member Indemnitee has or claims in good faith to have
incurred or suffered, or believes in good faith that it may incur
or suffer, Damages for which it is or may be entitled to
indemnification, compensation or reimbursement under Section 9
of this Agreement, such Purchaser Indemnitee may deliver, or such
Seller Member Indemnitee may deliver, a claim notice (a “Claim
Notice”) to the Seller Member or Purchaser, as applicable. Each
Claim Notice shall: (i) state that the Indemnified Party
believes in good faith that it is entitled to indemnification,
compensation or reimbursement under Section 9 of this Agreement;
(ii) contain a brief description of the facts and
circumstances supporting the Indemnified Party’s claim; and
(iii) if practicable, contain a non-binding, preliminary, good
faith estimate of the amount to which the Indemnified Party might
be entitled (the aggregate amount of such estimate, as it may be
modified by the Indemnified Party in good faith from time to time,
being referred to as the “Claimed Amount”).
(ii) During the forty-five (45)
day period commencing upon receipt by the Seller Member or
Purchaser, as applicable, of a Claim Notice from or on behalf of an
Indemnified Party (the “Dispute Period”), the Seller Member
or Purchaser, as applicable, may deliver to the Purchaser or Seller
Member, as applicable, a written response (the “Response
Notice”) in which it: (i) agrees that the full Claimed
Amount is owed to the Indemnified Party; (ii) agrees that
part, but not all, of the Claimed Amount is owed to the Indemnified
Party; or (iii) indicates that no part of the Claimed Amount
is owed to the Indemnified Party. If the Response Notice is
delivered in accordance with clause “(ii)” or “(iii)” of the
preceding sentence, the Response Notice shall also contain a brief
description of the facts and circumstances supporting the Seller
Member’s agent’s or Purchaser’s position, as applicable, that only
a portion or no part of the Claimed Amount is owed to the
Indemnified Party, as the case may be. Any part of the Claimed
Amount that is not agreed to be owed to the Indemnified Party
pursuant to the Response Notice (or the entire Claimed Amount, if
Purchaser or the Seller Member, as applicable, asserts in the
Response Notice that no part of the Claimed Amount is owed to the
Indemnified Party) being referred to as the “Contested
Amount” (it being understood that the Contested Amount shall be
modified from time to time to reflect any good faith modifications
by or on behalf of the Indemnified Party to the Claimed Amount). If
a Response Notice is not received by or on behalf of the
Indemnified Party from the Seller Member or Purchaser, as
applicable, prior to the expiration of the Dispute Period, then the
Seller Member or Purchaser, as applicable, shall be conclusively
deemed to have agreed that an amount equal to the full Claimed
Amount is owed to the Indemnified Party.
(iii) If Purchaser or the
Seller Member, as applicable, in its Response Notice agrees that
the full Claimed Amount is owed to the Indemnified Party, or if no
Response Notice is received by or on behalf of the Indemnified
Party from Purchaser or the Seller Member, as applicable, prior to
the expiration of the Dispute Period, then, subject to the
limitations in Section 9.3, the Indemnifying Party shall take such
necessary action to cause the Indemnified Party to be paid the
Claimed Amount within ten (10) Business Days.
(iv) If Purchaser or the Seller
Member, as applicable, delivers a Response Notice to the Seller
Member or Purchaser, as applicable, during the Dispute Period
agreeing that part, but not all, of the Claimed Amount is owed to
the Indemnified Party (the “Agreed Amount”), then, subject
to the limitations in Section 9.3, the Indemnifying Party shall
take such necessary action to cause the Indemnified Party to be
paid the Agreed Amount within 10 Business Days.
(v) If Purchaser or the Seller
Member, as applicable, delivers a Response Notice to the Seller
Member or the Purchaser, as applicable, during the Dispute Period
indicating that there is a Contested Amount, the Seller Member and
the Purchaser Indemnitee shall use commercially reasonable efforts
in good faith to resolve the dispute related to the Contested
Amount within the forty five (45) day period (the “Initial
Resolution Period”) commencing upon receipt by Seller Member or
the Purchaser Indemnitee, as applicable, of such Response Notice.
If the Seller Member and the Purchaser Indemnitee resolve such
dispute, such resolution shall be binding on the Seller Member and
such Purchaser Indemnitee and a settlement agreement stipulating
the amount owed to such Purchaser Indemnitee or Seller Indemnitee
(the “Stipulated Amount”) shall be signed by Purchaser and
the Seller Member. Thereafter, subject to the limitations in
Section 9.3, the Indemnifying Party shall take such necessary
action to cause the Indemnified Party to be paid the Stipulated
Amount.
(vi) In the event that there is
a dispute relating to any Claim Notice or Contested Amount (whether
it is a matter between the Purchaser Indemnitee, on the one hand,
and the Seller Member, on the other hand, or it is a matter that is
subject to a claim or Legal Proceeding asserted or commenced by a
third party brought against the Purchaser Indemnitee) and such
dispute is not resolved within the Initial Resolution Period, such
dispute (an “Arbitrable Dispute”) shall be settled by
binding arbitration in accordance with the procedures set forth
under the commercial rules then in effect of the American
Arbitration Association. Notwithstanding the preceding sentence,
nothing in this Agreement shall prevent the Indemnified Party from
seeking preliminary injunctive relief from a court of competent
jurisdiction pending resolution of any Arbitrable Dispute. Upon
resolution of any arbitration described in this clause “(vi),”
Purchaser and Seller Member, as applicable, subject to the
limitations in Section 9.3, shall thereafter take such necessary
action to cause the Indemnified Party to be paid the amount set
forth in such resolution within 10 Business Days (or such shorter
time set forth in the resolution). .
10.7 Successors and Assigns.
This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties
hereto. This Agreement shall be binding upon: (a) the Seller
Member and its successors and assigns (if any); and
(b) Purchaser and its successors and assigns (if any). This
Agreement shall not inure to the benefit of any Person other than:
(i) the Purchaser and (ii) the other Purchaser
Indemnitees; (iii) the Seller Member; (iv) the other Seller
Member Indemnitees; and (v) the respective successors and
assigns (if any) of the foregoing.
10.8 Remedies Cumulative; Specific
Performance. Except as expressly set forth in this Agreement,
the rights and remedies of the parties hereto shall be cumulative
(and not alternative). The parties to this Agreement agree that, in
the event of any breach or threatened breach by any party of any
covenant, obligation or other provision set forth in this
Agreement: (a) the non-breaching party shall be entitled,
without any proof of actual damages (and in addition to any other
remedy that may be available to it) to: (i) a decree or order
of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened
breach; and (b) the non-breaching party shall not be required
to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related
action or Legal Proceeding.
10.9 Waiver. No failure on the
part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or
further exercise thereof or of any other power, right, privilege or
remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power,
right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such Person;
and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
10.10 Waiver of Jury Trial. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING ARISING OUT
OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.11 Amendments. This
Agreement may not be amended, modified, altered or supplemented
other than by means of a written instrument duly executed and
delivered on behalf of Purchaser and the Seller Member.
10.12 Severability. In the
event that any provision of this Agreement, or the application of
any such provision to any Person or set of circumstances, shall be
determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of
such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.13 Parties in Interest.
Except for the provisions of Section 9, none of the provisions of
this Agreement is intended to provide any rights or remedies to any
employee, creditor or other Person other than Purchaser and the
Seller Member and their respective successors and assigns (if
any).
10.14 Entire Agreement. This
Agreement and the other agreements referred to herein set forth the
entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the
subject matter hereof and thereof;
10.15 Construction.
(a) Gender; Etc. For
purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and
the neuter gender shall include the masculine and feminine
genders.
(b) Ambiguities. The
parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this
Agreement.
(c) Interpretation. As
used in this Agreement, (i) the words “include” and
“including,” and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by
the words “without limitation”; and (ii) the use of the word
“or” shall not be exclusive.
(d) References. Except
as otherwise indicated, all references in this Agreement to
“Sections,” “Schedules” and “Exhibits” are intended to refer to
Sections of this Agreement and Schedules and Exhibits to this
Agreement.
[Remainder of page intentionally left blank]
The parties hereto have caused this Agreement to be executed and
delivered as of the date first written above.
PURCHASER:
mfifty, LLC,
a California Limited Liability Company
By: /s/ Michael
Hinshaw
Name: Michael
Hinshaw
Title:
Manager
THE SELLER MEMBER:
McorpCX, Inc.,
a California Limited Liability Company
By: /s/ Matthew
Kruchko
Name: Matthew
Kruchko
Title: President and Chief Executive
Officer
EXHIBIT A
CERTAIN DEFINITIONS
(a) Definitions. For purposes
of this Agreement (including this Exhibit A):
“Affiliate” means, with respect to any Person, any other
Person controlling, controlled by or under common control with such
Person. For purposes of this definition and this Agreement, the
term “control” (and correlative terms) means the power,
whether by Contract, equity ownership or otherwise, to direct the
policies or management of a Person.
“Business Day” means any day other than: (a) a
Saturday, Sunday or federal holiday; or (b) a day on which
banking institutions in San Francisco, California, are authorized
or required to be closed.
“Code” means the Internal Revenue Code of 1986, as amended.
All references to the Code, Treasury Regulations or other
governmental pronouncements shall be deemed to include references
to any applicable successor regulations or amending
pronouncement.
“Consent” means any approval, consent, ratification,
permission, waiver, order or authorization (including any
Governmental Authorization).
“Contract” means any legally binding written, oral or other
agreement (including “click-through” agreement), contract, license,
sublicense, subcontract, settlement agreement, lease, instrument,
note, purchase order, warranty, insurance policy, benefit plan or
other legally binding commitment or undertaking of any nature.
“Damages” includes any loss, damage, injury, decline in
value, liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including reasonable attorneys’ fees), charge,
cost (including out-of-pockets costs of investigation) or expense
of any nature.
“Encumbrance” means any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, intangible property
right, claim, infringement, option, right of first refusal,
preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security or
restriction on the transfer, use or ownership of any security or
other asset).
“Entity” means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company
(including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
“Governmental Authorization” means any permit, license,
approval, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given
or otherwise provided by or under the authority of any Governmental
Entity or pursuant to any Legal Requirement.
“Governmental Entity” means any: (a) multinational or
supranational body exercising legislative, judicial or regulatory
powers, (b) nation, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(c) federal, state, local, municipal, foreign or other
government; or (d) governmental or quasi-governmental
authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official,
organization, unit, body or Entity and any court or other
tribunal).
“Income Tax” means any federal, state, local or foreign Tax
measured by or imposed on net income.
“IRS” means the United States Internal Revenue Service.
“Legal Proceeding” means any action, suit, litigation,
arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing,
inquiry, audit, examination or investigation commenced, brought,
conducted or heard by or before, or otherwise involving, any court
or other Governmental Entity or any arbitrator or arbitration
panel, and with respect to any hearing, inquiry, audit, examination
or investigation solely to the extent the subject of such hearing,
inquiry, audit or examination has been provided notice thereof by
the applicable Governmental Entity.
“Legal Requirement” means any federal, state, local,
municipal, foreign, supranational or other law, statute,
constitution, treaty, requirement of common law, directive,
resolution, ordinance, code, edict, writ, decree, rule, regulation,
judgment, ruling, injunction or requirement issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by
or under the authority of any Governmental Entity.
“Material Adverse Effect” means, with respect to any party
to this Agreement, any effect that, taken individually or together
with any other effect, would materially impair or delay the
ability of any of any party to this Agreement to perform their
respective obligations under this Agreement or otherwise materially
impede or delay the consummation of the transactions contemplated
under this Agreement; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of
(i) changes in laws of general applicability or
interpretations thereof by Governmental Entities, (ii) changes
in generally accepted accounting principles or regulatory
accounting requirements, (iii) changes in general economic
conditions generally, (iv) the announcement of this Agreement
or any of the transactions contemplated thereunder, or
(v) changes that are the result of natural disasters,
calamities, acts of God or acts of war or terrorism, provided that
the effect of such changes described in clauses (i), (ii),
(iii) and (v) shall not be excluded as a Material Adverse
Effect to the extent of a materially disproportionate impact, if
any, they have on the Seller Member on the one hand or the
Purchaser on the other hand, as measured relative to similarly
situated entities.
“Order” means any order, writ, injunction, judgment, decree,
ruling or award of any arbitrator or any court or other
Governmental Entity.
“Permits” means, collectively, all licenses, certificates,
registrations, Consents, Orders, franchises, permits, approvals or
other similar authorizations issued, granted or approved by any
Agency or Governmental Entity in connection with the operation of
the Company, together with all renewals or modifications
thereof.
“Person” means any individual, Entity or Governmental
Entity.
“Purchaser Indemnitees” means the following Persons:
(a) Purchaser; (b) Purchaser’s current and future
Affiliates; (c) the respective Representatives of the Persons
referred to in clauses “(a)” and “(b)” above; (d) the
respective successors and assigns of the Persons referred to in
clauses “(a),” “(b)” and “(c)” above; provided, however,
that the Seller Member shall not be deemed to be “Purchaser
Indemnitees.”
“Representatives” means officers, directors, employees,
agents, attorneys, accountants, advisors and representatives.
“Seller Member Indemnitees” the following Persons:
(a) the Seller Member (b) the Seller Member’s current and
future Affiliates, (c) the respective Representatives of the
Persons referred to in clauses “(a)” and “(b)” above; and
(d) the respective successors and assigns of the Persons
referred to in clauses “(a),” “(b)” and “(c)” above.
“Tax” means: (i) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance,
property, production, sales, use, license, excise, franchise,
employment, payroll, withholding on amounts paid to or by any
Person, alternative or add-on minimum, ad valorem, value-added,
transfer, stamp, or environmental tax (including taxes under Code
Section 59A), escheat payments or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax
or additional amount imposed by any Governmental Entity; and (ii)
any liability for the payment of amounts determined by reference to
amounts described in clause “(i)” as a result of any obligation
under any agreement or arrangement, as a result being a transferee
or successor, or otherwise.
“Tax Return” means any return (including any information
return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document
or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Entity in connection with
the determination, assessment, collection or payment of any Tax or
in connection with the administration, implementation or
enforcement of or compliance with any applicable Legal Requirement
relating to any Tax, including any claim for refund, amended return
or declaration of estimated Tax.
“Treasury Regulations” means the regulations promulgated
under the Code, including temporary regulations.
“TSX-V” means the TSX Venture Exchange.
(b) Index of Defined Terms. The
following terms, as used in this Agreement (including this Exhibit
A) have the meanings given to them in the section or place
indicated below:
Term
|
Section or
Place Where Defined
|
Acquired Units
|
Recital C
|
Agreed Amount
|
Section 10.6(c)(iv)
|
Agreement
|
Introduction.
|
Arbitrable Dispute
|
Section 10.6(c)(vi)
|
Claim Notice
|
Section 10.6(c)(i)
|
Claimed Amount
|
Section 10.6(c)(i)
|
Closing
|
Section 1.5
|
Closing Cash Consideration
|
Section 1.3
|
Closing Date
|
Section 1.5
|
Contested Amount
|
Section 10.6(c)(ii)
|
Continuation Agreement
|
Recital D
|
Continuation Agreement Fee
|
Section 1.2
|
Contribution Agreement
|
Section 2.6
|
Dispute Period
|
Section 10.6(c)(ii)
|
End Date
|
Section 8.1(b)
|
Hinshaw Shares
|
Section 4.4
|
Indemnified Party
|
Section 9.4
|
Term |
Section or
Place Where Defined |
Indemnifying Party
|
Section 9.4
|
Initial Resolution Period
|
Section 10.6(c)(v)
|
LuckFound Shares
|
Section 4.4
|
McorpCX LLC
|
Recital A
|
Promissory Note
|
Section 1.3
|
Proxy Statement
|
Section 2.3(c)
|
Purchaser
|
Introduction
|
Purchaser Cure Period
|
Section 8.1(f)
|
Purchase Price
|
Section 1.2(a)
|
Response Notice
|
Section 10.6(c)(ii)
|
SEC
|
Section 2.2
|
Securities Act
|
Section 3.8
|
Security Agreement
|
Section 1.4(a)(ii)
|
Seller Member Closing Certificate
|
Section 6.3(b)
|
Seller Member Cure Period
|
Section 8.1(e)
|
Seller Member Meeting
|
Section 4.3
|
Seller Member
|
Introduction
|
Seller’s Board
|
Section 2.2
|
Shareholder Approval
|
Section 2.2
|
Signing Cash Consideration
|
Section 1.3
|
Stipulated Amount
|
Section 10.8(c)(v)
|
Third Party Claim
|
Section 9.4(a)
|
Undisclosed Liability
|
Section 2.6
|
Units
|
Recital A
|
Unit Assignment Agreement
|
Section 1.4(b)(i)
|
EXHIBIT B
FORM OF UNIT ASSIGNMENT
UNIT ASSIGNMENT
FOR VALUE RECEIVED,
(the “Assignor”) hereby sells, assigns and
transfers unto _____________________________, _____________
Membership Units of McorpCX , LLC (the “Company”), standing in
Assignor’s name on the books of the Company and does hereby
irrevocably constitute and appoint _________________________ to
transfer such units on the books of the Company with full power of
substitution in the premises.
Dated: _________________, 2020
[Assignor]
By:
Name:
Title:
EXHIBIT C
FORM OF PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
MFIFTY, LLC
Secured Promissory Note
$756,000 |
___________ ___,
2020 |
1. Principal. For value
received, mfifty, LLC, a California limited liability company (the
“Maker”), hereby unconditionally promises to pay to McorpCX,
Inc., a California corporation (the “Payee”), the aggregate
principal sum of Seven Hundred and Fifty Six Thousand Dollars
($756,000) (the “Principal”), all in accordance with the
terms and conditions of this Secured Promissory Note (this
“Note”).
2. Interest. The
Maker hereby unconditionally promises to pay to the order of the
Payee interest (“Interest”), which will accrue daily on the
Outstanding Balance (defined below) at an initial rate of 0.99%, to
be recalculated at the end of each twelve (12) month period
commencing on the date of this Note based on the annual Applicable
Federal Rate for mid-term loans on the first (1st)
business day following each such twelve (12) month period (the
“Interest Rate”); provided however, that if any provisions
of this Note would require Maker to pay interest at a rate
exceeding the highest rate allowed by applicable law, Maker shall
instead pay interest under this Note at the highest rate permitted
by applicable law. Interest will be calculated on the basis of a
year of 365 days, and charged for the actual number of days
elapsed. Any overdue amount of the Outstanding Balance or other
overdue amounts owing hereunder, whether at stated maturity, by
acceleration or otherwise (an “Overdue Amount”), shall bear
interest, payable in cash on demand, at a rate equal to five
percent (5%) per annum in excess of the Interest Rate (the
“Default Interest Rate”). An Overdue Amount shall bear
interest at the Default Interest Rate from the date an Overdue
Amount was due, until such Overdue Amount is paid in full.
3. Payments of Principal
and Interest. The entire unpaid Principal, together with all
accrued and unpaid Interest (collectively, the “Outstanding
Balance”) shall become due and payable as set forth below:
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(a)
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Interest shall become due an |