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

Filed by Party other than the Registrant

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to § 240.14a-12

 

MCORPCX, INC.

(Exact name of Registrant as specified in its charter.)

 

Commission File number 000-54918

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11: Not applicable

 

1.

Title of each class of securities to which transaction applies: 

 

2.

Aggregate number of securities to which transaction applies: 

 

3.

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): 

 

4.

Proposed maximum aggregate value of transaction: 

 

5.

Total fee paid: 

 

Fee paid previously with preliminary materials.

 

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.

 

1.

Amount Previously Paid;

 

2.

Form, Schedule or Registration Statement No.

 

3.

Filing Party:

 

4.

Date Filed:

 



 

 

 

 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.

 

  Sincerely,
   
  /s/ Matthew Kruchko
   
  Matthew Kruchko
  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;

 

(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 (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;

 

(6) To amend the Company’s articles of incorporation to change the name of the Company 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;

 

(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.

 

 

 

  BY ORDER OF THE BOARD OF DIRECTORS  
     
  /s/ Gregg Budoi  
  Gregg Budoi  
  Chairman of the Board   

 

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
 
 
 
TABLE OF CONTENTS

 

GENERAL INFORMATION

- 1 -

SUMMARY TERM SEET

- 2 -

COMMONLY ASKED QUESTIONS AND ANSWERS

- 9 -

RISK FACTORS

- 16 -

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

- 18 -

THE SPECIAL MEETING

- 19 -

Recommendation of the Board

- 20 -

Record Date, Stockholders Entitled to Vote and Voting Power

- 20 -

Quorum

- 21 -

Required Vote

- 21 -

Voting

- 21 -

Solicitation of Proxies

- 22 -

Revocability of Proxies

- 22 -

Communicating with Members of the Board of Directors

- 22 -

PROPOSAL 1– Approval of the Sale of McorpCX LLC Membership Interests

- 23 -

Background of the LLC Sale Transaction

- 23 -

Reasons for the LLC Sale Transaction and the Valuation Report

- 25 -

Parties to the Unit Purchase Agreement

- 29 -

The Unit Purchase Agreement

- 30 -

Regulatory Approvals required for the LLC Sale Transaction

- 32 -

Expected Timing of the sale of McorpCX, LLC

- 32 -

Use of Proceeds and Future Operations

- 32 -

Certain United States Federal and State Income Tax Consequences of the Sale of McorpCX, LLC

- 33 -

No Dissenters’ Rights

- 33 -

Interests of the Company’s Directors and Executive Officers in the Sale of McorpCX, LLC

- 33 -

Required Vote

- 34 -

PROPOSAL 2 – Delisiting from TSX-V

- 35 -

Background of Listing on the TSX Venture Exchange

- 35 -

Rationale for the Proposed Delisting

- 35 -

Process to Delist the Shares

- 35 -

Consequences of the Proposed Delisting

- 35 -

Determination and Recommendation by the Board

- 36 -

Required Vote

- 36 -

PROPOSAL 3 - ELECTION OF DIRECTORS

- 37 -

Nominees for Election as Directors

- 37 -

EXECUTIVE OFFICERS

- 39 -

Background of Officers

- 40 -

Involvement in Certain Legal Proceedings

- 40 -

CORPORATE GOVERNANCE AND BOARD MATTERS

- 42 -

Board Meetings and Attendance

- 42 -

Independence of Directors

- 42 -

Board Leadership Structure

- 42 -

Risk Oversight

- 42 -

Our Director Nominations Process

- 43 -

The Committees of the Board

- 44 -

 

 

 

Special Committee – Selection of President and Chief Executive Officer

- 44 -

Compensation Committee Functions

- 45 -

Audit Committee and Charter

- 45 -

Audit Committee Financial Expert

- 45 -

Code of Ethics

- 45 -

Whistleblower Policy

- 46 -

Stockholder Communications with Board

- 46 -

Delinquent Section 16(a) Reports

- 46 -

EXECUTIVE COMPENSATION

- 47 -

Compensation Committee Interlocks and Insider Participation

- 52 -

CERTAIN RELATIONSHIPS AND TRANSACTIONS

- 52 -

Related Party Transactions

- 52 -

Review and Approval of Related Party Transactions

- 53 -

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

- 54 -

Securities Authorized for Issuance under Equity Compensation Plans

- 55 -

PROPOSAL 4 – AMENDMENT TO THE ARTICLES OF INCORPORATION TO DECREASE THE QUORUM REQUIREMENT FOR STOCKHOLDER MEETINGS

- 56 -

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

- 58 -

PROPOSAL 6- NAME CHANGE AMENDMENT TO ARTICLES

- 59 -

PROPOSAL 7- INDEPENDENT ACCOUNTANTS AND AUDITORS

- 60 -

Ratification of Independent Auditors

- 63 -

AUDIT COMMITTEE REPORT

- 61 -

PROPOSAL 8 – NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

- 62 -

PROPOSAL 9 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

- 63 -

STOCKHOLDER PROPOSALS

- 64 -

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING

- 64 -

DUPLICATE ANNUAL REPORT AND PROXY STATEMENT

- 65 -

OTHER MATTERS

- 65 -

MISCELLANEOUS

- 65 -

ANNEX A

- 66 -

ANNEX B

- 70 -

ANNEX C

- 70 -

ANNEX D

- 71 -

ANNEX E

- 72 -

ANNEX F

- 76 -

 

i

 

MCORPCX, INC.

 

PROXY STATEMENT

 

 

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.

 

- 1 -

 

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.

 

- 2 -

 

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:

 

 

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.

 

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.

 

- 3 -

 

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.

 

- 4 -

 

 Purpose

 

The Special Meeting is being held to consider and vote on:

 

 

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”);

 

 

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”);

 

 

a proposal to elect five directors nominated by the Board to serve until the next annual meeting of stockholders;

 

 

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;

 

 

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;

 

 

a proposal to amend the Company’s articles of incorporation to change the name of the corporation from McorpCX, Inc. to MCX Technologies Corporation;

 

 

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;

 

 

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;

 

 

a proposal to conduct a non-binding advisory vote on the frequency of future advisory votes on executive compensation;

 

 

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

 

 

to transact any other business properly brought before the meeting.

 

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.

 

- 5 -

 

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:

 

 

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

 

 

by providing proper instructions to your broker, bank or other nominee if you hold your shares in “street name.”

 

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.

 

- 6 -

 

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.

 

- 7 -

 

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. 

 

- 8 -

 

COMMONLY ASKED QUESTIONS AND ANSWERS

 

Q:

Why am I receiving this Proxy Statement and Proxy?

 

A:

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.

 

Q:

What is the Proxy?

 

A:

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.

 

Q:

What happens if you do not indicate how your Shares are to be voted?

 

A:

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.

 

Q:

Who can vote at the Meeting?

 

A:

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.

 

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:

How can Shares held through a brokerage account be voted?

 

A:

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.

 

- 9 -

 

Q:

What am I voting on?

 

A:

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.

 

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH OF THESE PROPOSALS.

 

Q:

How do I vote?

 

A:

Registered stockholders may vote online at the Special Meeting, by mail, by phone, or on the Internet.

 

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.

 

 
- 10 -

 

Q:

What does it mean if I receive more than one Proxy?

 

A:

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.

 

Q:

What if I change my mind after returning my Proxy?

 

A:

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:

 

 

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

 

 

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

 

 

voting at the Special Meeting.

 

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:

Will my Shares be voted if I do not sign and return my Proxy?

 

A:

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.

 

- 11 -

 

Q:

Who will count the votes?

 

A:

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.

 

Q:

How many Shares must be present to hold the Meeting?

 

A:

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.

 

Votes are counted as present at the Special Meeting if a stockholder either:

 

 

is present and votes in person at the Meeting; or

 

 

has properly submitted a Proxy.

 

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:

How many votes are required to elect directors?

 

A:

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.

 

Q:

What is the LLC Sale Proposal?

 

A:

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.

 

- 12 -

 

Q:

How many votes are required to approve the LLC Sale Proposal?

 

A:

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.

 

Q:

Am I entitled to appraisal or dissenter’s rights in connection with LLC Sale Transaction?

 

A:

No. Holders of outstanding Shares will not have appraisal or dissenter’s rights in connection with LLC Sale Transaction.

 

Q:

When is the LLC Sale Transaction expected to be consummated?

 

A:

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,

 

Q:

Will the Company continue to file periodic reports with the SEC following the LLC Sale Transaction?

 

A:

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.

 

Q:

How does the Company plan to use the cash proceeds from the LLC Sale Transaction?

 

A:

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.

 

Q:

What are the U.S. federal income tax consequences of the LLC Sale Transaction to U.S. Stockholders?

 

A:

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.

 

- 13 -

 

Q:

What if the LLC Sale Proposal is not adopted?

 

A:

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.

 

Q:

How many votes are required to adopt the other proposals?

 

A:

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.

 

Q:

What is the effect of withholding votes or “abstaining”?

 

A:

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.

 

Q:

How are votes counted?

 

A:

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.

 

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:

Could other matters be discussed at the Meeting?

 

A:

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.

 

- 14 -

 

Q:

Where and when will I be able to find the voting results?

 

A:

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.

 

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:

Who do I contact if I have any further questions?

 

A:

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.

 

- 15 -

 

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:

 

 

the diversion of management and employee attention from our day-to-day business;

 

 

the potential disruption to business partners and clients; and

 

 

the possible inability to respond effectively to competitive pressures, industry developments and future opportunities.

 

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.

 

- 16 -

 

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:

 

 

the ability to maintain our relationships with our existing clients;

 

the ability to attract new clients; and

 

potential capital costs used for investment in the technology services business;

 

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.

 

- 17 -

 

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:

 

 

the Company’s stockholders failing to approve the LLC Sale Proposal;

 

 

the failure of one or more conditions to the closing of the LLC Sale Transaction to be satisfied or waived by the applicable party;

 

 

an increase in the amount of costs, fees, expenses and other charges related to the Unit Purchase Agreement or LLC Sale Transaction;

 

 

the occurrence of any event, change or other circumstances that could give rise to the termination of the Unit Purchase Agreement;

 

 

risks arising from the diversion of management’s attention from the Company’s ongoing business operations;

 

 

risks associated with the Company’s ability to identify and realize business opportunities following the LLC Sale Transaction;

 

 

fluctuations in demand for products and services of the Company and its subsidiaries;

 

 

risks of losing key personnel or customers;

 

 

protection of the Company’s intellectual property and government policies and regulations, including, but not limited to those affecting the Company’s industry; and  

 

 

the other factors discussed under the heading “Risk Factors” in this Proxy Statement. 

 

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.

 

- 18 -

 

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.

 

- 19 -

 

Purpose

 

The Special Meeting is being held to consider and vote on:

 

 

the LLC Sale Proposal;

 

 

the TSX-V Delisting Proposal

 

 

a proposal to elect five directors nominated by the Board of Directors to serve until the next annual meeting of stockholders;

 

 

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;

 

 

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;

 

 

a proposal to amend the Company’s articles of incorporation to change the name of the corporation from McorpCX, Inc. to MCX Technologies Corporation;

 

 

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;

 

 

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;

 

 

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

 

 

a proposal to conduct a non-binding advisory vote on the frequency of future advisory votes on executive compensation.

 

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. 

 

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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.

 

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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:

 

 

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

 

 

by providing proper instructions to your broker, bank or other nominee if you hold your shares in “street name.”

 

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:

 

 

submitting another properly completed proxy with a later date;

 

 

attending and voting at the Special Meeting; or

 

 

delivering to the Company’s principal offices (Attention: Corporate Secretary) a written instrument that revokes the proxy.

 

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.

 

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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.

 

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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.

 

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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):

 

 

The Company’s business and operations, and its current and historical financial condition and results of operations;

 

 

The current corporate structure and ongoing challenges of the Company to develop its technological services and software development operations;

 

 

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;

 

 

The Company’s business plan and strategic priorities;

 

 

The Company’s inability to raise funds in the capital markets;

 

 

The instability of the Company’s management team, including a relatively high turnover rate of executive officers with the Company;

 

 

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;

 

 

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

 

 

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.

 

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.

 

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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:

 

 

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;

 

 

Reviewed the Company’s website and news releases for the previous 18 months;

 

 

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;

 

 

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;

 

 

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.

 

 

Reviewed details on the breakdown of revenues from new and existing customers of the Company from 2017 to 2019;

 

 

Reviewed information concerning McorpCX, LLC ‘s staff compensation;

 

 

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;

 

 

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.

 

 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.

 

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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.

 

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 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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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.

 

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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.

 

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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.

 

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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 

 

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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).

 

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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.

 

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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.

 

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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 HinshawPresident 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;

 

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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.

 

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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.

 

- 42 -

 

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.

 

- 43 -

 

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.

 

- 44 -

 

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.

 

- 45 -

 

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.

 

- 46 -

 

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.

 

- 47 -

 

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.

 

- 48 -

 

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.

 

- 49 -

 

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.

  

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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. 

 

- 51 -

 

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.

 

- 52 -

 

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.

 

- 53 -

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.

 

- 54 -

 

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.

 

- 55 -

 

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.

 

- 56 -

 

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.

 

- 57 -

 

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.

 

- 58 -

 

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.

 

- 59 -

 

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.

 

- 60 -

 

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

 

- 61 -

 

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.

 

- 62 -

 

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. 

 

- 63 -

 

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.

 

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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

 

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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

 

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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

 

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

 

2.2     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.

 

3

 

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.

 

4

 

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.

 

5

 

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.

 

6

 

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.

 

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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.

 

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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.

 

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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).

 

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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.

 

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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.

 

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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.

 

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(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.

 

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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

 

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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.

 

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(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.

 

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(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.

 

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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]

 

19

 

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     

 

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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.

 

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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.

 

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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

 

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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)

 

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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:     

 

25

 

 

 

 

 

EXHIBIT C

 

FORM OF PROMISSORY NOTE

 

 

 

 

 

 

26

 

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:

 

 

(a)

Interest shall become due and payable monthly, in arrears, on the first business day of each calendar month (each a “Calendar Month”) during the term of this Note;