Item 1.01. Entry into a Material Definitive Agreement.
On January 8, 2017, Smart Server, Inc. (the “Company”) entered into an Asset Purchase Agreement with NextGen Dealer Solutions, LLC (“NextGen”), Halcyon Consulting, LLC (“Halcyon”), and members of Halcyon signatory thereto (“Halcyon Members” and together with Halcyon, the “Halcyon Parties”). NextGen and the Halcyon Parties are collectively referred to as the “Seller Parties.” NextGen has developed a proprietary technology platform that will underpin the operations of the Company. The Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, the Company will acquire all of NextGen's assets, properties and rights of whatever kind, tangible and intangible, other than the excluded assets under the terms of the Agreement. The Company will assume liability only for certain post-closing contractual obligations pursuant to the terms of the Agreement. The transaction is expected to close in the first quarter of 2017.
The Agreement provides that the Company will acquire substantially all of the assets of NextGen in exchange for approximately $750,000 in cash, plus 1,523,809 unregistered shares of common stock of the Company (the "Purchaser Shares"), and a subordinated secured promissory note issued by the Company in favor of NextGen in the amount of $1,333,333 (the "Acquisition Note"). The Acquisition Note matures on the third anniversary of the date the Acquisition Note is entered into (the "Maturity Date"). Interest will accrue on the Acquisition Note (i) at a rate of 6.5% annually from the date the Acquisition Note is entered into through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the date the Acquisition Note is entered into through the Maturity Date. In connection with the closing of the transaction, the Company has agreed with certain investors to accelerate the funding of the second tranche of their investment totaling $1.35 million by issuing such investors 1,161,920 shares of the Company's common stock and a note in the amount of $667,000, to be issued on the closing date.
Under the terms of the Agreement, no Indemnifying Party (as defined in the Agreement) is liable to an Indemnified Party (as defined in the Agreement) until the aggregate amount of all losses in respect of indemnification exceeds $50,000 (the "Loss Threshold"), and in such case such parties shall be liable for all losses including the Loss Threshold up to a cap of $1,333,333. Certain fundamental representations and warranties, the post-closing covenants and certain other specified obligations of the Company and the Seller Parties are outside of the Loss Threshold and the cap. No Halcyon Member will be personally liable for indemnification pursuant to the Agreement, however, if NextGen transfers the Acquisition Note or any of the Purchaser Shares or disposes of the proceeds of the transfer at any time prior to the third anniversary of the closing date, Halcyon Members will be liable, jointly and severally with the other Seller Parties, for the indemnification pursuant to the Agreement.
Each of the Company, NextGen and Halcyon has provided customary representations, warranties and covenants in the Agreement. The completion of the acquisition is subject to various closing conditions, including (a) the absence of any temporary restraining order, preliminary or permanent injunction, or other order or legal proceeding prohibiting or preventing the transactions contemplated by the Agreement, (b) performance in all respects by each party of its covenants and agreements, and (c) the delivery by each party of all required closing documents. Additionally, pursuant to the Agreement, commencing on January 16, 2017 and through the closing date or the date on which the Agreement terminates, whichever is first to occur, the Company is required to fund all reasonable ordinary course payroll expenses of NextGen up to $14,000 per week.
The Agreement contains certain termination rights for both the Company and NextGen. Both the Company and NextGen have the right to terminate the Agreement if the closing does not occur on or before February 15, 2017.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by the Agreement. The Agreement and a copy of the press release announcing the transaction are filed as Exhibits 2.1 and 99.1, respectively, to this report and are incorporated herein by reference.
On January 9, 2016, the Company’s Board of Directors approved the adoption of the RumbleON, Inc. 2017 Stock Incentive Plan (the "Plan"), subject to stockholder approval at the Company's next Annual Meeting of Stockholders. The purposes of the Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers ("Eligible Individuals") by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such persons and the stockholders of the Company. The Plan will allow the Company to grant a variety of stock-based and cash-based awards to Eligible Individuals. Twelve percent (12%) of the Company's issued and outstanding shares of common stock from time to time are reserved for issuance under the Plan. As of the date of this report, 6.400,000 shares are issued and outstanding, resulting in 768,000 shares available for issuance under the Plan. The foregoing description of the Plan does not purport to be complete and is qualified in its entirety by the Plan attached as Exhibit 10.1 to this report and incorporated herein by reference.
