SITO SITO Mobile Ltd

Item 1.01 Entry into a Material Definitive Agreement.

On September 14, 2019, SITO Mobile, Ltd., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MediaJel, Inc., a Nevada corporation (“MediaJel”), MJ Acquisition Corp., a Nevada corporation and a wholly owned subsidiary of the Company (“Acquisition Sub”), and Jonathan Black, as the representative of the equityholders of MediaJel. Pursuant to the Merger Agreement, Acquisition Sub will, subject to the satisfaction or waiver of the conditions therein, merge with and into MediaJel with MediaJel surviving the merger and becoming a wholly owned subsidiary of the Company (the “Merger”).

Under the Merger Agreement, in exchange for all of the issued and outstanding capital stock of MediaJel, the Company will issue 20,000,000 shares of its common stock, par value $0.001 per share (“Common Stock”), to MediaJel’s stockholders, subject to certain adjustments (i) based on the amount of cash held by MediaJel at closing and (ii) if the volume-weighted average price of the Company’s Common Stock for the ten trading days immediately prior to the closing is less than $0.65. The cash adjustment will be made on a pre-closing basis and without taking into consideration any transaction expenses payable by MediaJel. Options and warrants exercisable for shares of MediaJel capital stock will be converted into or replaced with an option or warrant, as applicable, representing the right to acquire, on substantially the same terms and conditions, a number of shares of the Company’s Common Stock determined according to the exchange ratio described in the Merger Agreement.

The Merger Agreement contains customary representations, warranties and covenants by the Company and MediaJel. Each of the Company and MediaJel has agreed, among other things, to conduct its and its subsidiaries’ businesses prior to the closing of the Merger in the ordinary course consistent with past customs and practice and not to solicit alternative transactions.

The Merger Agreement has been approved by the respective boards of directors of the Company, Acquisition Sub and MediaJel. The Company’s board further determined that the MediaJel stockholders are “exempt persons” under that certain Section 382 Tax Benefits Preservation Plan dated as of April 3, 2017. The consummation of the proposed Merger is subject to the receipt of the requisite approval of the stockholders of each of the Company and MediaJel and the fulfillment of certain other conditions, including the continued listing of the Company’s Common Stock on the Nasdaq Stock Market.

The Company has agreed that upon consummation of the Merger, the MediaJel stockholders will have the right to designate three persons who will be appointed to the Company’s board of directors. Additionally, the Company will agree, subject to their continued ownership of certain percentages of the shares of the Company’s Common Stock acquired by the MediaJel stockholders in connection with the Merger, to cause the slate of nominees standing for election, and recommendation by the Board, at the 2020 and 2021 annual meetings of the Company’s stockholders to include up to three persons designated by the former MediaJel stockholders. MediaJel’s stockholders will, upon consummation of the Merger, agree that during the time that such MediaJel stockholders may appoint designees to the Company’s board of directors, they will vote the shares of the Company’s Common Stock in favor of the Company’s nominees for directors and not contrary to the recommendations of the Company’s board of directors on other matters.

Jake Litke, the Chief Executive Officer of MediaJel, and Jonathan Black, the Chief Operations Officer of MediaJel, will continue to run MediaJel after the transaction and will be appointed as Chief Executive Officer and Chief Operations Officer, respectively, of the Company upon consummation of the Merger and will enter into employment agreements with the Company. Gregg H. Saunders, the current acting Chief Financial Officer of the Company, will remain as Chief Financial Officer following the Merger. Tom Pallack, the Company’s current Chief Executive Officer, will transition to the role of a consultant to the Company.

The Company has also agreed to grant certain registration rights in favor of such MediaJel stockholders, including the requirement that the Company file a resale shelf registration statement with the Securities and Exchange Commission (the “SEC”) and customary “piggyback” registration rights. The registration rights agreement will also provide that the Company will pay certain expenses relating to such registrations and indemnify the registration rights holders against (or make contributions in respect of) certain liabilities which may arise under the Securities Act.

The Merger Agreement may be terminated by MediaJel or the Company if, among other reasons, approval by the Company’s stockholders of the issuance of shares of Common Stock pursuant to the Merger Agreement is not obtained. Either party may also terminate the Merger Agreement in the event the consummation of the Merger has not occurred by March 15, 2020 and the cause for the consummation not occurring is not the terminating party’s failure to fulfill any of its obligations under the Merger Agreement. If the Merger Agreement is terminated (i) by either party due to the failure to obtain the approval of the Company’s stockholders at the special meeting or (ii) by MediaJel due to a failure of a closing condition related to the Company’s breach of certain covenants relating to the special meeting, the Company will pay a break fee in the amount of $1,250,000 (the “Break Fee”) to MediaJel. If the Merger Agreement is terminated by the Company due to a failure of a closing condition related to MediaJel’s breach of certain covenants relating to the pre-closing conduct of its business or the failure to obtain the approval of the Merger by its stockholders, MediaJel will pay the Break Fee to the Company.

In connection with the execution of the Merger Agreement, certain of the Company’s stockholders holding an aggregate of approximately 1.6% of the Company’s outstanding Common Stock have entered into Voting and Support Agreements with MediaJel pursuant to which such Company stockholders have agreed, among other things, to vote all of their shares of the Company’s Common Stock in favor of the issuance of shares of the Company’s Common Stock in connection with the Merger.

The foregoing summary of the Merger Agreement, the Merger and the agreements the Company and its stockholders have entered and will enter into with MediaJel and MediaJel’s stockholders does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto and the terms of which are incorporated herein by reference.

The Merger Agreement has been included with this Current Report on Form 8-K pursuant to applicable rules and regulations of the Securities and Exchange Commission in order to provide investors and stockholders with information regarding its terms. However, it is not intended to provide any other factual information about the Company, Acquisition Sub, or MediaJel, their respective subsidiaries and affiliates, or any other party. In particular, the representations, warranties and covenants contained in the Merger Agreement have been made only for the purpose of the Merger Agreement, and, as such, are intended solely for the benefit of the parties to the Merger Agreement. In many cases, these representations, warranties and covenants are subject to limitations agreed upon by the parties and are qualified by certain disclosures exchanged by the parties in connection with the execution of the Merger Agreement. Any references to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement and these changes may not be fully reflected in the Company’s public disclosures.

As a result of the foregoing, investors and stockholders are strongly encouraged not to rely on the representations, warranties and covenants contained in the Merger Agreement, or on any descriptions thereof, as accurate characterizations of the state of facts or condition of the Company, MediaJel or any other party. Investors and stockholders are likewise cautioned that they are not third-party beneficiaries under the Merger Agreement and do not have any direct rights or remedies pursuant to the Merger Agreement.