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EX-10.5 - SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT - root9B Holdings, Inc. | rtnb_ex105.htm |
UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, DC 20549
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FORM 8-K
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CURRENT REPORT PURSUANT
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TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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Date of
report (Date of earliest event reported): January 24,
2017
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root9B Holdings, Inc.
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(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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000-50502
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20-0443575
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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102 N. Cascade Avenue, Suite 220
Colorado Springs, CO
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80919
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
Telephone Number, Including Area Code:
(602) 889 1137
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N/A
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(Former Name or
Former Address, if Changed Since Last Report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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☐
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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☐
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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☐
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Item 1.01
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement Extension
On
January 24, 2017, root9B Holdings, Inc., a Delaware corporation
(the “Company”) entered into an amendment (the
“Second Amendment”), pursuant to which the Company and
certain Majority Note Holders (as defined therein) agreed to amend
the Securities Purchase Agreement (as amended, the
“Agreement”), dated September 6, 2016, by and between
the Company and certain accredited investors (the
“Investors”), as amended by an amendment dated December
22, 2016 (the “First Amendment”). The Second Amendment
extends the date by which the last closing under the Agreement must
occur from December 31, 2016 until March 31, 2017. Except as
modified by the Second Amendment, all other terms of the Agreement,
discussed below, remain unchanged and in full force and
effect.
The
foregoing description of the principal terms of the Second
Amendment does not purport to be complete and is qualified in its
entirety by reference to the Second Amendment, a copy of which is
filed as an exhibit to this Current Report on Form 8-K as Exhibit
10.5.
Fifth Closing
As
previously disclosed, the Company is offering secured convertible
promissory notes (as amended, the “Notes”) with an
aggregate principal amount of up to $10,000,000, along with
warrants to purchase shares (the “Warrant Shares”) of
the Company’s common stock, par value $0.001 per share (the
“Common Stock”), representing fifty percent (50%)
warrant coverage (the “Warrants”), to the Investors in
a private placement, pursuant the Agreement. The following
description of Notes and Warrants is presented with adjustment for
the Company’s reverse split of its Common Stock at a ratio of
one-for-fifteen (the “Reverse Split”), which was
effective on December 5, 2016.
On
January 25, 2017, the Company held a fifth closing (the
“Closing”) of such private placement, at which the
Company sold Notes with an aggregate principal amount equal to
$750,000, along with Warrants to purchase approximately 31,250
shares of Common Stock. Following the Closing, the Company has sold
Notes with an aggregate principal amount of $6,521,000, along with
Warrants to purchase approximately 271,708 shares of Common Stock
and may sell additional Notes with an aggregate principal amount of
up to $3,479,000, along with Warrants to purchase approximately
144,958 shares of Common Stock, at additional closings, which may
be conducted on a rolling basis until March 31, 2017.
The
term of each Note is three years after issuance (the
“Maturity Date”). Each Note accrues interest at a rate
of 10% per annum, payable on each March 31, June 30, September 30
and December 31, commencing December 31, 2016 until the earlier of
(i) the entire principal amount being converted, or (ii) the
Maturity Date. The interest payments shall be made in either cash
or, at the holder’s option, in shares of Common Stock (the
“Interest Payment Shares”) at a per share price equal
to 85% of the average daily volume weighted average price of the
Common Stock during the five consecutive trading day period
immediately prior to the interest payment date, but in no event
less than $12.00 per share. Following the date which is six months
after the date of issuance, at the election of the holder, all
principal and interest due and owing under each Note is convertible
into shares of Common Stock at a conversion price equal to $12.00
(the “Conversion Shares” and, together with the Warrant
Shares and the Interest Payment Shares, collectively, the
“Shares”). The conversion price is subject to
adjustment for stock splits, stock dividends, combinations, or
similar events. Pursuant to a security agreement entered into
concurrently with the Investors, the Notes are secured by
substantially all of the Company’s assets, subject to certain
exceptions including the assets related to and held by IPSA
International, Inc., a wholly-owned subsidiary of the Company
(“IPSA”).
The
Company may prepay any portion of the outstanding principal amount
of any Note and any accrued and unpaid interest, with the prior
written consent of the holder, by paying to the holder an amount
(the “Prepayment Amount”) equal to (i) if the
prepayment date is prior to the first anniversary of the date of
issuance (the “Anniversary Date”), (1) the unpaid
principal to be repaid plus (2) any accrued but unpaid interest
plus (3) an amount equal to the interest which has not accrued as
of the prepayment date but would accrue on the principal to be
repaid during the period beginning on the prepayment date and
ending on the Anniversary Date of the then-outstanding principal
amount of that Note or (ii) if the prepayment date is after the
Anniversary Date, (1) the unpaid principal to be repaid plus (2)
any accrued but unpaid interest plus (3) an amount equal to
one-half of the interest which has not accrued as of the prepayment
date but would accrue on the principal to be repaid during the
period beginning on the prepayment date and ending on the Maturity
Date. Additionally, each holder may exercise a one-time option to
partially redeem up to 50% of the Outstanding Amount (as defined
therein) if cash proceeds received by the Company in connection
with the sale of IPSA exceed certain threshold levels.
The
Warrants have a term of five years, an exercise price of $12.00 per
share (after giving effect to the Reverse Split) and may be
exercised at any time following the date which is six months after
the date of issuance. The number of shares of Common Stock issuable
upon exercise of the Warrants is subject to adjustment for certain
stock dividends or stock splits, or any reclassification of the
outstanding securities of, or reorganization of, the
Company.
Pursuant to the
terms of both the Notes and the Warrants, a holder may not be
issued Shares if, after giving effect to the conversion or exercise
of the Shares, as applicable, the holder, together with its
affiliates, would beneficially own in excess of 9.99% of the then
outstanding shares of Common Stock. In addition, in the event the
Company consummates a consolidation or merger with or into another
entity or other reorganization event in which the Common Stock is
converted or exchanged for securities, cash or other property, or
the Company sells, assigns, transfers, conveys or otherwise
disposes of all or substantially all of its assets or the Company
(other than the sale, merger or asset sale of IPSA) or another
entity acquires 50% or more of the outstanding Common Stock, then
following such event, (i) at their election within 30 days of
consummation of the transaction, the holders of the Notes will be
entitled to receive the Prepayment Amount, and (ii) the holders of
the Warrants will be entitled to receive upon exercise of such
Warrants the same kind and amount of securities, cash or property
which the holders would have received had they exercised the
Warrants immediately prior to such transaction. Any successor to
the Company or surviving entity shall assume the Company’s
obligations under the Notes and the Warrants.
Additionally, the
Notes shall not be convertible into Common Stock (nor any Interest
Payment Shares), and the Warrants shall not be exercisable for
Common Stock, until the Company has a sufficient number of shares
of Common Stock available for issuance to permit full conversion or
exercise of the Notes and Warrants, respectively.
The
Agreement contains customary representations, warranties, and
covenants by, among, and for the benefit of the parties. The
Agreement requires the Company at any time after the Company files
its annual report on Form 10-K for the year ended December 31,
2016, at the request of the holders of a majority in interest of
the aggregate principal amount of the then-outstanding Notes, to
file a registration statement covering the resale of the Shares
within 90 days of the request for registration. In addition, the
Agreement grants the holders piggyback registration rights until
the first day the Shares may be sold under Rule 144 of the
Securities Act of 1933, as amended (the “Securities
Act”).
The
Notes and Warrants were issued and sold pursuant to exemptions from
the registration requirements of the Securities Act, including
Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder,
as well as comparable exemptions under applicable state securities
laws, as transactions by an issuer not involving a public offering.
The offering was not conducted in connection with a public
offering, and no public solicitation or advertisement was made or
relied upon by any Investor in connection with the offering.
Moreover, each Investor represented to the Company that (1) it is
an accredited investor, as that term is defined under Regulation D
of the Securities Act, in the United States, acquiring the Notes,
Warrants, and Shares for investment purposes only and not with a
view to or for sale in connection with any distribution thereof,
(2) either alone or with its representatives, has such knowledge,
sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of its
investment, and (3) it had the opportunity to review the
Company’s public filings and was afforded (a) the opportunity
to ask questions and receive answers from the Company concerning
the conditions of the offering, (b) access to information about the
Company sufficient to enable such Investor to evaluate its
investment in the Company, and (c) the opportunity to obtain such
additional information that the Company possessed or could acquire
without unreasonable effort or expense necessary to make an
informed investment decision.
The
foregoing description does not purport to be complete and is
qualified in its entirety by reference to the full text of the
Agreement, form of Note, form of Warrant, and the security
agreement, copies of which are filed as Exhibits 10.1, 10.2, 10.3
and 10.4, respectively, to this Current Report on Form 8-K and
incorporated herein by reference. Copies of the First Amendment, an
amendment to the Notes made in connection with the First Amendment,
and the form of note issued pursuant to the Agreement as amended by
the First Amendment, which were disclosed in the Company’s
Current Report on Form 8-K/A filed with the SEC on January 6, 2017,
will be filed in accordance with the rules and regulations of the
SEC, with portions omitted and filed separately with the SEC
pursuant to ta request for confidential treatment. This Current
Report on Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy securities.
Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
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The
information disclosed in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 2.03.
Item 3.02
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Unregistered Sales of Equity Securities.
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The
information disclosed in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 3.02.
Item 5.02
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Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
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On
January 25, 2017, Gregory Morris announced his intention to resign
from the Company’s Board of Directors (the
“Board”) and all committees thereof, effective April 1,
2017. Mr. Morris is a member of the Company’s Audit Committee
and is the chair of the Compensation Committee. Mr. Morris’s
decision to resign was not the result of any disagreement with the
Company on any matter relating to the Company’s operations,
policies, or practices during his period of service as a director.
Mr. Morris is resigning in order to focus his efforts on several
new and existing opportunities.
Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibits.
The
information set forth in the Exhibit Index immediately following
the signature page to this Current Report on Form 8-K is
incorporated by reference into this Item 9.01.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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ROOT9B
HOLDINGS, INC.
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Dated: January 26,
2017
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By:
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/s/
Dan
Wachtler
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Name
Dan
Wachtler
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Title
President &
Chief Operating Officer
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Exhibit Index
Exhibit
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Description
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10.1
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Securities
Purchase Agreement, dated September 9, 2016 (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of the
Company filed with the Commission on September 12,
2016).
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10.2
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Form of
Secured Convertible Promissory Note (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K of the Company filed
with the Commission on September 12, 2016).
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10.3
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Form of
Common Stock Purchase Warrant (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K of the Company filed with
the Commission on September 12, 2016).
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10.4
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Form of
Security Agreement (incorporated by reference to Exhibit 10.4 to
the Current Report on Form 8-K of the Company filed with the
Commission on September 12, 2016).
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Second
Amendment to Securities Purchase Agreement, effective January 24,
2017.
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