Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (date of earliest event reported): March 28, 2018
SharpSpring, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-36280
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05-0502529
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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550
SW 2nd Avenue,Gainesville, FL 32601
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(Address
of principal executive offices, including zip code)
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Registrant’s
telephone number, including area code: (888) 428-9605
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:
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☐
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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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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01
Entry into a Material Definitive Agreement
On
March 28, 2018, SharpSpring, Inc. (the “Company”)
entered into a Convertible Note Purchase Agreement (the “Note
Purchase Agreement”) with SHSP Holdings, LLC
(“Investor”), pursuant to which the Company issued to
Investor a Convertible Promissory Note in the aggregate principal
amount of $8,000,000 (the “Note”). The Note Purchase
Agreement contains customary representations, warranties and
covenants of the Company and the Investor. A description of the
material terms of the Note is set forth under Item 2.03,
below.
Simultaneously
with the execution of the Note Purchase Agreement and the issuance
of the Note, on March 28, 2018, the Company entered into the
Investors’ Rights Agreement (the “Investors’
Rights Agreement”) by and among the Company, Investor and two
management stockholders, Richard A. Carlson and Travis Whitton (the
“Management Stockholders”). Under the Investors’
Rights Agreement, the Investor has customary demand and piggyback
registration rights with respect to the shares of Company common
stock, par value $.001 (the “Common Stock”), issued or
issuable upon conversion of the Notes and, under specified
conditions, held by members of Investor or Evercel Holdings LLC, an
affiliate of Investor, or its members. In addition, Investor will
have the right to designate one person for election to the
Company’s Board of Directors for as long as Investor
continues to hold any of the Notes, and the Company agreed to use
its reasonable best efforts to cause such person to be elected to
the Company’s Board at each annual meeting of the
Company’s stockholders. The Management Stockholders also
agreed under the Investors’ Rights Agreement, for so long as
the Investor continues to hold any Notes and the respective
Management Stockholders remain employed by the Company, to limit
their sales of Common Stock to specified aggregate values. The
Company further agreed, so long as any Notes are outstanding, to
limit its outstanding senior indebtedness to 18.6% of the
Company’s trailing 12-month revenue, based on the
Company’s current credit facility limit as a percentage of
trailing 12-month revenue.
The
foregoing descriptions of the Note Purchase
Agreement and the Investors’ Rights Agreement are not
intended to be complete and are qualified in their entirety by the
full text of the Note Purchase Agreement, a copy of which is
attached hereto as Exhibit 10.1, and the form of Investors’
Rights Agreement, a copy of which is attached hereto as Exhibit
4.2, each of which is incorporated herein by
reference.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant
Pursuant
to the Note Purchase Agreement, Company issued the Note to Investor
on March 28, 2018 (the “Issue Date”). Interest on the
Note will accrue at a rate of 5.0% per annum, beginning on the
Issue date until the principal amount and all accrued but unpaid
interest shall have been paid or converted into shares of Common
Stock. The Note is an unsecured debt obligation of the Company,
subordinate to the Company’s senior credit facility and
subject to a Subordination Agreement by and between Investor and
Western Alliance Bank dated as of March 28, 2018. A copy of the
Form of Subordination Agreement is attached hereto as Exhibit
4.3.
The
Note will be due and payable on the fifth anniversary of the
Issuance Date (the “Maturity Date”). Interest under the
Note will be due and payable on each anniversary of the Issuance
Date, and will be paid by the issuance of additional convertible
promissory notes of like tenor to the Notes (each, a “PIK
Note” and, together with the Note, the “Notes”)
with a principal amount equal to the accrued interest being paid by
delivery of such PIK Note. Except under limited circumstances as
described in the Note, the Company may not prepay any amounts under
any of the Notes without the prior written consent of Investor. At
the Maturity Date, the Company may elect to convert all outstanding
Notes into shares of Common Stock at a conversion price equal to
80% of the volume weighted average closing price of the Common
Stock for the 30 trading days prior to and including the Maturity
Date. The Company will have the right to extend the Maturity Date
for up to six months on up to three separate occasions, during
which time interest would accrue on the outstanding principal
amount of the Note at a rate of 10% per annum.
2
The
principal amount of the Note and any accrued interest thereon may
be converted, in whole or in part, into shares of Common Stock at
any time prior to the Maturity Date at a conversion price of $7.50
per share, subject to customary adjustments (the “Conversion
Price”). If the closing price of the Common Stock exceeds
175% of the Conversion Price for a period of 120 consecutive
trading days, the Company will have the right to convert all of the
outstanding Notes, provided that immediately prior to such
conversion the Company will be required to issue to Investor any
PIK Notes that would have been issued under the Note had it
remained outstanding through the Maturity Date, and all such PIK
Notes will be included in the conversion.
In the
event of a Change in Control (as defined in the Note) of the
Company prior to the Maturity Date, the Company would be required
to issue to Investor any additional PIK Notes as would have been
issued if the Note had remained outstanding through the Maturity
Date, and Investor will have the right, at its option, to (i)
convert the Note, in whole or in part, into the consideration
receivable by holders of Common Stock in the Change in Control
transaction, or (ii) require the Company or its successor to pay
the outstanding principal amount and all accrued interest on the
Note concurrently with the consummation of the Change in Control
transaction.
The
Note contains an “exchange cap” pursuant to which the
Company and Investor have agreed that Investor will not attempt to
convert any portion of the Note, and the Company will not issue to
Investor any Common Stock upon any attempted conversion of the
Note, if the number of shares of Common Stock issuable upon such
conversion, plus (i) the number of shares of Common Stock issued
pursuant to conversions prior thereto and (ii) the number of shares
of Common Stock beneficially owned by any affiliate of Investor
would (x) equal 20% or more of the number of the outstanding shares
of Common Stock or (y) represent 20% or more of the total voting
power of the Company’s securities outstanding immediately
after giving effect to such issuance that are entitled to vote on a
matter being voted on by holders of the Common Stock, unless and
until the Company obtains stockholder approval permitting such
issuance. The Company has agreed to seek stockholder approval of
the issuance of the Common Stock to Investor upon conversion of the
Notes at its next annual meeting of stockholders and at subsequent
stockholder meetings as and if necessary.
The
Note contains customary events of default, as defined in the Note
(each, an “Event of Default”). If any Event of Default
occurs, then, at any time thereafter and while such Event of
Default is continuing, Investor may declare the entire outstanding
principal amount of the Note and all accrued but unpaid interest to
be immediately due and payable.
The
foregoing description of the Note is not intended to be complete
and is qualified in its entirety by the full text of the Note, the
form of which is attached hereto as Exhibit 4.1 and incorporated
herein by reference.
Item 3.02
Unregistered Sales of Equity Securities
On March 28, 2018, the Company entered into the Note Purchase
Agreement with Investor, pursuant to which the Company issued the
Note to Investor in the aggregate principal amount of $8,000,000.
The principal amount of the Note and any accrued interest thereon
may be converted, in whole or in part, into shares of Common Stock
at any time prior to the Maturity Date at a conversion price of
$7.50 per share, subject to customary adjustments. Assuming full
conversion of the principal amount of the Notes and accrued
interest on the Maturity Date, the Company anticipates that it
would issue 1,361,000 shares of Common Stock. Additional
information regarding the terms of conversion of the Note is
provided under Item 2.03, above.
3
The Company offered and sold the Notes to Investor in reliance on
the exemption from registration provided by Section 4(a)(2) of
the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The Company relied on these
exemptions from registration based in part on representations made
by Investor in the Note Purchase Agreement.
Item 8.01
Other Events
On March 28, 2018, the Company issued a press release announcing
the issuance of the Note and the other transactions described in
this Current Report on Form 8-K. A copy of the press release is
attached hereto as Exhibit 99.1 and incorporated herein by
reference.
Item 9.01
Financial Statements and Exhibits
(d) Exhibits
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Exhibit No.
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Description
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Form of Convertible Promissory Note, attached as Exhibit A to the
Note Purchase Agreement
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Form of Investors’ Rights Agreement by and among SharpSpring,
Inc., SHSP Holdings, LLC and the Management Stockholders signatory
thereto, attached as Exhibit B to the Note Purchase
Agreement
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Form of Subordination Agreement by and between SHSP Holdings, LLC
and Western Alliance Bank, attached as Exhibit C to the Note
Purchase Agreement
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Convertible Note Purchase Agreement among SharpSpring, Inc. and
SHSP Holdings, LLC
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Press Release dated March 28, 2018
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4
SIGNATURES
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 hereunto duly authorized.
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SHARPSPRING,
INC.
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Dated:
March 28, 2018
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By:
/s/ Edward S. Lawton
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Edward
S. Lawton
Chief
Financial Officer
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