Item 1.01. Entry into Material Definitive
Agreement.
Public Offering
On
January 10, 2020, RumbleOn, Inc. (the “Company”)
entered into an underwriting agreement (the “Underwriting
Agreement”) with National Securities Corporation, as
representative to the several underwriters named on Schedule 1-A to
the Underwriting Agreement (the “Underwriters”),
relating to the Company’s public offering (the
“Offering”) of 18,000,000 shares of Class B Common
Stock (the “Firm Shares”) and an additional 2,700,000
shares of Class B Common Stock (the “Additional
Shares,” and together with Firm Shares, the
“Shares”).
The
Underwriters agreed to purchase the Firm Shares at a price of $0.57
per share. The Firm Shares were offered, issued, and sold pursuant
to a prospectus supplement and accompanying prospectus filed with
the Securities and Exchange Commission (the “SEC”)
pursuant to an effective shelf registration statement filed with
the SEC on Form S-3 (Registration No. 333-234340) under the
Securities Act of 1933, as amended (the “Securities
Act”).
On January 14, 2020, the Company issued the Firm
Shares and closed the Offering at a public price of $0.57 per share
for net proceeds to the Company of approximately $9.3 million after
deducting the underwriting discount and offering fees and expenses
payable by the Company. Certain
of the Company's officers and directors participated in the
Offering.
On
January 16, 2020, the Company received notice of the Underwriters'
intent to exercise the over-allotment option in full. The Company
expects to close on the over-allotment exercise on January 17,
2020.
The
Underwriting Agreement included customary representations,
warranties, and agreements by the Company, customary conditions to
closing, indemnification obligations of the Company and the
Underwriters, including for liabilities under the Securities Act,
other obligations of the parties and termination provisions. The
representations, warranties and covenants contained in the
Underwriting Agreement were made only for purposes of such
agreement and as of specific dates, were solely for the benefit of
the parties to the agreement and were subject to limitations agreed
upon by the contracting parties.
The
Underwriting Agreement is filed as Exhibit 1.1 to this report and
is incorporated herein by reference. The foregoing description of
the terms of the Underwriting Agreement is qualified in its
entirety by reference to Exhibit 1.1. A copy of the opinion of
Snell & Wilmer L.L.P. relating to the legality of the issuance
and sale of the Shares in the Offering is attached hereto as
Exhibit 5.1.
The Company intends to use the net proceeds of the
Offering for working capital and general corporate purposes, which
may include further technology development, increased spending on
marketing and advertising and capital expenditures necessary to
grow the business. Pending these uses, the Company may invest the net
proceeds in short-term interest-bearing investment grade
instruments.
Convertible Note Exchange and Offer
Also on January 10, 2020, the Company entered into
a note exchange and subscription agreement (the "Note Exchange
& Subscription Agreement"), as amended by that certain Joinder
and Amendment effective January 13, 2020 (the "Joinder Agreement,"
and together with the Note Exchange & Subscription Agreement,
the "Note Agreement"), with the investors in the Company's May 2019
144A Convertible Note transaction (the "Note Investors"), pursuant
to which the Company agreed to complete (i) a note exchange
pursuant to which $30 million of the Company's 6.75% Convertible
Senior Notes due 2024 would be cancelled in exchange for a new
series of 6.75% Convertible Senior Notes due 2025 (the “New
Notes”) and (ii) the issuance of additional New Notes in a
private placement in reliance on the exemption from registration
provided by Rule 506 of Regulation D of the Securities Act as a
sale not involving any public offering (the "Note
Offering"). On January 14, 2020, the Company closed the Note
Offering. The net proceeds for
the Note Offering were approximately $8.6 million, after deducting
offering-related expenses.
The New Notes were
issued on January 14, 2020
pursuant to an Indenture (the “Indenture”), by and
between the Company and Wilmington Trust, National Association, as
trustee (the “Trustee”). The Note Agreement includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The New Notes will bear interest
at 6.75% per annum, payable semiannually on January 1 and July 1 of
each year, beginning on July 1, 2020. The New Notes may bear
additional interest under specified circumstances relating to the
Company’s failure to comply with its reporting obligations
under the Indenture or if the New Notes are not freely tradeable as
required by the Indenture. The New Notes will mature on January 1,
2025, unless earlier converted, redeemed or repurchased pursuant to
their terms.
The initial conversion rate of the New Notes is
500 shares of Class B Common Stock per $1,000 principal amount of
New Notes, which is equal to an initial conversion price of $2.00
per share. The conversion rate is subject to adjustment in certain
events as set forth in the Indenture, but will not be adjusted for
any accrued and unpaid interest. In addition, upon the occurrence
of a "make-whole fundamental change" (as defined in the Indenture),
the Company will, in certain circumstances, increase the conversion
rate by a number of additional shares for a holder that elects to
convert its New Notes in connection with such make-whole
fundamental change. Before July 1, 2024, the New
Notes will be convertible only under circumstances as described in
the Indenture. No adjustment to
the conversion rate as a result of conversion or a make-whole
fundamental change adjustment will result in a conversion rate
greater than 1233.0456 shares per $1,000 in principal
amount.
The Indenture contains a “blocker provision” which
provides that no holder (other than the depositary with respect to
the notes) or beneficial owner of a New Note shall have the right
to receive shares of the Class B Common Stock upon conversion to
the extent that, following receipt of such shares, such holder or
beneficial owner would be the beneficial owner of more than 4.99%
of the outstanding shares of the Class B Common Stock.
The New Notes are not
redeemable by the Company before the January 14,
2023. The
Company may redeem for cash all
or any portion of the New Notes, at its option, on or after January
14, 2023 if the last reported sale price of the Class B Common
Stock has been at least 130% of the conversion price then in effect
for at least 20 trading days (whether or not consecutive),
including the trading day immediately preceding the date on which
the Company provides notice of redemption, during any 30
consecutive trading day period ending on, and including, the
trading day immediately preceding the date on which the Company
provides notice of redemption at a redemption price equal to 100%
of the principal amount of the notes to be redeemed, plus accrued
and unpaid interest to, but excluding, the redemption date. No
sinking fund is provided for the notes.
The
New Notes rank senior in right of payment to any of the
Company’s indebtedness that is expressly subordinated in
right of payment to the New Notes; equal in right of payment to any
of the Company’s unsecured indebtedness that is not so
subordinated; effectively junior in right of payment to any of the
Company’s secured indebtedness to the extent of the value of
the assets securing such indebtedness; and structurally junior to
all indebtedness and other liabilities of current or future
subsidiaries of the Company (including trade
payables).
The
New Notes are subject to events of default typical for this type of
instrument. If an event of default, other than an event of default
in connection with certain events of bankruptcy, insolvency or
reorganization of the Company or any significant subsidiary, occurs
and is continuing, the Trustee by notice to the Company, or the
holders of at least 25% in principal amount of the outstanding New
Notes by notice to the Company and the Trustee, may declare 100% of
the principal of and accrued and unpaid interest, if any, on all
the New Notes then outstanding to be due and payable.
In
connection with the Note Offering, on January 14, 2020, the Company
entered into a registration rights agreement (the "Registration
Rights Agreement") with the Note Investors, pursuant to which the
Company has agreed to file with the SEC an automatic shelf
registration statement, if the Company is eligible to do so and has
not already done so, and, if the Company is not eligible for an
automatic shelf registration statement, then in lieu of the
foregoing the Company shall file a shelf registration statement for
the registration of, and the sale on a continuous or delayed basis
by the holders of, all of the New Notes pursuant to Rule 415 or any
similar rule that may be adopted by the Commission, and use its
commercially reasonable efforts to cause the shelf registration
statement to become or be declared effective under the Securities
Act on the day that is 120 days after January 14,
2020.
The
foregoing description is qualified in its entirety by reference to
the text of the Indenture, the form of 6.75% Convertible Senior New
Notes due 2025, the form of Registration Rights Agreement, the form
of Note Exchange & Subscription Agreement and the form of
Joinder Agreement, which are attached as Exhibits 4.1, 4.2, 4.3,
10.1 and 10.2 respectively, to this Current Report on Form 8-K and
are incorporated herein by reference.
Investor Note Exchange
Also,
in connection with the closing of the Offering and the Note
Offering, certain of the Company's investors extended the maturity
of currently outstanding promissory notes, and exchanged such notes
for new notes (the "New Investor Notes"), pursuant to that certain
Note Exchange Agreement, dated January 14, 2020 (the
"Investor Note Exchange
Agreement"), by and between the
Company and each investor thereto (the "Investors"), including
Halcyon Consulting, LLC ("Halcyon"), an entity affiliated with
Kartik Kakarala, a director of the Company, such New Investor Note
for an aggregate principal amount of $833,333, Blue Flame Capital,
LLC ("Blue Flame"), an entity affiliated with Denmar Dixon, a
director of the Company, such New Investor Note for an aggregate
principal amount of $99,114 and
Mr. Dixon, individually, such New Investor Note for an aggregate
principal amount of $272,563. The
New Investor Notes, having an aggregate principal amount of
approximately $1.5 million, will mature on January 31, 2021, and
will be convertible at any time at the Investor's option at a price
of $3.00 per share. In connection with the issuance of the New
Investor Notes, the Company also entered into a Security Agreement,
dated as of January 14, 2020 with the Investors, pursuant to which
the Company granted to the Investors a security interest in certain
collateral to secure, on a pro rata basis based on the percentage
equal to the amount of principal outstanding on each New Investor
Note divided by the amount of principal outstanding on all of the
New Investor Notes to each Investor.
The
foregoing description is qualified in its entirety by reference to
the text of the form of Investor Note Exchange Agreement, the form
of New Investor Note and the form of Security Agreement, which are
attached as Exhibits 10.3, 10.4, and 10.5 respectively, to this
Current Report on Form 8-K and are incorporated herein by
reference.