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): April 30,
2018
SharpSpring, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
001-36280
|
05-0502529
|
|
(State
or other jurisdiction of Incorporation or
Organization)
|
(Commission
File Number)
|
(I.R.S.
EmployerIdentification No.)
|
|
550 SW 2nd Avenue, Gainesville, FL
|
|
32601
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant's
telephone number, including area code:
888-428-9605
(Former
name or former address, if changed since last report)
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:
☐
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in 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 checkmark 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 April 30, 2018 SharpSpring, Inc. (the
“Company”) and its subsidiaries Quattro Hosting LLC and
SharpSpring Technologies, Inc. (together with the Company,
collectively, “Borrowers”), entered into a
Loan
and Security Modification Agreement with
Western Alliance Bank (“Bank”) that
modifies the Loan and Security Agreement dated March 21, 2016 by
and among Borrowers and Bank, as amended from time to time. The
modification extends the maturity date of the Loan and Security
Agreement to March 21, 2020, sets the minimum Adjusted EBITDA
covenants for 2018 and adjusts the Prime rate floor to 4.75%, among
other things.
A copy of
the
Loan and Security Modification
Agreement
is attached hereto as
Exhibit
10.4
and is incorporated herein
by reference.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant
The
information set forth above under Item 1.01 is incorporated by
reference in this Item 2.03.
Item 9.01 Financial Statements and Exhibits
(d)
Exhibits.
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
|
Loan
Agreement dated March 21, 2016, by and among SharpSpring,
Inc., Quattro Hosting LLC, SharpSpring Technologies, Inc. and
Western Alliance Bank
|
|
|
|
|
|
|
|
Intellectual
Property Security Agreement dated March 21, 2016, by and
among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
|
|
|
|
|
|
Loan
and Security Modification Agreement dated
October 25, 2017,
by and
among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
|
|
|
|
|
|
|
Loan
and Security Modification Agreement dated
April 30, 2018,
by and
among SharpSpring, Inc., Quattro Hosting LLC, SharpSpring
Technologies, Inc. and Western Alliance Bank
|
*
Incorporated by
reference to the Company’s Form 8-K filed on March 22,
2016.
**
Incorporated by
reference to the Company’s Form 8-K filed on October 30,
2017.
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.
|
|
SharpSpring,
Inc.
|
|
|
|
|
|
|
|
Dated:
May 1, 2018
|
By:
|
/s/
Edward
S. Lawton
|
|
|
|
|
Edward S.
Lawton
|
|
|
|
|
Chief
Financial Officer
|
|
LOAN AND SECURITY MODIFICATION AGREEMENT
This
Loan and Security Modification Agreement is entered into as of
April 30, 2018 by and between SHARPSPRING, INC., QUATTRO HOSTING
LLC, and SHARPSPRING TECHNOLOGIES, INC. (each, a
“Borrower”) and WESTERN ALLIANCE BANK
(“Bank”), and effective as of March 21,
2018.
1.
DESCRIPTION OF EXISTING
INDEBTEDNESS
: Among other indebtedness which may be owing by
Borrowers to Bank, Borrowers are indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement by and between
Borrowers and Bank, dated as of March 21, 2016 and as may be
amended from time to time (the “Loan and Security
Agreement”). Capitalized terms used without definition herein
shall have the meanings assigned to them in the Loan and Security
Agreement.
2.
CONSENT TO SUBORDINATED DEBT
.
Bank hereby consents to Borrower’s incurrence of $8,000,000
in Indebtedness owing to SHSP Holdings, Inc., and in accordance
with that certain Subordination Agreement between Bank and SHSP
Holdings, Inc., such Indebtedness constitutes Permitted
Indebtedness under the Loan and Security Agreement as Subordinated
Debt.
3.
MODIFICATION(S) TO LOAN AND SECURITY
AGREEMENT
.
A.
The following
definitions in Section 1.1 are amended and restated in their
entirety to read as follows:
“Prime
Rate” means the greater of four and three quarters percent
(4.75%) or the Prime Rate published in the Money Rates section of
the Western Edition of The Wall Street Journal, or such other rate
of interest publicly announced from time to time by Bank as its
Prime Rate.
“Revolving
Maturity Date” means March 21, 2020.
B.
Section 6.9(c) is
amended and restated in its entirety to read as
follows:
(c)
Minimum Adjusted
EBITDA. Parent’s and its Subsidiaries’ quarterly
Adjusted EBITDA shall be at least 75% of its projected Adjusted
EBITDA for such period as set forth in Borrowers’ Financial
Plan if Borrowers’ projected Adjusted EBITDA is above zero
for such period, or at least 125% of its projected Adjusted EBITDA
for such period as set forth in Borrowers’ Financial Plan if
Borrowers’ projected Adjusted EBITDA is below zero for such
period. Based on Borrowers’ Financial Plan for 2018 provided
by Borrowers which has been deemed acceptable by Bank, the maximum
Adjusted EBITDA loss for the quarters listed below are set forth
below:
|
Quarter
Ending
|
Maximum
Adjusted EBITDA Loss
|
|
March
31, 2018
|
($2,519,000)
|
|
June
30, 2018
|
($2,194,000)
|
|
September
30, 2018
|
($1,858,000)
|
|
December
31, 2018
|
($1,488,000)
|
C.
Exhibit D to the
Agreement is replaced in its entirety with Exhibit D attached
hereto.
4.
CONSISTENT CHANGES
. The Loan
Documents are each hereby amended wherever necessary to reflect the
changes described above.
5.
NO DEFENSES OF BORROWER/GENERAL
RELEASE
. Each Borrower agrees that, as of this date, it has
no defenses against the obligations to pay any amounts under Loan
Documents. Each Borrower and its affiliates (each, a
“Releasing Party”) acknowledges that Bank would not
enter into this Loan and Security Modification Agreement without
Releasing Party’s assurance that it has no claims against
Bank or any of Bank’s officers, directors, employees or
agents. Except for the obligations arising hereafter under this
Loan and Security Modification Agreement, each Releasing Party
releases Bank and each of Bank’s officers, directors and
employees from any known or unknown claims that Releasing Party now
has against Bank of any nature, including any claims that Releasing
Party, its successors, counsel, and advisors may in the future
discover they would have now had if they had known facts not now
known to them, whether founded in contract, in tort or pursuant to
any other theory of liability, including but not limited to any
claims arising out of or related to the Loan and Security Agreement
or the transactions contemplated thereby. Releasing Party waives
the provisions of California Civil Code section 1542, which
states:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR.
The
provisions, waivers and releases set forth in this section are
binding upon each Releasing Party and its shareholders, agents,
employees, assigns and successors in interest. The provisions,
waivers and releases of this section shall inure to the benefit of
Bank and its agents, employees, officers, directors, assigns and
successors in interest. The provisions of this section shall
survive payment in full of the Obligations, full performance of all
the terms of this Loan and Security Modification Agreement and the
other Loan Documents, and/or Bank’s actions to exercise any
remedy available under the Loan Documents or
otherwise.
6.
CONTINUING VALIDITY
. Each
Borrower understands and agrees that in modifying the existing Loan
Documents, Bank is relying upon each Borrower's representations,
warranties, and agreements, as set forth in the Loan Documents.
Each Borrower represents and warrants that the representations and
warranties contained in the Loan and Security Agreement are true
and correct as of the date of this Loan and Security Modification
Agreement, and that no Event of Default has occurred and is
continuing. Except as expressly modified pursuant to this Loan and
Security Modification Agreement, the terms of the Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Loan Documents pursuant to this Loan
and Security Modification Agreement in no way shall obligate Bank
to make any future modifications to the Loan Documents. Nothing in
this Loan and Security Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and
Borrowers to retain as liable parties all makers and endorsers of
Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by
virtue of this Loan and Security Modification Agreement. The terms
of this paragraph apply not only to this Loan and Security
Modification Agreement, but also to any subsequent loan and
security modification agreements.
7.
CHOICE OF
LAW AND VENUE; JURY TRIAL WAIVER
; REFERENCE PROVISION
. This
Loan and Security Modification Agreement constitutes a “Loan
Document” as defined and set forth in the Loan and Security
Agreement, and is subject to Sections 11 and 12 of the Loan and
Security Agreement, which are incorporated by reference
herein.
8.
CONDITIONS PRECEDENT
. As a
condition to the effectiveness of this Loan and Security
Modification Agreement, Bank shall have received, in form and
substance satisfactory to Bank, the following:
(a)
corporate
resolutions and incumbency certificates;
(b)
payment of the
facility fee set forth in Section 2.5(a) of the Agreement that was
previously due and payable on March 21, 2018, plus all Bank
Expenses incurred through the date hereof; and
(c)
such other
documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.
[signature page follows]
9.
COUNTERSIGNATURE
. This Loan and
Security Modification Agreement shall become effective only when
executed by Bank and Borrowers.
SHARPSPRING,
INC.
WESTERN ALLIANCE
BANK
By: /s/ Edward
Lawton
by: /s/ Guy
Simpson
Name: Edward
Lawton
Name: Guy
Simpson
Title:
CFO
Title: SVP and
Business Line Manager
|
QUATTRO
HOSTING LLC
By: /s/
Edward Lawton
Name:
Edward Lawton
Title:
CFO
|
|
SHARPSPRING
TECHNOLOGIES, INC.
By: /s/
Edward Lawton
Name:
Edward Lawton
Title:
CFO
|
EXHIBIT D
COMPLIANCE CERTIFICATE
TO:
WESTERN ALLIANCE
BANK
FROM:
SHARPSPRING, INC.,
QUATTRO HOSTING LLC, and SHARPSPRING TECHNOLOGIES,
INC.
The
undersigned authorized officer of
SHARPSPRING, INC.,
on behalf of
itself and all other Borrowers,
hereby certifies that in
accordance with the terms and conditions of the Loan and Security
Agreement between Borrowers and Bank (the “Agreement”),
(i) each Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below
and (ii) all representations and warranties of Borrowers stated in
the Agreement are true and correct as of the date hereof. Attached
herewith are the required documents supporting the above
certification. The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to
the next except as explained in an accompanying letter or
footnotes.
Please indicate compliance status by circling Yes/No under
“Complies” column.
|
Reporting Covenant
|
Required
|
Complies
|
|
|
|
|
|
|
A/R
& A/P Agings
|
Monthly
within 30 days
|
Yes
|
No
|
|
Borrowing
Base Certificate
|
Monthly
within 30 days
|
Yes
|
No
|
|
Monthly
Recurring Revenue report for prior 12 months
|
Monthly
within 30 days
|
Yes
|
No
|
|
Monthly
consolidated financial statements
|
Monthly
within 30 days
|
Yes
|
No
|
|
Monthly
consolidating financial statements
|
Monthly
within 30 days
|
Yes
|
No
|
|
Compliance
Certificate
|
Monthly
within 30 days
|
Yes
|
No
|
|
Annual
audited financial statements
|
FYE
within 180 days
|
Yes
|
No
|
|
Annual
operating budget, sales projections and operating plans approved by
board of directors
|
Annually
no later than 30 days following the beginning of each fiscal
year
|
Yes
|
No
|
|
|
|
|
|
|
A/R and
Collateral Audit
|
Initial
and Annual
|
Yes
|
No
|
|
|
|
|
|
|
Deposit
balances with Bank
|
$
___________________
|
|
|
|
Deposit
balance outside Bank
|
$
___________________
|
|
|
|
Financial Covenant
|
Required
|
Actual
|
Complies
|
|
|
|
|
|
|
|
Minimum
Cash at Bank + Availability on Revolving Facility
|
$1,500,000
|
$_________
|
Yes
|
No
|
|
Minimum
MRR Retention Rate (monthly)
|
At
least 90%
|
________%
|
Yes
|
No
|
|
Minimum
Adjusted EBITDA (quarterly)
|
3/31/18:
($2,519,000)
|
$_________
|
Yes
|
No
|
|
Negative
deviation not to exceed 25% of Financial Plan
|
6/30/18:
($2,194,000)
|
____%
|
|
|
|
|
9/30/18:
($1,858,000)
|
|
|
|
|
|
12/31/18:
($1,488,000)
|
|
|
|
|
Comments Regarding Exceptions:
See Attached.
|
|
|
|
|
|
Sincerely,
|
|
|
|
|
|
|
|
|
_________________________________________
|
|
|
SIGNATURE
|
|
|
|
|
|
_________________________________________
|
|
|
TITLE
|
|
|
|
|
|
|
_________________________________________
|
|
|
DATE
|
|