RideNow Group, Inc S-3/A, filed Jun 26, 2020
RideNow Group, Inc. (RDNW)
S-3/A
2020-06-26
View Original
Added on
October 20, 2026
As filed with the Securities and Exchange Commission on June 26,
2020
Registration No. 333-239285
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
REGISTRATION STATEMENT
ON FORM S-1
ON FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
RumbleOn, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or
organization)
46-3951329
(I.R.S.
Employer Identification Number)
901 W. Walnut Hill Lane
Irving, Texas 75038
(469) 250-1185
(Address,
including zip code, and telephone number, including area code, of
registrant’s principal
executive offices)
Marshall Chesrown
Chairman and Chief Executive Officer
RumbleOn, Inc.
901 W. Walnut Hill Lane
Irving, Texas 75038
(469) 250-1185
(Name,
address, including zip code, and telephone number, including area
code, of agent for service)
With a copy to:
Michael Francis, Esq.
Christina C. Russo, Esq.
Akerman LLP
350 East Las Olas Boulevard, Suite 1600
Fort Lauderdale, Florida 33301
(954) 463-2700
Approximate date of commencement of proposed sale to the
public: From time to time after the effective date of this
registration statement, as determined by the selling
stockholders.
If the
only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check
the following box: ☐
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box: ☒
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this
Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become
effective upon filing with the Commission pursuant to Rule 462(e)
under the Securities Act, check the following box: ☐
If this
Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register
additional securities or additional classes of securities pursuant
to Rule 413(b) under the Securities Act, check the following box:
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated
filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☒
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Smaller
reporting company
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☒
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Emerging
growth company
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☐
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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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered
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Amount to be registered
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Proposed maximum
offering price per share (1)
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Proposed maximum
aggregate offering price (1)
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Amount of
registration fee
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6.75% Convertible
Senior Notes due 2025
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$38,750,000
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100%
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38,750,000
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$5,029.75(2)
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Class B Common
Stock, par value $0.001 per share underlying the Notes
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968,750
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(3)
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(3)
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(4)
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(1)
Estimated solely
for the purpose of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933, as
amended.
(2)
Pursuant to Rule
457(p) under the Securities Act, the registrant is carrying forward
to this registration statement the amount of $5,029.75, which
consists of (i) $3,636, which is the aggregate dollar amount
previously paid that is attributable to $30,000,000 of securities
registered for resale under the registrant’s registration
statement on Form S-3 (File No. 333-233399) initially filed on
August 22, 2019, which unsold securities were deregistered and (ii)
$1,393.75, which was previously paid in connection with the
registrant's initial filing of this registration statement on June
19, 2020. Accordingly, no additional fee is required to be paid
herewith.
(3)
Includes 968,750
shares of Class B Common Stock issuable upon conversion of the
6.75% Convertible Senior Notes due 2025 (the "Notes") at an initial
conversion rate of 25 shares of Class B Common Stock per $1,000
principal amount of the Notes, which is equal to a conversion price
of approximately $40.00 per share of Class B Common Stock. As of
the date of this prospectus, this represents the maximum number of
shares of Class B Common Stock issuable upon conversion of the
Notes. Pursuant to Rule 416 under the Securities Act, such number
of shares of Class B Common Stock registered hereby also includes
such indeterminate number of shares of Class B Common Stock that
may be issued in connection with a stock split, stock dividend,
recapitalization or similar event.
(4)
Pursuant to Rule
457(i) under the Securities Act, there is no additional filing fee
with respect to the shares of Class B Common Stock issuable upon
conversion of the Notes because no additional consideration will be
received in connection with the exercise of the conversion
privilege.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, as amended or until the registration statement shall become
effective on such date as the Commission acting pursuant to said
Section 8(a), may determine.
The information in this prospectus is not complete and may be
changed. The selling securityholders may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JUNE 26,
2020
PRELIMINARY PROSPECTUS
6.75% Convertible Senior Notes due 2025 and
Shares of Class B Common Stock Issuable Upon Conversion of
the Notes
We
issued the 6.75% Convertible Senior Notes due 2025 (the
“Notes”) in the Note Offering (as defined below) in
January 2020. This prospectus will be used by selling
securityholders to resell their Notes and the shares of Class B
Common Stock, par value $0.001 per share (the “Class B Common
Stock”), issuable upon conversion of the Notes. We will not
receive any proceeds from the resale of the Notes or the sale of
the shares of Class B Common Stock issuable upon conversion of the
Notes. The Notes mature on January 1, 2025, unless earlier
converted, redeemed or repurchased.
The
holders of the Notes may convert the Notes into shares of our Class
B Common Stock at any time prior to the close of business on the
business day immediately preceding the stated maturity date, into
shares of our Class B Common Stock, upon satisfaction of one or
more of the conditions described in this prospectus, at an initial
conversion rate of 25 shares of Class B Common Stock per $1,000
principal amount of Notes, which is equal to a conversion price of
approximately $40.00. The conversion rate is subject to adjustment,
as described in this prospectus. In particular, holders who convert
their Notes in connection with certain fundamental changes may be
entitled to a make-whole premium in the form of additional shares
of our Class B Common Stock per $1,000 principal amount of
Notes.
At
the initial conversion rate, if all Notes were converted into
shares of our common stock, we would issue 968,750 shares of Class
B Common Stock. As of the date of this prospectus, this represents
the maximum number of shares of Class B Common Stock issuable upon
conversion of the Notes.
The
Notes are subordinated to our existing and future secured
indebtedness to the extent of the value of the assets securing such
indebtedness and effectively subordinated to all indebtedness and
other liabilities of our subsidiaries. For information concerning
the selling securityholders and the manner in which they may offer
and sell the Notes and the shares of Class B Common Stock issuable
upon conversion of the Notes, see “Selling
Securityholders” and “Plan of Distribution” in
this prospectus.
We
are not selling any securities under this prospectus and we will
not receive any proceeds from the resale of the Notes or the sale
of the shares of Class B Common Stock issuable upon conversion of
the Notes.
Our
Class B Common Stock trades on the NASDAQ Capital Market
(“NASDAQ”) under the trading symbol “RMBL”.
On June 25, 2020, the last reported sales price of our Class B
Common Stock on the NASDAQ was $10.41 per share. The Notes are not
listed on any securities exchange or included in any automated
quotation system. We do not intend to apply to list the Notes on
any securities exchange or any automated dealer quotation
system.
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Investing
in the Notes or the shares of Class B Common Stock involves risks.
See “Risk
Factors,” beginning on
page 7 and in any documents we file with the Securities and
Exchange Commission that are incorporated by reference into this
prospectus.
You
should rely only on the information contained in this prospectus.
We have not authorized any dealer, salesperson or other person to
provide you with information concerning us, except for the
information contained in this prospectus. The information contained
in this prospectus is complete and accurate only as of the date on
the front cover page of this prospectus, regardless of the time of
delivery of this prospectus or the sale of any Notes or shares of
Class B Common Stock. This prospectus is not an offer to sell these
securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is , 2020
TABLE OF CONTENTS
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ABOUT
THIS PROSPECTUS
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ii
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PROSPECTUS
SUMMARY
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1
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THE
OFFERING
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2
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RISK
FACTORS
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7
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CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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8
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USE OF
PROCEEDS
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12
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SELLING
SECURITYHOLDERS
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13
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PLAN OF
DISTRIBUTION
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14
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CERTAIN
U. S. FEDERAL INCOME TAX CONSIDERATIONS
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16
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DESCRIPTION
OF THE NOTES
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24
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DESCRIPTION
OF CAPITAL STOCK
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55
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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56
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WHERE
YOU CAN FIND MORE INFORMATION
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57
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LEGAL
MATTERS
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58
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EXPERTS
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59
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PART
II INFORMATION NOT
REQUIRED IN THE PROSPECTUS
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60
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SIGNATURES
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63
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ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission, or the SEC,
using a “shelf”
registration process for the delayed offering and sale of
securities pursuant to Rule 415 under the Securities Act of 1933,
as amended (the “Securities Act”). Under the shelf process, the
selling securityholders may, from time to time, sell the offered
securities described in this prospectus in one or more offerings.
Additionally, under the shelf process, in certain circumstances, we
may provide a prospectus supplement that will contain specific
information about the terms of a particular offering by one or more
of the selling securityholders. We may also provide a prospectus
supplement to add information to, or update or change information
contained in, this prospectus.
This
prospectus does not contain all of the information set forth in the
registration statement, portions of which we have omitted as
permitted by the rules and regulations of the SEC. Statements
contained in this prospectus as to the contents of any contract or
other document are not necessarily complete. You should refer to
the copy of each contract or document filed as an exhibit to the
registration statement for a complete description.
You
should rely only on the information contained in or incorporated by
reference into this prospectus and any applicable prospectus
supplements. Such documents contain important information you
should consider when making your investment decision. We have not
authorized anyone to provide you with different or additional
information. The selling securityholders are offering to sell and
seeking offers to buy our Notes and shares of our Class B Common
Stock only in jurisdictions in which offers and sales are
permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of Notes or Class B Common
Stock.
Unless
the context otherwise requires, all references to “RumbleOn,” “RMBL,” the “Company,” “registrant,” “we,” “us,” “our” and similar names refer to
RumbleOn, Inc., formerly Smart Server, Inc., and its consolidated
subsidiaries.
The
share amounts set forth in this prospectus have been adjusted to
reflect the one-for-twenty reverse stock split of the
Company’s Class A Common Stock and Class B Common Stock,
effective May 20, 2020.
ii
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PROSPECTUS SUMMARY
This summary does not contain all of the information that is
important to you. You should read the entire prospectus carefully,
including the “Risk Factors” section and the
consolidated financial statements and related notes included in
this prospectus or incorporated by reference into this prospectus,
before making an investment decision.
Overview
RumbleOn,
Inc., a Nevada corporation, is a technology driven, motor vehicle
dealer and e-commerce platform provider disrupting the vehicle
supply chain using innovative technology that aggregates, processes
and distributes inventory in a faster and more cost-efficient
manner.
We
operate an infrastructure-light platform that facilitates the
ability of all participants in the supply chain, including
RumbleOn, other dealers and consumers to
Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal is to
transform the way VIN-specific pre-owned vehicles are bought and
sold by providing users with the most comprehensive, efficient,
timely and transparent transaction experiences. While our initial
customer facing emphasis through most of 2018 was on motorcycles
and other powersports, in 2019 we enhanced our platform to
accommodate nearly any VIN-specific vehicle, and via our October
2018 acquisition of Wholesale, Inc., we made a concerted effort to
grow our cars and light truck categories.
Convertible Note Exchange and Offer
On
January 10, 2020, the Company entered into a Note Exchange and
Subscription Agreement, as amended by the Joinder Agreement, with
the investors in the 2019 Note Offering, pursuant to which the
Company agreed to complete (i) a note exchange pursuant to which
$30,000,000 of the Old Notes would be cancelled in exchange for a
new series of 6.75% Convertible Senior Notes due 2025 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. On January 14, 2020, the Company closed the 2020
Note Offering. The proceeds for the 2020 Note Offering, after
deducting for payment of accrued interest on the Old Notes and
offering-related expenses were approximately
$8,272,375.
The New Notes were
issued on January 14, 2020
pursuant to an Indenture (the "New 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 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 New Indenture or if the
New Notes are not freely tradeable as required by the New
Indenture. The New Notes will mature on January 1, 2025, unless
earlier converted, redeemed or repurchased pursuant to their
terms.
Corporate Information
We were
incorporated as a development stage company in the State of Nevada
as Smart Server, Inc. in October 2013. In February 2017, we changed
our name to RumbleOn, Inc. Our principal executive offices are
located at 901 W. Walnut Hill Lane, Irving, Texas 75038 and our
telephone number is (469) 250-1185. Our Internet website is
www.rumbleon.com. Our Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and amendments to
reports filed or furnished pursuant to Sections 13(a) and 15(d) of
the Exchange Act are available, free of charge, under the Investor
Relations tab of our website as soon as reasonably practicable
after we electronically file such material with, or furnish it to,
the SEC. The information on our website, however, is not, and
should not be, considered part of this prospectus, is not
incorporated by reference into this prospectus, and should not be
relied upon in connection with making any investment decision with
respect to our securities. The SEC also maintains an Internet
website located at www.sec.gov that contains the information we
file or furnish electronically with the SEC.
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THE OFFERING
This prospectus relates to the sale by certain
security holders of the Notes and the shares of our Class B Common Stock
issuable upon conversion of the Notes. The following is a brief
summary of certain terms of this offering. For a more complete
description of the terms of the Notes, see “Description of
the Notes” beginning on page 24 of
this prospectus and for a complete description of the Class B
Common Stock, see “Description of Capital Stock”
beginning on page 55 of
this prospectus.
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Issuer:
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RumbleOn, Inc., a
Nevada corporation
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Securities
Offered by the Selling Securityholders:
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Up to $38,750,000
aggregate principal amount of 6.75% Convertible Senior Notes due
2025 and 968,750 shares of our Class B Common Stock issuable upon
conversion of the Notes. The total dollar value of the shares of
our Class B Common Stock issuable upon conversion of the Notes is
$10,084,687 (based on $10.41 (on a post split basis) per share, the
last reported sales price of our Class B Common Stock on NASDAQ on
June 25, 2020).
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Maturity:
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January
1, 2025, unless earlier converted, redeemed, or
repurchased.
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Interest:
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6.75% per year.
Interest will accrue from, and including January 14, 2020 and will
be payable semi-annually in arrears on January 1 and July 1 of each
year, beginning on July 1, 2020. We will pay additional interest,
if any, at our election as the sole remedy relating to the failure
to comply with our reporting obligations as described under
“Description of Notes—Events of Default” and
under the circumstances described under “Description of
Notes—Registration Rights; Additional
Interest.”
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Conversion Rights:
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Holders of the
Notes may, subject to the blocker provision, convert their Notes at
their option at any time prior to the close of business on the
business day immediately preceding July 1, 2024, but only under the
following circumstances:
●
during
any calendar quarter commencing after the calendar quarter ending
on March 31, 2020 (and only during such calendar quarter), if the
last reported sale price of our Class B Common Stock for at least
20 trading days (whether or not consecutive) during a period of 30
consecutive trading days ending on, and including, the last trading
day of the immediately preceding calendar quarter is greater than
or equal to 130% of the conversion price on each applicable trading
day;
●
during
the five consecutive business day period immediately following any
five consecutive trading day period, or the measurement period, in
which the trading price per $1,000 principal amount of Notes for
each trading day of the measurement period was less than 98% of the
product of the last reported sale price of our Class B Common Stock
and the conversion rate for the Notes on each such trading
day;
●
if
we call any or all of the Notes for redemption, at any time prior
to the close of business on the scheduled trading day immediately
preceding the redemption date; or
●
on
the occurrence of specified corporate events.
On or
after July 1, 2024, to the close of business on the business day
immediately preceding the maturity date, holders may convert all or
any portion of their Notes at the applicable conversion rate at any
time, in multiples of $1,000 principal amount, at the option of the
holder regardless of such conditions.
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2
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The conversion rate
for the Notes will initially be 25 shares of Class B Common Stock
per $1,000 principal amount of Notes (equivalent to an initial
conversion price of approximately $40.00 per share of Class B
Common Stock), subject to adjustment as described in this
prospectus.
On
conversion, subject to the blocker provision to the extent
applicable, we will pay or deliver, as the case may be, cash,
shares of our Class B Common Stock, or a combination of cash and
shares of our Class B Common Stock, at our election. If we satisfy
our conversion obligation solely in cash or through a combination
of cash and shares of our Class B Common Stock, the amount of cash
and shares of Class B Common Stock, if any, due on conversion will
be based on a daily conversion value (as described in this
prospectus) calculated on a proportionate basis for each trading
day in a 40 trading day observation period (as described in this
prospectus). See “Description of Notes—Conversion
Rights—Settlement upon Conversion.”
In
addition, following certain corporate events that occur prior to
the maturity date or if we issue a notice of redemption, we will
increase the conversion rate for a holder who elects to convert its
Notes in connection with such a corporate event or notice of
redemption in certain circumstances as described under
“Description of Notes—Conversion Rights—Increase
in Conversion Rate on Conversion on a Make-Whole Fundamental Change
or Notice of Redemption.”
Except
as set forth under ‘‘Description of
Notes—Conversion Rights—Interest Make-Whole Payment
upon Certain Conversions,’’ you will not receive any
additional cash payment or additional shares representing accrued
and unpaid interest, if any, on conversion of a Note, except in
limited circumstances. Instead, interest will be deemed to be paid
by the cash, shares of our Class B Common Stock, or a combination
of cash and shares of our Class B Common Stock paid or delivered,
as the case may be, to you on conversion of a Note
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Interest Make-Whole Payment:
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On or after the
date that is one year after the last date of original issuance of
the Notes offered hereby or after the occurrence of any 30 trading
day period during which the last reported sale price of our 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),
we will make an interest make-whole payment (an
‘‘interest make-whole payment’’) to a
converting holder (other than a conversion in connection with a
make-whole fundamental change in which the conversion rate is
adjusted) equal to the sum of the present values of the scheduled
payments of interest that would have been made on the Notes to be
converted had such Notes remained outstanding from the conversion
date through the earlier of (i) the date that is two years after
the conversion date and (ii) February 15, 2023 if the Notes had not
been so converted. The present values of the remaining interest
payments will be computed using a discount rate equal to
2.0%.
We may
pay any interest make-whole payment either in cash or in shares of
our Class B Common Stock, at our election. If we elect to pay any
interest make-whole payment in cash, we will pay cash in an amount
equal to the interest make-whole payment. If we do not make such
election, the payment of any interest make-whole payment shall be
in shares of our Class B Common Stock. If we elect, or are deemed
to have elected, to pay any interest make-whole payment by
delivering shares of our Class B Common Stock, the number of shares
of our Class B Common Stock a converting holder of Notes will
receive will be equal to the amount of the interest make-whole
payment due divided by the greater of (A) the product of (x) 95.0%
and (y) the simple average of the daily VWAP of our Class B Common
Stock for the 10 trading days ending on and including the trading
day immediately preceding the conversion date and (B) the
conversion price on the applicable conversion date. We will pay
cash in lieu of delivering any fractional share as described under
‘‘Description of Notes — Conversion Right —
Settlement upon Conversion’’ and under
‘‘Description of Notes — Conversion Rights
— Interest Make-Whole Payment upon Certain
Conversions.’’ If we elect to pay any interest
make-whole payment in cash we will pay cash in an amount equal to
the interest make-whole payment. See ‘‘Description of
Notes — Conversion Rights — Interest Make-Whole Payment
upon Certain Conversions.’’
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Notwithstanding the foregoing, (x) if we elect or are deemed to have elected to pay any interest make-whole payment in shares of our Class B Common Stock, the number of shares of our Class B Common Stock we may deliver in connection with a conversion of the Notes, including those delivered in connection with an interest make-whole payment, will not exceed 61.6523 shares of Class B Common Stock per $1,000 principal amount of Notes, subject to adjustment at the same time and in the same manner as the conversion rate as set forth under ‘‘— Conversion Rate Adjustments’’ and (y) if we elect to pay any interest make-whole payment in cash, the amount of cash we may deliver in connection with an interest make-whole payment will not exceed 61.6523 per $1,000 principal amount of Notes. |
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Beneficial Ownership “Blocker Provision”:
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The
Indenture governing the Notes contains a “blocker
provision” which provides that no holder (other than the
depositary with respect to the Notes) or beneficial owner of a Note
shall have the right to receive shares of our Class B Common Stock
upon conversion to the extent that, following receipt of such
shares, such holder or beneficial owner (together with such
holder’s affiliates and any other persons whose beneficial
ownership of common stock would be aggregated with the
holder’s for purposes of Section 13(d) of the Exchange Act
and the rules promulgated thereunder, including any
“group” of which such holder is a member) would be the
beneficial owner of more than 4.99% of the outstanding shares of
our Class B Common Stock.
If any
holder or beneficial owner is so prevented from receiving any
shares to which it would otherwise be entitled, our obligation to
deliver such shares shall not be extinguished, and we shall deliver
such shares (or any designated portion thereof) within two business
days following written notice from the converting holder or
beneficial owner that receipt of such shares (or any designated
portion thereof) would not be prohibited by the blocker
provision.
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Redemption at Our Option:
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We may
not redeem the Notes prior to January 14, 2023. We may redeem for
cash all or any portion of the Notes, at our option, on or after
January 14, 2023 if the last reported sale price of our 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
we provide notice of redemption, during any 30 consecutive trading
day period ending on, and including, the trading day immediately
preceding the date on which we provide 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, which means that we are not
required to redeem or retire the Notes periodically.
We will
give notice of any redemption not less than 50 nor more than 65
scheduled trading days before the redemption date by mail or
electronic delivery to the trustee, the paying agent and each
holder of Notes. See “Description of Notes— Optional
Redemption on or after January 14, 2023.”
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4
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Fundamental Change:
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If
we undergo a “fundamental change” (as defined under the
heading “Description of Notes — Fundamental Change
Permits Holders to Require Us to Repurchase Notes” in this
prospectus), subject to certain conditions, holders may require us
to repurchase for cash all or part of their Notes in principal
amounts of $1,000 or a multiple thereof. The fundamental change
repurchase price will be equal to 100% of the principal amount of
the Notes to be repurchased, plus accrued and unpaid interest to,
but excluding, the fundamental change repurchase date. See
“Description of Notes —Fundamental Change Permits
Holders to Require Us to Repurchase Notes.”
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Ranking:
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The Notes will be our general unsecured obligations and will
rank:
●
senior
in right of payment to any of our indebtedness that is expressly
subordinated in right of payment to the Notes;
●
equal
in right of payment to all of our liabilities that are not so
subordinated;
●
effectively
junior to any of our secured indebtedness to the extent of the
value of the assets securing such indebtedness; and
●
structurally
junior to all indebtedness and other liabilities (including trade
payables) of our subsidiaries.
As of December 31, 2019, excluding operating lease liabilities and
the derivative liability, our total consolidated net indebtedness
was approximately $82,585,522, of which an aggregate of $60,494,304
was secured indebtedness, and approximately $59,160,970 of such
secured indebtedness is directly attributable to the Company's
vehicles in inventory or held for sale, and the security of those
lenders includes all of the vehicles financed by such lenders as
well as all of the assets of our subsidiaries Wholesale Inc. and
AutoSport USA, Inc. As of December 31, 2019, approximately
$80,092,280 of our total consolidated indebtedness was senior
indebtedness.
The Indenture governing the Notes includes certain limitations on
the amount of secured debt that we or our current or future
subsidiaries may incur, but will not limit the amount of unsecured
debt or other liabilities that we may incur.
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Registration Rights; Additional Interest:
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Under
certain circumstances described in this prospectus, we have agreed
to file a shelf registration statement with the SEC relating to the
resale of the Notes and any Class B Common Stock issuable upon
conversion of the Notes and use commercially reasonable efforts to
cause the shelf registration statement to become or be declared
effective under the Securities Act within 120 days of the date of
the related Note Exchange & Subscription Agreement (which date
has been adjusted to June 29, 2020 for certain intervening events,
including the COVID-19 pandemic). If such registration statement is
not filed or has not become effective within the time periods set
forth in related registration rights agreement, we will be required
to pay additional interest to holders of the Notes. See
‘‘Description of Notes—Registration Rights;
Additional Interest.’’
If, at
any time during the six-month period beginning on, and including,
the date that is six months after January 14, 2020, we fail to
timely file any document or report that we are required to file
with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as
applicable (after giving effect to all applicable grace periods
under the Exchange Act and other than reports on Form 8-K), or such
Notes are not otherwise freely tradable pursuant to Rule 144 by
holders other than our affiliates (or holders that were our
affiliates at any time during the three months immediately
preceding) as a result of restrictions pursuant to U.S. securities
laws or the terms of the Indenture or the Notes, we will pay
additional interest on such Notes at a rate equal to 0.50% per
annum of the principal amount of Notes outstanding for each day
during such period for which our failure to file has occurred and
is continuing or such Notes are not otherwise freely tradable as
described above by holders other than our affiliates (or holders
that were our affiliates at any time during the three months
immediately preceding).
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5
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Use
of proceeds:
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We estimate that the net proceeds to us from the Note Offering were approximately $8.6 million. We will not receive any proceeds from the resale of the Notes or the sale of the shares of Class B Common Stock issuable upon conversion of the Notes. See “Use of Proceeds.” |
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Risk Factors: |
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See “Risk Factors” beginning on page 7 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our Notes and our Class B Common Stock. |
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NASDAQ Stock Symbol: |
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Our Class B Common Stock is listed on the NASDAQ Capital Market under the symbol “RMBL”. |
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6
RISK FACTORS
Investing
in our securities involves significant risks. Before making an
investment decision, you should consider carefully the risks,
uncertainties and other factors described under "Risk Factors" in
our most recent Annual Report on Form 10-K, as supplemented and
updated by subsequent quarterly reports on Form 10-Q and current
reports on Form 8-K that we have filed or will file with the SEC,
and in other documents which are incorporated by reference into
this prospectus.
If
any of these risks were to occur, our business, affairs, prospects,
assets, financial condition, results of operations and cash flow
could be materially and adversely affected. If this occurs, the
market or trading price of our securities could decline, and you
could lose all or part of your investment. In addition, please read
“Cautionary Statement Regarding Forward-Looking
Statements” in this prospectus, where we describe additional
uncertainties associated with our business and the forward-looking
statements included or incorporated by reference into this
prospectus.
7
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Our
business, financial condition, results of operations, cash flows
and prospects, and the prevailing market price and performance of
our securities, may be adversely affected by a number of factors,
including the matters discussed below. Certain statements and
information set forth in this registration statement, as well as
other written or oral statements made from time to time by us or by
our authorized executive officers on our behalf, constitute
“forward-looking
statements” within the
meaning of the Federal Private Securities Litigation Reform Act of
1995. We intend for our forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, and we set
forth this statement and these risk factors in order to comply with
such safe harbor provisions. You should note that our
forward-looking statements speak only as of the date of this
registration statement or when made and we undertake no duty or
obligation to update or revise our forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. Although we believe that the
expectations, plans, intentions and projections reflected in our
forward-looking statements are reasonable, such statements are
subject to risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. The risks,
uncertainties and other factors that our stockholders and
prospective investors should consider include the
following:
●
We have a limited
operating history and we cannot assure you we will achieve or
maintain profitability;
●
Our annual and
quarterly operating results may fluctuate significantly or may fall
below the expectations of investors or securities analysts, each of
which may cause our stock price to fluctuate or
decline;
●
The initial
development and progress of our business to date may not be
indicative of our future growth prospects and, if we continue to
grow rapidly, we may not be able to manage our growth
effectively;
●
There is
substantial doubt about our ability to continue as a going
concern;
●
We may require
additional capital to pursue our business objectives and respond to
business opportunities, challenges or unforeseen circumstances. If
capital is not available on terms acceptable to us or at all, we
may not be able to develop and grow our business as anticipated and
our business, operating results and financial condition may be
harmed;
●
We may fail to
maintain our listing on The Nasdaq Stock Market;
●
The success of our
business relies heavily on our marketing and branding efforts,
especially with respect to the RumbleOn website and our branded
mobile applications, and these efforts may not be
successful;
●
The failure to
develop and maintain our brand could harm our ability to grow
unique visitor traffic and to expand our regional partner
network;
●
We rely on Internet
search engines to drive traffic to our website, and if we fail to
appear prominently in the search results, our traffic would
decline, and our business would be adversely affected;
●
A significant
disruption in service on our website or of our mobile applications
could damage our reputation and result in a loss of consumers,
which could harm our business, brand, operating results, and
financial condition;
●
We may be unable to
maintain or grow relationships with information data providers or
may experience interruptions in the data feeds they provide, which
may limit the information that we are able to provide to our users
and regional partners as well as adversely affect the timeliness of
such information and may impair our ability to attract or retain
consumers and our regional partners and to timely invoice all
parties;
●
If we are unable to
provide a compelling vehicle buying experience to our users, the
number of transactions between our users, RumbleOn and dealers will
decline, and our revenue and results of operations will suffer
harm;
●
If key industry
participants, including powersports and recreation vehicle dealers
and regional auctions, perceive us in a negative light or our
relationships with them suffer harm, our ability to operate and
grow our business and our financial performance may be
damaged;
8
●
The growth of our
business relies significantly on our ability to increase the number
of regional partners in our network such that we are able to
increase the number of transactions between our users and regional
partners. Failure to do so would limit our growth;
●
Our ability to grow
our complementary product offerings may be limited, which could
negatively impact our development, growth, revenue and financial
performance;
●
Our sales of
powersports/recreation vehicles may be adversely impacted by
increased supply of and/or declining prices for pre-owned vehicles
and excess supply of new vehicles;
●
We rely on a number
of third parties to perform certain operating and administrative
functions for the Company;
●
We participate in a
highly competitive market, and pressure from existing and new
companies may adversely affect our business and operating
results;
●
Seasonality or
weather trends may cause fluctuations in our unique visitors,
revenue and operating results;
●
We collect,
process, store, share, disclose and use personal information and
other data, and our actual or perceived failure to protect such
information and data could damage our reputation and brand and harm
our business and operating results;
●
Failure to
adequately protect our intellectual property could harm our
business and operating results;
●
We may in the
future be subject to intellectual property disputes, which are
costly to defend and could harm our business and operating
results;
●
We operate in a
highly regulated industry and are subject to a wide range of
federal, state and local laws and regulations. Failure to comply
with these laws and regulations could have a material adverse
effect on our business, results of operations and financial
condition;
●
We provide
transportation services and rely on external logistics to transport
vehicles. Thus, we are subject to business risks and costs
associated with the transportation industry. Many of these risks
and costs are out of our control, and any of them could have a
material adverse effect on our business, financial condition and
results of operations;
●
We depend on key
personnel to operate our business, and if we are unable to retain,
attract and integrate qualified personnel, our ability to develop
and successfully grow our business could be harmed;
●
We may acquire
other companies or technologies, which could divert our
management's attention, result in additional dilution to our
stockholders and otherwise disrupt our operations and harm our
operating results;
●
The recent outbreak
of COVID-19 will likely have a significant negative impact on our
business, sales, results of operations, financial condition, and
liquidity;
●
We may be unable to
realize the anticipated synergies related to the Acquisitions,
which could have a material adverse effect on our business,
financial condition and results of operations;
●
We may be
unable to successfully integrate the Wholesale Entities' business
and realize the anticipated benefits of the
Acquisitions;
●
Our business
relationships, those of the Wholesale Entities or the combined
company may be subject to disruption due to uncertainty associated
with the Acquisitions;
●
If we are unable to
maintain effective internal control over financial reporting for
the combined companies, we may fail to prevent or detect material
misstatements in our financial statements, in which case investors
may lose confidence in the accuracy and completeness of our
financial statements;
9
●
The Wholesale
Entities may have liabilities that are not known, probable or
estimable at this time;
●
As a result of the
Acquisitions, we and the Wholesale Entities may be unable to retain
key employees;
●
The trading
price for our Class B Common Stock may be volatile and could be
subject to wide fluctuations in per share price;
●
Our principal
stockholders and management own a significant percentage of our
stock and an even greater percentage of the Company's voting power
and will be able to exert significant control over matters subject
to stockholder approval;
●
If securities or
industry analysts do not publish research or reports about our
business, or if they issue an adverse or misleading opinion
regarding our stock, our stock price and trading volume could
decline;
●
Because our Class B
Common Stock may be deemed a low-priced "penny" stock, an
investment in our Class B Common Stock should be considered high
risk and subject to marketability restrictions;
●
We do not currently
or for the foreseeable future intend to pay dividends on our common
stock;
●
We are subject to
reduced reporting requirements so long as we are considered a
"smaller reporting company" and we cannot be certain if the reduced
disclosure requirements applicable to smaller reporting companies
will make our common stock less attractive to
investors;
●
If we fail to
maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, stockholders could lose
confidence in our financial and other public reporting, which would
harm our business and the trading price of our common
stock;
●
Anti-takeover
provisions may limit the ability of another party to acquire us,
which could cause our stock price to decline;
●
Although the Notes
are referred to as convertible senior Notes, the Notes are
effectively subordinated to any of our future secured debt and
structurally subordinated to any liabilities of our
subsidiaries;
●
The Notes are our
obligations only and a substantial portion of our operations are
conducted through, and a substantial portion of our consolidated
assets are held by, our subsidiaries;
●
Operating our
business requires a significant amount of cash, and we may not have
sufficient cash flow from our business to pay the Notes and any
other debt;
●
Recent and future
regulatory actions and other events may adversely affect the
trading price and liquidity of the Notes;
●
The trading price
for our Class B Common Stock may be volatile and could be subject
to wide fluctuations in per share price which could adversely
impact the trading price of the Notes;
●
We may incur
substantially more debt in the future or take other actions which
would intensify the risks discussed in these risk
factors;
●
We may not have the
ability to raise the funds necessary to settle the Notes in cash on
a conversion, to repurchase the Notes on a fundamental change, or
to repay the Notes at maturity. In addition, the terms of our
future debt may contain limitations on our ability to pay cash on
conversion or repurchase of the Notes;
●
Redemption may
adversely affect the return on the Notes;
●
The conditional
conversion feature of the Notes, if triggered, may adversely affect
our financial condition and operating results;
●
Conversion of the
Notes may dilute the ownership interest of our stockholders or may
otherwise depress the market price of our Class B Common
Stock;
10
●
Future sales of our
Class B Common Stock or equity-linked securities in the public
market could lower the market price for our Class B Common Stock
and adversely impact the trading price of the Notes;
●
Holders of Notes
are not entitled to any rights with respect to our Class B Common
Stock, but they will be subject to all changes made with respect to
them to the extent our conversion obligation includes shares of our
Class B Common Stock;
●
The conditional
conversion feature of the Notes could result in holders receiving
less than the value of our Class B Common Stock into which the
Notes would otherwise be convertible;
●
On conversion of
the Notes, holders may receive less valuable consideration than
expected because the value of our Class B Common Stock may decline
after holders exercise their conversion rights but before we settle
our conversion obligation;
●
The increase in the
conversion rate for Notes converted in connection with a make-whole
fundamental change or a notice of redemption may not adequately
compensate holders for any lost value of their Notes as a result of
such transaction or redemption;
●
The conversion rate
of the Notes may not be adjusted for dilutive events;
●
Some significant
restructuring transactions may not constitute a fundamental change,
in which case we would not be obligated to offer to repurchase the
Notes;
●
Certain provisions
in the indenture governing the Notes may delay or make it more
expensive for a third party to acquire us;
●
Holders of Notes
are not entitled to receive any shares of our Class B Common Stock
otherwise deliverable upon conversion of the Notes to the extent
that such receipt would cause such holders to become, directly or
indirectly, a beneficial owner of shares of our Class B Common
Stock in excess of 4.99% of the total number of the shares of our
Class B Common Stock then issued and outstanding;
●
We cannot assure
you that an active trading market will develop for the
Notes;
●
We rely on
third-party financing providers to finance a portion of our
customers' vehicle purchases;
●
Any adverse rating
of the Notes may cause their trading price to fall;
and
●
Other statements
regarding our future operations, financial condition and prospects,
and business strategies.
Forward-looking
statements may appear throughout this prospectus, including without
limitation, the following sections: “Risk Factors” and “Overview”. Forward-looking statements
generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These
forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties, which
could cause our actual results to differ materially from those
reflected in the forward-looking statements. Factors that could
cause or contribute to such differences include, those discussed in
this Registration Statement on Form S-3, and in particular, the
risks discussed under the caption “Risk Factors” and those discussed in other
documents we file with the SEC. We undertake no obligation to
revise or publicly release the results of any revision to these
forward-looking statements, except as required by law. Given these
risks and uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements.
11
USE OF
PROCEEDS
We
estimate that the net proceeds to us from the Note Offering were
approximately $8.6 million. We will not receive any proceeds from
the resale of the Notes or the sale of the shares of Class B Common
Stock issuable upon conversion of the Notes. All proceeds from the
sale of the Notes and shares of Class B Common Stock will be for
the accounts of the selling securityholders.
12
SELLING
SECURITYHOLDERS
The
Company issued the Notes in a private placement in January 2020 to
the purchasers in transactions exempt from registration pursuant to
Rule 506 of Regulation D of the Securities Act. Selling
securityholders may offer and sell the Notes and the underlying
shares of Class B Common Stock pursuant to this prospectus. The net
proceeds for the Note Offering were approximately $8.6 million,
after deducting offering-related expenses. The information
concerning beneficial ownership has been provided by the selling
securityholders. Information concerning the selling securityholders
may change from time to time, and any changed information will be
set forth if and when required in prospectus supplements or other
appropriate forms permitted to be used by the SEC.
We do
not know when or in what amounts the selling securityholders may
offer securities for sale. The selling securityholders may choose
not to sell any or all of the securities offered by this
prospectus. Because the selling securityholders may offer all or
some of the securities, and because there are currently no
agreements, arrangements or understandings with respect to the sale
of any of the securities, we cannot accurately report the number of
the securities that will be held by the selling securityholders
after completion of the offering. However, for purposes of this
table, we have assumed that, after completion of the offering, all
of the securities covered by this prospectus will be sold by the
selling securityholders.
The
following table contains information as of June 22, 2020 with
respect to the selling securityholders and the principal amount of
Notes and the underlying shares of Class B Common Stock
beneficially owned by each selling securityholder that may be
offered using this prospectus. The number of shares outstanding,
and the percentage of beneficial ownership, post-offering are based
on 3,148,157 shares of Class B Common Stock issued and outstanding
as of the conclusion of the offering, calculated on the basis of
(i) 2,179,407 shares of Class B Common Stock issued and outstanding
as of June 22, 2020 prior to the offering and (ii) assuming the
conversion and sale by the selling securityholders of the 968,750
shares of Class B Common Stock underlying the Notes. For the
purposes of the following table, the number of shares of Class B
Common Stock beneficially owned has been determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934 (the
“Exchange Act”), and such information is not
necessarily indicative of beneficial ownership for any other
purpose. Under Rule 13d-3, beneficial ownership includes any shares
as to which the selling securityholders have sole or shared voting
power or investment power and also any shares which each selling
shareholder, respectively, has the right to acquire within 60 days
of the date of this prospectus through the exercise of any stock
option, warrant or other rights.
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Selling
Securityholder
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Principal Amount
at Maturity of Notes Beneficially Owned Priorto
Offering
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Number of
Shares Owned Prior to Offering (1)
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Maximum
Principal Amount at Maturity of Notes to be Sold Pursuant to this
Prospectus
|
Maximum Number
of Shares to be Sold Pursuant to this Prospectus (2)
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Principal
Amount at Maturity of Notes Owned After
Offering
|
Percentage of
Notes Owned After Offering
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Number of
Shares Owned After Offering
|
Percentage of
Shares Owned After Offering
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Nineteen77 Global
Multi-Strategy Alpha Master Limited (3)
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$20,000,000
|
-
|
$20,000,000
|
500,000
|
-
|
-
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-
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-
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Silverback Asset
Management, LLC (4)
|
$12,500,000
|
-
|
$12,500,000
|
312,500
|
-
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-
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-
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-
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Geode Capital
Management, LLC (5)
|
$6,250,000
|
-
|
$6,250,000
|
156,250
|
-
|
-
|
-
|
-
|
(1)
This
column does not include shares of Class B Common Stock issuable
upon conversion of the Notes.
(2)
Represents
the shares of Class B Common Stock to be issuable upon conversion
of the Notes at the Initial Conversion Rate.
(3)
UBS
O’Connor LLC (“O’Connor”) is the investment
manager of Nineteen77 Global Multi-Strategy Alpha Master Limited
(“GLEA”) and, accordingly, has voting control and
investment discretion over the securities described herein held by
GLEA. Kevin Russell, the Chief Investment Officer of
O’Connor, also has voting control and investment discretion
over the securities described herein held by GLEA. As a result,
each of O’Connor and Mr. Russell may be deemed to have
beneficial ownership (as determined under Section 13(d) of the
Securities Exchange Act of 1934, as amended) of the securities
described herein held by GLEA.
(4)
Elliot
Bossen, the CEO of Silverback Asset Management, LLC, has the power
to vote and dispose of the shares held by Silverback Asset
Management, LLC and may be deemed to be the beneficial owner of
these shares. The address for Silverback Asset Management, LLC, is
1414 Raleigh Road, Suite 250, Chapel Hill, North Carolina
27517.
(5)
Geode
Capital Management LP (“Geode”) serves as investment
manager of Geode Diversified Fund, a segregated account of Geode
Capital Master Fund Ltd. (the “Fund”), and accordingly
has voting control and investment discretion over the securities
described herein held by the Fund. Bobe Simon and Ted Blake,
portfolio managers of the Fund, may be deemed to exercise ultimate
investment power of the securities held by the Fund. Geode and each
of Mr. Simon and Mr. Blake disclaim beneficial ownership of such
securities except to the extent of their pecuniary interest
therein.
As set
forth above, none of the selling securityholders or their
affiliates hold securities of the Company other than the Notes.
Also, none of the selling stockholders has, or within the past
three years has had, any position, office or material relationship
with us or any of our predecessors or affiliates, except as
discussed below, the selling stockholders previously held an
aggregate of $30.0 million in principal amount of the Company's Old
Notes.
On
January 10, 2020, the Company entered into a Note Exchange and
Subscription Agreement, as amended by the Joinder Agreement, with
the investors in the 2019 Note Offering, pursuant to which the
Company agreed to complete (i) a note exchange pursuant to which
$30,000,000 of the Old Notes would be cancelled in exchange for a
new series of 6.75% Convertible Senior Notes due 2025 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. On January 14, 2020, the Company closed the 2020
Note Offering. The proceeds for the 2020 Note Offering, after
deducting for payment of accrued interest on the Old Notes and
offering-related expenses were approximately
$8,272,375.
The New Notes were
issued on January 14, 2020
pursuant to the
New Indenture, by and between the
Company and the
Trustee. The Note Agreement includes customary
representations, warranties and covenants by the Company and
customary closing conditions. The New Notes 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 New
Indenture or if the New Notes are not freely tradeable as required
by the New Indenture. The New Notes will mature on January 1, 2025,
unless earlier converted, redeemed or repurchased pursuant to their
terms.
13
PLAN OF DISTRIBUTION
Selling Securityholders
We are
registering the Notes and the shares of Class B Common Stock to
permit the resale of these Notes and the shares of Class B Common
Stock by the holders of the Notes and the shares of Class B Common
Stock from time to time after the date of this prospectus. We will
not receive any of the proceeds from the sale by the selling
stockholders of the Notes or the shares of Class B Common Stock. We
will bear all fees and expenses incident to our obligation to
register the Notes and the shares of Class B Common
Stock.
The
selling stockholders, or their pledgees, donees, transferees, or
any of their successors in interest selling shares received from a
named selling stockholder as a gift, partnership distribution or
other non-sale-related transfer after the date of this prospectus
(all of whom may be selling stockholders), may sell the securities
from time to time on any stock exchange or automated interdealer
quotation system on which the securities are listed, in the
over-the-counter market, in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing
market prices or at prices otherwise negotiated. The selling
stockholders may sell the securities by one or more of the
following methods, without limitation:
(a)
block trades in
which the broker or dealer so engaged will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
(b)
purchases by a
broker or dealer as principal and resale by the broker or dealer
for its own account pursuant to this prospectus;
(c)
an exchange
distribution in accordance with the rules of any stock exchange on
which the securities are listed;
(d)
ordinary brokerage
transactions and transactions in which the broker solicits
purchases;
(e)
privately
negotiated transactions;
(f)
short
sales;
(g)
through the writing
of options on the securities, whether or not the options are listed
on an option exchange;
(h)
through the
distribution of the securities by any selling securityholder to its
partners, members or stockholders;
(i)
one or more
underwritten offerings on a firm commitment or best efforts basis;
or
(j)
any combination of
any of these methods of sale.
The
selling stockholders may also transfer the securities by gift. We
do not know of any arrangements by the selling stockholders for the
sale of any of the securities. The selling stockholders may engage
brokers and dealers, and any brokers or dealers may arrange for
other brokers or dealers to participate in effecting sales of the
securities. These brokers, dealers or underwriters may act as
principals, or as an agent of a selling stockholder. Broker-dealers
may agree with a selling stockholder to sell a specified number of
the securities at a stipulated price per security. If the
broker-dealer is unable to sell securities acting as agent for a
selling stockholder, it may purchase as principal any unsold
securities at the stipulated price. Broker-dealers who acquire
securities as principals may thereafter resell the securities from
time to time in transactions in any stock exchange or automated
interdealer quotation system on which the securities are then
listed, at prices and on terms then prevailing at the time of sale,
at prices related to the then-current market price or in negotiated
transactions. Broker-dealers may use block transactions and sales
to and through broker-dealers, including transactions of the nature
described above. The selling stockholders may also sell the
securities in accordance with Rule 144 under the Securities Act of
1933, as amended, rather than pursuant to this prospectus,
regardless of whether the securities are covered by this
prospectus.
From
time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the
securities owned by them. The pledgees, secured parties or persons
to whom the securities have been hypothecated will, upon
foreclosure in the event of default, be deemed to be selling
stockholders. The number of a selling stockholder’s
securities offered under this prospectus will decrease as and when
it takes such actions. The plan of distribution for that selling
stockholder’s securities will otherwise remain unchanged. In
addition, a selling stockholder may, from time to time, sell the
securities short, and, in those instances, this prospectus may be
delivered in connection with the short sales and the securities
offered under this prospectus may be used to cover short
sales.
14
To
the extent required under the Securities Act of 1933, the aggregate
amount of selling stockholders’ securities being offered and
the terms of the offering, the names of any agents, brokers,
dealers or underwriters and any applicable commission with respect
to a particular offer will be set forth in an accompanying
prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the securities may receive
compensation in the form of underwriting discounts, concessions,
commissions or fees from a selling stockholder and/or purchasers of
selling stockholders’ securities of securities, for whom they
may act (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
The
selling stockholders and any underwriters, brokers, dealers or
agents that participate in the distribution of the securities may
be deemed to be “underwriters” within the meaning of
the Securities Act of 1933, and any discounts, concessions,
commissions or fees received by them and any profit on the resale
of the securities sold by them may be deemed to be underwriting
discounts and commissions.
15
CERTAIN U. S. FEDERAL INCOME TAX CONSIDERATIONS
This
section is a discussion of certain material United States federal
income tax considerations relating to the ownership, disposition
and conversion of the Notes and the ownership and disposition of
the Class B Common Stock into which the Notes may be converted.
This summary does not provide a complete analysis of all potential
tax considerations. The information provided below is based on
existing U.S. federal income tax authorities, all of which are
subject to change or differing interpretations, possibly with
retroactive effect. There can be no assurances that the Internal
Revenue Service (the “IRS”) will not challenge one or
more of the tax consequences described herein, and we have not
obtained, nor do we intend to obtain, a ruling from the IRS with
respect to the U.S. federal income tax consequences of owning,
disposing of or converting the Notes or of owning or disposing of
the Class B Common Stock into which the Notes may be converted. The
summary generally applies only to beneficial owners of the Notes
that purchased their Notes in the Note Offering for an amount equal
to the issue price of the Notes , which is the first price at which
a substantial amount of the Notes is sold for money to investors
(not including sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement
agents or wholesalers), and that hold the Notes and Class B Common
Stock as “capital assets” within the meaning of Section
1221 of the Code (generally, property held for
investment).
This
discussion does not purport to deal with all aspects of U.S.
federal income taxation that may be relevant to a particular
beneficial owner in light of the beneficial owner’s
circumstances (for example, persons subject to the alternative
minimum tax provisions of the Code, or a U.S. holder (as defined
below) whose “functional currency” is not the U.S.
dollar). Also, it is not intended to be wholly applicable to all
categories of beneficial owners, some of which may be subject to
special rules (such as partnerships and pass-through entities and
investors in such entities, dealers in securities, traders in
securities that elect to use a mark-to-market method of tax
accounting, banks, thrifts, regulated investment companies, real
estate investment trusts, controlled foreign corporations, passive
foreign investment companies, insurance companies, tax-exempt
entities, tax-deferred or other retirement accounts, certain former
citizens or long-term residents of the United States, persons
holding Notes or Class B Common Stock as part of a hedging,
conversion or integrated transaction or a straddle, persons deemed
to sell Notes or Class B Common Stock under the constructive sale
provisions of the Code, or persons required under Section 451(b) of
the Code to conform the timing of income accruals with respect to
the Notes to their financial statements). Finally, the summary does
not address the potential application of the Medicare contribution
tax on net investment income imposed by Section 1411 of the Code,
the rules applicable to qualified small business stock under
Section 1202 of the Code, the effects of the U.S. federal estate
and gift tax laws or any applicable non-U.S., state or local
laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES
OF U.S. FEDERAL ESTATE OR GIFT TAX LAWS, NON-U.S., STATE AND LOCAL
LAWS, AND TAX TREATIES.
As used
herein, the term “U.S. holder” means a beneficial owner
of a Note or the Class B Common Stock into which the Notes may be
converted that, for U.S. federal income tax purposes, is (1) an
individual who is a citizen or resident of the United States, (2) a
corporation, or an entity treated as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of
the United States, any state of the United States, or the District
of Columbia, (3) an estate the income of which is subject to U.S.
federal income taxation regardless of its source, or (4) a trust if
it (x) is subject to the primary supervision of a U.S. court and
the control of one of more U.S. persons or (y) has a valid election
in effect under applicable U.S. Treasury regulations to be treated
as a U.S. person. A “non-U.S. holder” is a beneficial
owner of a Note or the Class B Common Stock into which the Notes
may be converted (other than an entity or arrangement treated as a
partnership for U.S. federal income tax purposes) that is not a
U.S. holder. If an entity or arrangement, domestic or foreign,
treated as a partnership for U.S. federal income tax purposes is a
beneficial owner of a Note or Class B Common Stock acquired upon
conversion of a note, the tax treatment of a partner in the
partnership will depend upon the status of the partner and the
activities of the partnership. A beneficial owner of a Note or
Class B Common Stock acquired upon conversion of a Note that is a
partnership, and partners in such partnership, should consult their
own tax advisors about the U.S. federal income tax consequences of
purchasing, owning and disposing of such Note or Class B Common
Stock.
U.S. Holders
Taxation of Interest
U.S.
Holders will be required to recognize as ordinary income any stated
interest paid or accrued on the Notes, in accordance with their
regular method of tax accounting for U.S. federal income tax
purposes. In general, if the terms of a debt instrument entitle a
holder to receive payments (other than certain fixed periodic
interest payments) that exceed the issue price of the instrument by
at least a statutorily defined de minimis amount, the U.S. holder
will be required to include such excess in income as
“original issue discount” over the term of the
instrument on a constant yield to maturity basis, irrespective of
the U.S. holder’s regular method of tax accounting. We
expect, and the discussion below assumes, that the Notes were not
issued with original issue discount for U.S. federal income tax
purposes.
16
Additional Amounts
We may
be required to make payments of additional amounts on a Note in
certain circumstances as described under “Description of
Notes—Events of Default”, “Description of
Notes—Registration Rights; Additional Interest”, and
Description of Notes—Interest Make-Whole Payment upon Certain
Conversions” above. We intend to take the position that this
possible payment of such additional amounts will not subject the
Notes to the special rules governing certain contingent payment
debt instruments under the applicable Treasury Regulations (which,
if applicable, could materially and adversely affect the timing,
amount and character of income with respect to the Notes ), based
on our determination that there is only a remote possibility that
we would be required to make any additional payments; if such
additional payments were required to be paid, they would be an
incidental amount; or that such additional payments are disregarded
for purposes of these rules. Our determination that the Notes are
not contingent payment debt instruments, while not binding on the
IRS, is binding on U.S. holders unless they disclose their contrary
position in the manner required by applicable Treasury Regulations.
The IRS may take a position contrary to our position. The remainder
of this discussion assumes that the Notes are not treated as
contingent payment debt instruments subject to such rules. If,
contrary to expectations, we pay an additional amount, although it
is not free from doubt, such additional amount should be taxable to
a U.S. holder as ordinary interest income at the time it accrues or
is paid, in accordance with the U.S. holder’s regular method
of tax accounting.
In
addition, upon certain conversions of the Notes we may pay
additional shares or cash in certain circumstances. Due to a lack
of relevant authority regarding the treatment of such payments, in
particular the interest make-whole payment, the applicability of
the Treasury Regulations governing contingent payment debt
instrument is uncertain. While not free from doubt, we intend to
take the position that the Notes should not be treated as
contingent payment debt instruments because of the possibility of
payment of these additional shares or cash. This position is based
in part on the fact that the payments will be made only to holders
who are converting their Notes under certain circumstances and as
result are most appropriately treated as a change in conversion
rate, however denominated. Depending upon the circumstances, such
additional payments, if made in the form of additional shares, may
be taxed as deemed dividends to you as described under
‘‘— Constructive
Distributions.’’
U.S.
holders should consult their own tax advisors regarding the tax
consequences in the event we pay additional amounts and the tax
consequences of the Notes being treated as contingent payment debt
instruments.
Sale, Exchange, Redemption or Other Taxable Disposition of
Notes
A U.S.
holder generally will recognize capital gain or loss if the U.S.
holder disposes of a Note in a sale, exchange, redemption or other
taxable disposition (other than conversion of a Note into either
shares of our Class B Common Stock or a combination of cash and
shares of our Class B Common Stock, the U.S. federal income tax
consequences of which are described under “—Conversion
of Notes” below). The U.S. holder’s gain or loss will
equal the difference between the amount realized by the U.S. holder
(other than amounts attributable to accrued but unpaid interest)
and its tax basis in the note. The amount realized by the U.S.
holder will include the amount of any cash and the fair market
value of any other property received for the note. The U.S.
holder’s tax basis in the Note generally will equal the
amount it paid for the Note plus the amount, if any, included in
income on an adjustment to the conversion rate of the Notes , as
described in ‘‘— Constructive
Distributions,’’ below. The portion of any amount
realized that is attributable to accrued interest will not be taken
into account in computing the U.S. holder’s capital gain or
loss. Instead, that portion will be recognized as ordinary interest
income to the extent that the U.S. holder has not previously
included the accrued special in income. The gain or loss recognized
by the U.S. holder on the disposition of the Note will be long-term
capital gain or loss if it held the Note for more than one year, or
short-term capital gain or loss if it held the Note for one year or
less, at the time of the transaction. Long-term capital gains of
non-corporate taxpayers currently are taxed at reduced rates.
Short-term capital gains are taxed at ordinary income rates. The
deductibility of capital losses is subject to
limitations.
Conversion of Notes
Upon
conversion of a Note solely into cash, a U.S. holder generally will
be subject to the rules described under “—Sale,
Exchange, Redemption or Other Taxable Disposition of Notes”
above, subject to the discussion under “—Constructive
Distributions” below regarding the possibility that certain
adjustments to the conversion rate of a Note may be treated as a
taxable dividend. A U.S. holder generally will not recognize any
income, gain or loss on the conversion of a Note solely into shares
of our Class B Common Stock, except with respect to cash received
in lieu of a fractional share of Class B Common Stock and the fair
market value of any Class B Common Stock attributable to accrued
and unpaid interest (which will be treated as ordinary income),
subject to the discussion below under “—Constructive
Distributions” regarding the possibility that certain
adjustments to the conversion rate of a Note may be treated as a
taxable dividend. The U.S. holder’s aggregate tax basis in
the Class B Common Stock received upon conversion of a Note
(including any fractional share for which cash is paid, but
excluding shares attributable to accrued and unpaid interest) will
equal the U.S. holder’s tax basis in the Note that was
converted. The U.S. holder’s holding period in the Class B
Common Stock received (other than shares attributable to accrued
and unpaid interest) will include the holding period in the
converted note.
17
The tax
consequences of the conversion of a Note into a combination of cash
(including an interest make-whole payment) and shares of our Class
B Common Stock are not entirely clear. If the Note constitutes a
“security” for U.S. federal income tax purposes, a U.S.
holder may be treated as exchanging the Note for our Class B Common
Stock and cash in a recapitalization for U.S. federal income tax
purposes. The term “security” is not defined in the
Code or in the Treasury Regulations, and has not been clearly
defined by judicial decisions. An instrument is a
“security” for these purposes if, based on all the
facts and circumstances, the instrument constitutes a meaningful
investment in the issuer of the instrument. Although there are a
number of factors that may affect the determination of whether a
debt instrument is a “security,” one of the most
important factors is the original term of the instrument, or the
length of time between the issuance of the instrument and its
maturity. In general, instruments with an original term of more
than ten years are likely to be treated as
“securities,” and instruments with an original term of
less than five years may not be treated as
“securities.” In addition, the convertibility of a debt
instrument into stock of the issuer may argue in favor of
“security” treatment because of the possible equity
participation in the issuer. We intend to take the position that
the Notes are “securities” and that the conversion of a
Note into a combination of cash (including an interest make-whole
payment) and shares of our Class B Common Stock is treated as a
recapitalization, in each case, for U.S. federal income tax
purposes, although there can be no assurance in this
regard.
If the
Note is a “security” and the conversion of a Note into
a combination of cash (including an interest make-whole payment)
and shares of our Class B Common Stock is treated as a
recapitalization for U.S. federal income tax purposes, the U.S.
holder would not be permitted to recognize loss, but would be
required to recognize gain, if any. The amount of gain recognized
by a U.S. holder would equal the lesser of (1) the excess (if any)
of (a) the amount of cash received (excluding any cash received in
lieu of a fractional share of our Class B Common Stock and any cash
received attributable to accrued and unpaid interest, but including
an interest make-whole payment) plus the fair market value of our
Class B Common Stock received (treating a fractional share of our
Class B Common Stock as issued and received for this purpose and
excluding any such Class B Common Stock that is attributable to
accrued and unpaid interest) upon conversion over (b) the U.S.
holder’s tax basis in the converted note, and (2) the amount
of cash received upon conversion (other than any cash received in
lieu of a fractional share of our Class B Common Stock and any cash
received attributable to accrued and unpaid interest). Subject to
the discussion under “—Constructive
Distributions” below regarding the possibility that certain
adjustments to the conversion rate of a Note may be treated as a
taxable dividend, the gain recognized by a U.S. holder upon
conversion of a Note will be long-term capital gain if the U.S.
holder held the Note for more than one year, or short-term capital
gain if the U.S. holder held the Note for one year or less, at the
time of the conversion. Long-term capital gains of non-corporate
taxpayers currently are taxed at reduced rates. Short-term capital
gains are taxed at ordinary income rates. The U.S. holder’s
tax basis in the Class B Common Stock received (including any
fractional share for which cash is paid, but excluding shares
attributable to accrued and unpaid interest) generally would equal
the tax basis of the converted note, decreased by the amount of
cash received (other than cash in lieu of a fractional share of
Class B Common Stock and any cash attributable to accrued and
unpaid interest), and increased by the amount of gain (if any)
recognized upon conversion (other than any gain recognized as a
result of cash received in lieu of a fractional share of Class B
Common Stock). The U.S. holder’s holding period in the Class
B Common Stock received (other than shares attributable to accrued
and unpaid interest) would include the holding period in the
converted note.
Alternatively, the
conversion of a Note into a combination of cash (including an
interest make-whole payment) and shares of our Class B Common Stock
may be treated as in part a payment in redemption for cash of a
portion of the Note and in part a conversion of a portion of the
Note into Class B Common Stock. In that case, a U.S. holder’s
aggregate tax basis in the Note would be allocated between the
portion of the Note treated as redeemed and the portion of the Note
treated as converted into Class B Common Stock on a pro rata basis
(based on relative fair market values). The U.S. holder generally
would recognize capital gain or loss with respect to the portion of
the Note treated as redeemed equal to the difference between the
amount of cash received by the U.S. holder (other than amounts
attributable to accrued and unpaid interest) and the U.S.
holder’s tax basis in the portion of the Note treated as
redeemed, subject to the discussion under
“—Constructive Distributions” below regarding the
possibility that certain adjustments to the conversion rate of a
Note may be treated as a taxable dividend. See “—Sale,
Exchange, Redemption or Other Taxable Disposition of Notes”
above. With respect to the portion of the Note treated as
converted, a U.S. holder generally would not recognize any gain or
loss (except with respect to cash received in lieu of a fractional
share of Class B Common Stock and Class B Common Stock received
attributable to accrued and unpaid interest), subject to the
discussion under “—Constructive Distributions”
below regarding the possibility that certain adjustments to the
conversion rate of a Note may be treated as a taxable dividend. The
tax basis allocated to the portion of the Note treated as converted
into Class B Common Stock would be the U.S. holder’s tax
basis in the Class B Common Stock received (including any
fractional share for which cash is paid, but excluding shares
attributable to accrued and unpaid interest). The U.S.
holder’s holding period in the Class B Common Stock received
(other than shares attributable to accrued and unpaid interest)
would include the holding period in the converted
note.
With
respect to cash received in lieu of a fractional share of our Class
B Common Stock, a U.S. holder would be treated as if the fractional
share were issued and received and then immediately redeemed for
cash. Accordingly, the U.S. holder generally would recognize gain
or loss equal to the difference between the cash received and that
portion of the U.S. holder’s tax basis in the Class B Common
Stock attributable to the fractional share on a proportionate basis
in accordance with its relative fair market value. Any such gain or
loss generally would be capital gain or loss and would be long-term
capital gain or loss, if at the time of the conversion, the Notes
had been held for more than one year.
18
Any
cash and the value of any portion of our Class B Common Stock that
is attributable to accrued and unpaid interest on the Notes not yet
included in income by a U.S. holder would be taxed as ordinary
income. The basis in any shares of Class B Common Stock
attributable to accrued and unpaid interest not yet included in
income would equal the fair market value of such shares when
received. The holding period in any shares of Class B Common Stock
attributable to accrued and unpaid interest would begin on the day
after the date of conversion.
A U.S.
holder that converts a Note between a record date for an interest
payment and the next interest payment date and consequently
receives a payment of cash interest, as described in
“Description of Notes—Conversion
Rights—General,” should consult its own tax advisor
concerning the appropriate treatment of such payment.
If we
undergo certain corporate transactions, as described under
“Description of Notes—Conversion
Rights—Conversion Rate Adjustments” above, the
conversion obligation may be adjusted so that holders would be
entitled to convert the Notes into the type of consideration that
they would have been entitled to receive upon such corporate
transaction had the Notes been converted into our Class B Common
Stock immediately prior to such corporate transaction, except that
such holders will not be entitled to receive the additional shares
resulting from the adjustment described under “Description of
Notes—Conversion Rights—Rate Adjustments” unless
such Notes are converted in connection with the relevant make-whole
fundamental change. Depending on the facts and circumstances at the
time of such corporate transaction, such adjustment may result in a
deemed exchange of the outstanding Notes , which may be a taxable
event for U.S. federal income tax purposes. Whether or not such an
adjustment results in a deemed exchange, a conversion of a Note
into such consideration might be a taxable event. U.S. holders are
urged to consult their own tax advisors regarding the U.S. federal
income tax consequences of such an adjustment upon a business
combination or other corporate transaction.
Constructive Distributions
Holders
of convertible debt instruments such as the Notes may, in certain
circumstances, be deemed to have received distributions of stock if
the conversion rate of such instruments is adjusted. In addition,
the failure to provide for such an adjustment may also result in a
deemed distribution to U.S. holders who hold the Notes. However,
adjustments to the conversion rate made pursuant to a bona fide
reasonable adjustment formula that has the effect of preventing the
dilution of the interest of the holders of the debt instruments
will generally not be deemed to result in a constructive
distribution of stock. Certain of the possible adjustments (or
failures to make adjustments) provided in the Notes may not qualify
as being pursuant to a bona fide reasonable adjustment formula. If
such adjustments are made in connection with other shareholders of
our company receiving a distribution of money or other property,
holders will be deemed to have received constructive distributions
in amounts based on the value of their increased interest in our
equity resulting from such adjustments. Generally, such deemed
distributions will be taxable in the same manner as an actual
distribution as described below under ‘‘—
Distributions on the Class B Common Stock,” even though
holders have not received any cash or property as a result of such
adjustments, except that it is unclear whether such deemed
distributions would be eligible for the reduced tax rate applicable
to certain dividends paid to non-corporate U.S. holders or the
dividend-received deduction applicable to certain dividends paid to
corporate U.S. holders. You should consult your tax advisor as to
whether such deemed distributions are eligible for
dividends-received deduction or the preferential rates applicable
to certain dividends. Generally, a U.S. holder’s tax basis in
a Note will be increased to the extent any such constructive
distribution is treated as a dividend. Because a constructive
dividend deemed received by you would not give rise to any cash
from which any applicable withholding could be satisfied, if we pay
backup withholding on your behalf (because you failed to establish
an exemption from backup withholding), we may, at our option, set
off any such payment against payments of cash and Class B Common
Stock payable on the Notes (or, in certain circumstances, from any
payments on the Class B Common Stock).
Distributions on the Class B Common Stock
Distributions, if
any, made on our Class B Common Stock generally will be included in
your income as dividend income to the extent paid out of our
current or accumulated earnings and profits as determined for U.S.
federal income tax purposes. Distributions in excess of our current
and accumulated earnings and profits will be treated as a
non-taxable return of capital to the extent of your adjusted tax
basis in the Class B Common Stock, and thereafter as capital gain
from the sale or exchange of such Class B Common Stock. Dividends
received by a corporate U.S. holder may be eligible for the
dividends-received deduction, and dividends received by
non-corporate U.S. holders generally will be subject to tax at the
current lower applicable capital gains rates, provided in each case
that certain holding period and other applicable requirements are
satisfied.
Sale, Exchange or Other Taxable Disposition of the Class B Common
Stock
Upon
the sale, exchange or other taxable disposition of our Class B
Common Stock, you generally will recognize capital gain or loss
equal to the difference between (i) the amount of cash and the fair
market value of all other property received upon such disposition
and (ii) your adjusted tax basis in such Class B Common Stock. Such
capital gain or loss will be long-term capital gain or loss if your
holding period for our Class B Common Stock exceeds one year at the
time of such disposition. Long-term capital gains recognized by
certain non-corporate U.S. holders, including individuals, will
generally be subject to a reduced rate of U.S. federal income tax.
Your ability to deduct capital losses may be limited.
19
Backup Withholding and Information Reporting
We (or
the applicable paying agent) are required to furnish to the record
holders of the Notes and Class B Common Stock, other than exempt
holders, and to the Internal Revenue Service information with
respect to interest and principal paid on the Notes, constructive
distributions on the Notes treated as dividends, dividends paid on
the Class B Common Stock and the proceeds received upon the sale,
exchange or other disposition of such Notes or Class B Common
Stock. You may be subject to backup withholding with respect to
interest paid on the Notes, constructive distributions on the Notes
treated as dividends, dividends paid on the Class B Common Stock or
proceeds received from a disposition of the Notes or shares of
Class B Common Stock. If you are a U.S. holder and not otherwise
exempt from information reporting and backup withholding, payments
to you will be subject to backup withholding if:
●
you fail to furnish
your taxpayer identification number
(‘‘TIN’’), which, for an individual, is
ordinarily his or her social security number, in the manner
required by the Code and applicable Treasury
Regulations;
●
we (or the
applicable paying agent) are notified by the Internal Revenue
Service that the TIN you furnished is incorrect;
●
in the case of
interest and dividend payments, other than certain amounts
attributable to accrued interest on sales of Notes between interest
payment dates, there has been a ‘‘notified payee
underreporting’’ with respect to interest or dividends
paid to you, as described in the Code; or
●
in the case of
interest and dividend payments, other than certain amounts
attributable to accrued interest on sales of Notes between interest
payment dates, you have failed to certify under penalty of perjury
that you have furnished a correct TIN and that you are not subject
to backup withholding under the Code.
The
amount of any reportable payments, such as interest or dividends,
made to you (unless you are an exempt recipient) and the amount
withheld, if any, with respect to such payments will be reported to
you and to the Internal Revenue Service for each calendar year. You
should consult your tax advisor regarding your qualification for an
exemption from backup withholding and information reporting and the
procedures for obtaining such an exemption, if applicable. Backup
withholding is not an additional tax, and you may use amounts
withheld under the backup withholding rules as a credit against
your U.S. federal income tax liability or may claim a refund as
long as you provide the required information to the Internal
Revenue Service in a timely manner.
Non-U.S. Holders
Payments of Interest on the Notes
Subject
to the discussion of backup withholding below and the discussion of
withholding on foreign accounts below, interest paid to a non-U.S.
holder should not be subject to the U.S. federal income or
withholding tax provided that:
●
you do not own,
actually or constructively, 10% or more of the total combined
voting power of all classes of our stock entitled to vote
(including our Class B Common Stock into which the Note is
convertible);
●
you are not a
‘‘controlled foreign corporation’’ with
respect to which we are, directly or indirectly, a
‘‘related person’’;
●
you are not a bank
receiving interest pursuant to a loan agreement entered into in the
ordinary course of your trade or business; and
●
you provide your
name and address, and certify, under penalties of perjury, that you
are not a U.S. person (which certification may be made on an
Internal Revenue Service Form W-8BEN or Form W-8BEN-E, as
applicable, (or successor forms)) or (b) a securities clearing
organization, bank, or other financial institution that holds
customers’ securities in the ordinary course of its business
holds the Note on your behalf and certifies, under penalties of
perjury, that it has received Internal Revenue Service Form W-8BEN
or Form W-8BEN-E, as applicable, (or successor forms) from you or
from another qualifying financial institution intermediary, and, in
certain circumstances, provides a copy of the Internal Revenue
Service Form W-8BEN or Form W-8BEN-E, as applicable, (or successor
forms).
If you
hold your Notes through certain foreign intermediaries or certain
foreign partnerships, such foreign intermediaries or partnerships
must also satisfy the certification requirements of applicable
Treasury Regulations.
20
If you
cannot satisfy the requirements described above, you will be
subject to the 30% U.S. federal withholding tax with respect to
payments of interest on the Notes , unless you provide us with a
properly executed (1) Internal Revenue Service Form W-8BEN or Form
W-8BEN-E, as applicable, (or successor form) claiming an exemption
from or reduction in withholding under the benefit of an applicable
U.S. income tax treaty or (2) Internal Revenue Service Form W-8ECI
(or successor form) stating that the interest paid on the Note is
not subject to withholding tax because it is effectively connected
with your conduct of a trade or business in the United
States.
If you
are engaged in a trade or business in the United States and
interest on a Note is effectively connected with your conduct of
that trade or business (and if an income tax treaty applies and so
requires, such interest is attributable to a permanent
establishment or fixed base maintained by you in the United
States), you will be subject to U.S. federal income tax on that
interest on a net income basis (although you will be exempt from
the 30% withholding tax, provided the certification requirements
described above are satisfied) in the same manner as if you were a
U.S. person as defined under the Code. In addition, if you are a
non-U.S. corporation for U.S. federal income tax purposes, you may
be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the
taxable year, subject to adjustments, that are effectively
connected with your conduct of a trade or business in the United
States. For this purpose, interest will be included in the earnings
and profits of such non-U.S. corporation.
Certain Additional Payments
We may
be required to make additional payments to holders of the Notes
under the circumstances described under “Description of Notes
— Interest Make-Whole Payment upon Certain
Conversions,” “Description of Notes — Events of
Default,” “Description of Notes — Increase in
Conversion Rate upon Conversion upon a Make-Whole Fundamental
Change,” and “Description of Notes —Registration
Rights; Additional Interest.” For a discussion of the impact
of additional payments on the Notes, see the discussion under
“Consequences to U.S. holders—Additional
Amounts.” It is possible that certain of such payments might
be subject to U.S. federal withholding tax at a rate of 30% or
lower treaty rate, if applicable. We will determine if any
withholding is required if and when any such amounts become
payable. Non-U.S. holders should consult their own tax advisors as
to the tax considerations that relate to the potential additional
interest payments.
Sale, Exchange, Repurchase, Redemption or Other Taxable Disposition
of the Notes or the Class B Common Stock
Subject
to the discussion of backup withholding and withholding on foreign
accounts below, any gain realized upon the sale, exchange,
repurchase, redemption or other taxable disposition of a Note or a
share of Class B Common Stock generally will not be subject to U.S.
federal income tax unless:
●
that gain is
effectively connected with your conduct of a trade or business in
the United States (and if an income tax treaty applies and so
requires, such gain is attributable to a permanent establishment or
fixed base maintained by you in the United States);
●
you are an
individual who is present in the United States for 183 days or more
in the taxable year of that disposition, and certain other
conditions are met; or
●
we are or have been
a ‘‘United States real property holding
corporation’’ (‘‘USRPHC’’) for
U.S. federal income tax purposes at any time during the shorter of
the five-year period ending on the date of disposition or the
period that you held our Notes or Class B Common Stock and our
Class B Common Stock has ceased to be traded on an established
securities market prior to the beginning of the calendar year in
which the sale or other disposition occurs.
If your
gain is effectively connected with your conduct of a U.S. trade or
business (and if an income tax treaty applies and so requires, such
gain is attributable to a permanent establishment or fixed base
maintained by you in the United States), you generally will be
subject to U.S. federal income tax on the net gain derived from the
sale, exchange, repurchase, redemption or other disposition. If you
are a non-U.S. corporation for U.S. federal income tax purposes,
any such effectively connected gain received by you may also, under
certain circumstances, be subject to the branch profits tax at a
30% rate (or such lower rate as may be prescribed under an
applicable U.S. income tax treaty).
If you
are described in the second bullet point above, you will be subject
to a 30% U.S. federal income tax on the gain derived from the sale,
exchange, repurchase, redemption or other disposition, which gain
may be offset by U.S. source capital losses, even though you are
not considered a resident of the United States.
With
respect to the third bullet point above, generally, a corporation
is a U.S. real property holding corporation if the fair market
value of its U.S. real property interests, as defined in the Code
and applicable regulations, equals or exceeds 50% of the aggregate
fair market value of its worldwide real property interests and its
other assets used or held for use in a trade or business. We
believe we are not currently and do not anticipate becoming a
USRPHC for U.S. federal income tax purposes. Any amount paid to you
on a sale, exchange, repurchase or redemption of a Note by us which
represents interest will be taxable as described above under
“— Payments of Interest on the
Notes.”
21
Conversion of the Notes
A
non-U.S. holder’s conversion of a Note into Class B Common
Stock or a combination of Class B Common Stock and cash (including
an interest make-whole payment), will be treated as described under
“U.S. Holders — Conversion of the Notes”. To the
extent a non-U.S. holder realizes gain, such gain will be treated
as described under “— Sale, Exchange, Repurchase,
Redemption or Other Taxable Disposition of the Notes or the Class B
Common Stock” above. To the extent a non-U.S. holder receives
amounts attributable to accrued interest, such amounts will be
taxed in the manner described above under ‘‘—
Payments of Interest on the Notes.”
Dividends and Constructive Distributions
In
general, dividends, if any, received by you with respect to our
Class B Common Stock (and any deemed dividends resulting from
certain adjustments, or failures to make certain adjustments, to
the conversion rate of the Notes (see “—U.S. Holders
— Constructive Distributions” above)) will be subject
to withholding of U.S. federal income tax at a 30% rate, unless
such rate is reduced by an applicable U.S. income tax treaty. In
the case of any deemed dividend, this tax could be withheld from
amounts owed to you, including interest payments, shares of our
Class B Common Stock received upon exchange of the Notes and
payments on shares of our Class B Common Stock. Dividends that are
effectively connected with your conduct of a trade or business in
the United States (and if an income tax treaty applies and so
requires, are attributable to a permanent establishment or fixed
base maintained by you in the United States) are generally subject
to U.S. federal income tax as if you were a U.S. holder and are
exempt from the 30% withholding tax (assuming compliance with
certain certification requirements). Any such effectively connected
dividends received by a non-U.S. holder that is a corporation may
also, under certain circumstances, be subject to the branch profits
tax at a 30% rate or such lower rate as may be prescribed under an
applicable U.S. income tax treaty. In order to claim the benefit of
a U.S. income tax treaty or to claim exemption from withholding
because dividends paid to you on our Class B Common Stock (or any
constructive distributions on the Notes treated as dividends) are
effectively connected with your conduct of a trade or business in
the United States, you must provide a properly executed Internal
Revenue Service Form W-8BEN or Form W-8BEN-E, as applicable, for
treaty benefits or W-8ECI for effectively connected income (or such
successor forms as the Internal Revenue Service designates), prior
to the payment of dividends. These forms must be periodically
updated. You may obtain a refund of any excess amounts withheld by
timely filing an appropriate claim for refund.
Backup Withholding and Information Reporting
If you
are a non-U.S. holder, in general, you will not be subject to
backup withholding with respect to payments that we make to you
provided that we do not have actual knowledge or reason to know
that you are a U.S. person, as defined under the Code, and you have
given us the statement described above under “Non-U.S.
Holders — Payments of Interest on the Notes.” In
addition, you will not be subject to backup withholding or
information reporting with respect to the proceeds of the sale of a
Note or a share of Class B Common Stock within the United States or
conducted through certain U.S.-related financial intermediaries, if
the payer receives the statement described above and does not have
actual knowledge or reason to know that you are a U.S. person, as
defined under the Code, or you otherwise establish an exemption.
However, we (or the applicable paying agent) will be required to
report annually to the Internal Revenue Service and to you the
amount of, and the tax withheld with respect to, any interest and
dividends paid to you, regardless of whether any tax was actually
withheld. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to
the tax authorities of the country in which you reside. You
generally will be entitled to credit any amounts withheld under the
backup withholding rules against your U.S. federal income tax
liability provided that the required information is furnished to
the Internal Revenue Service in a timely manner.
Withholding on Foreign Accounts
The
Foreign Account Tax Compliance Act, or FATCA, and guidance issued
thereunder may impose withholding taxes on certain types of
payments made to ‘‘foreign financial
institutions’’ (as specifically defined) and certain
other non-U.S. entities (including financial intermediaries). Under
FATCA, failure to comply with certification, information reporting
and other specified requirements could result in withholding tax
being imposed on payments of interest, dividends and sales proceeds
of any property of a type which can produce U.S. source interest or
dividends to foreign intermediaries and certain non-U.S. holders.
FATCA imposes a 30% withholding tax on interest, dividends, or
gross proceeds from the sale or other disposition of Class B Common
Stock or Notes paid to a foreign financial institution or to a
non-financial foreign entity, unless (i) the foreign financial
institution undertakes certain diligence and reporting obligations,
(ii) the non- financial foreign entity either certifies it does not
have any “substantial United States owners” as
specifically defined in FATCA or furnishes identifying information
regarding each substantial United States owner or (iii) the foreign
financial institution or the non-financial foreign entity qualifies
for an exemption from the withholding tax. If the payee is a
foreign financial institution, in the absence of any applicable
exemption, it must enter into an agreement with the United States
Treasury requiring, among other things, that it undertake to
identify accounts held by certain United States persons or United
States-owned foreign entities, annually report certain information
about such accounts, and withhold 30% on “withholdable
payments” (as specifically defined) made to certain account
holders. An intergovernmental agreement between the United States
and the foreign entity’s jurisdiction may modify these
requirements. Prospective investors should consult their tax
advisors regarding the implications of FATCA with respect to an
investment in the Notes.
22
Dividend Equivalents
Section
871(m) of the Code requires withholding (of up to 30%, depending on
whether a treaty applies) on certain financial instruments to the
extent that the payments or deemed payments on the financial
instruments are treated as being contingent upon or determined by
reference to U.S.-source dividends. Under Treasury Regulations
promulgated under Section 871(m), Section 871(m) will apply to
financial instruments issued in 2019 only if they are
“delta-one.” A “delta-one” instrument is
one in which, as of the pricing date, the ratio of the change in
the fair market value of the instrument to a small change in the
fair market value of the property referenced by the instrument is
equal to 1.00. We have determined that the Notes are not delta-one
instruments. Accordingly, non-U.S. holders of the Notes should not
be subject to tax under Section 871(m). However, it is possible
that Section 871(m) withholding tax could apply to the Notes under
these rules in the future if, pursuant to a deemed taxable
exchange, the Notes are treated as newly issued after January 1,
2021. If withholding is required, we (or the applicable withholding
agent) would be entitled to withhold such taxes without being
required to pay any additional amounts with respect to amounts so
withheld. Non-U.S. holders should consult with their tax advisors
regarding the application of Section 871(m) and the regulations
thereunder in respect of their acquisition and ownership of the
Notes .
23
DESCRIPTION OF THE NOTES
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 “Notes”)
and (ii) the issuance of additional 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 Notes were
issued on January 14, 2020 pursuant to an Indenture, by and between
the Company and Wilmington Trust, National Association, as trustee
(the “trustee”). The terms of the Notes include those
expressly set forth in the Indenture and pursuant to
“—Registration Rights; Additional Interest,” or
qualify the Indenture, those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the
“Trust Indenture Act”). The Notes and any shares of
Class B Common Stock issuable upon conversion of the Notes are
entitled to the benefits of the registration rights
agreement.
The following
description is a summary of the material provisions of the Notes,
the Indenture and the registration rights agreement and does not
purport to be complete. This summary is subject to and is qualified
by reference to all of the provisions of the Notes, the Indenture
and the registration rights agreement, including the definitions of
certain terms used in these documents. We urge holders to read
these documents because they, and not this description, define
their rights as a holder of the Notes.
General
The
Notes are:
●
our general
unsecured, senior obligations;
●
initially be
limited to an aggregate principal amount of
$38,750,000;
●
bear cash interest
from, and including, January 14, 2020 at an annual rate of 6.75%
payable semiannually on January 1 and July 1 of each year,
beginning on July 1, 2020;
●
effectively
subordinated to all of our existing and future secured indebtedness
to the extent of the value of the collateral securing such
indebtedness;
●
equal in right of
payment to all of our other senior unsecured
indebtedness;
●
subject to
redemption at our option, in whole or in part, on or after January
14, 2023 if the last reported sale price of our 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
we provide notice of redemption, during any 30 consecutive trading
day period ending on, and including, the trading day immediately
preceding the date on which we provide 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;
●
subject to
repurchase by us at the option of the holders following a
fundamental change (as defined below under
“—Fundamental Change Permits Holders to Require Us to
Repurchase Notes”), at a fundamental change repurchase price
equal to 100% of the principal amount of the Notes to be
repurchased, plus accrued and unpaid interest to, but excluding,
the relevant fundamental change repurchase date;
●
to mature on
January 1, 2025, unless earlier converted, redeemed or
repurchased;
●
issued in minimum
denominations of $1,000 and integral multiples of $1,000 in excess
thereof; and
●
represented by one
or more registered Notes in global form, but in certain limited
circumstances may be represented by Notes in definitive form. See
“—Book-Entry, Settlement and
Clearance.”
24
Subject
to satisfaction of certain conditions and during the periods
described below, the Notes may be converted at an initial
conversion rate of 25 shares of Class B Common Stock per $1,000
principal amount of Notes (equivalent to an initial conversion
price of approximately $40.00 per share of Class B Common Stock).
The conversion rate is subject to adjustment if certain events
occur.
In
addition, on or after the date that is one year after the last date
of original issuance of the Notes offered hereby or after the
occurrence of any 30 trading day period during which the last
reported sale price of our 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), we will in certain circumstances
make an interest make-whole payment (an “interest make-whole
payment”) to a converting holder payable in cash or shares of
Class B Common Stock, at our election, as described under
“—Conversion Rights—Interest Make-Whole Payment
upon Certain Conversions.”
We will
settle conversions of Notes, subject to the blocker provision (as
defined below in “—Ownership Limitation”), by
paying or delivering, as the case may be, cash, shares of our Class
B Common Stock or a combination of cash and shares of our Class B
Common Stock, at our election, as described under
“—Conversion Rights—Settlement upon
Conversion,” and an interest-make whole payment, if
applicable. Holders of Notes will not receive any separate cash
payment for interest, if any, accrued and unpaid to the conversion
date except under the limited circumstances described
below.
The Indenture
does not limit the amount of unsecured debt that may be issued by
us or our subsidiaries under the Indenture or otherwise, though we
and our subsidiaries will be limited in the amount of secured debt
we or they can incur to the extent described under
“Description of Notes—Limitation on Liens Securing
Indebtedness.” The Indenture does not contain any financial
covenants and does not restrict us from paying dividends or issuing
or repurchasing our other securities. Other than restrictions
described under “—Limitation on Liens Securing
Indebtedness,” “—Fundamental Change Permits
Holders to Require Us to Repurchase Notes” and
“—Consolidation, Merger or Sale of Assets” below
and except for the provisions set forth under
“—Conversion Rights—Increase in Conversion Rate
upon Conversion upon a Make-Whole Fundamental Change or Notice of
Redemption,” the Indenture does not contain any covenants or
other provisions designed to afford holders of the Notes protection
in the event of a highly leveraged transaction, recapitalization or
similar restructuring involving us that could adversely affect such
holders.
We may not
reopen the Indenture to issue additional Notes without the consent
of the holders.
We intend to
make all payments due on the Notes when due, and believe that we
will have the financial ability to do so.
We do not
intend to list the Notes on any securities exchange or any
automated dealer quotation system.
Except to the
extent the context otherwise requires, we use the term
“Notes” in this prospectus to refer to each $1,000
principal amount of Notes. References in this prospectus to a
“holder” or “holders” of Notes that are
held through The Depository Trust Company (“DTC”) are
references to owners of beneficial interests in such Notes, unless
the context otherwise requires. However, we and the trustee will
treat the person in whose name the Notes are registered (Cede &
Co., in the case of Notes held through DTC) as the owner of such
Notes for all purposes. References herein to the “close of
business” refer to 5:00 p.m., New York City time, and to the
“open of business” refer to 9:00 a.m., New York City
time.
Ownership Limitation
Notwithstanding
the foregoing and anything to the contrary in this description of
Notes or in the Indenture, no holder (other than the depositary
with respect to the Notes) or beneficial owner of a Note shall have
the right to receive shares of our Class B Common Stock upon
conversion, and any purported delivery of shares of Class B Common
Stock to such holder or beneficial owner shall be null and void, to
the extent that, following receipt of such shares, such holder or
beneficial owner (together with such holder’s affiliates and
any other persons whose beneficial ownership of common stock would
be aggregated with the holder’s for purposes of Section 13(d)
of the Exchange Act and the rules promulgated thereunder, including
any “group” of which such holder is a member) would be
the beneficial owner (within the meaning of Section 13(d) under the
Exchange Act and the rules promulgated thereunder) of more than
4.99% of the outstanding shares of our Class B Common Stock;
provided that if such holder or beneficial owner is so prevented
from receiving any shares to which it would otherwise be entitled,
our obligation to deliver such shares shall not be extinguished,
and we shall deliver such shares (or any designated portion
thereof) within two business days following written notice from the
converting holder or beneficial owner that receipt of such shares
(or any designated portion thereof) would not be prohibited by this
sentence (this sentence being referred to as the “blocker
provision”); provided, however, that such blocker provision
shall not apply in connection with and subject to completion of a
third party tender offer for the Class B Common Stock issuable
thereupon. The provisions of this paragraph may be construed and
implemented by us in a manner that is otherwise than in strict
conformity with the terms of this paragraph in order to correct
this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of Notes. The trustee (including in its capacities as
security registrar, paying agent and conversion agent) shall have
no responsibility for construing or implementing the provisions of
this paragraph or for determining whether any holder or beneficial
owner of a Note would upon conversion be prevented from receiving
any shares as a result of this paragraph.
25
Purchase and Cancellation
We
will cause all Notes surrendered for payment, repurchase (including
as described immediately below and in “—Fundamental
Change Permits Holders to Require Us to Repurchase Notes”),
redemption, registration of transfer or exchange or conversion, if
surrendered to any person other than the trustee (including any of
our agents, subsidiaries or affiliates), to be delivered to the
trustee for cancellation in accordance with its customary
procedures. All Notes delivered to the trustee shall be cancelled
promptly by the trustee. Except for any Notes surrendered for
registration of transfer or exchange, no Notes shall be
authenticated in exchange for any Notes cancelled as provided in
the Indenture.
We
may, to the extent permitted by law, and directly or indirectly
(regardless of whether such Notes are surrendered to us),
repurchase Notes in the open market or otherwise, whether by us or
our subsidiaries or through a private or public tender or exchange
offer or through counterparties to private agreements, including by
cash-settled swaps or other derivatives. We will cause any Notes so
repurchased (other than Notes repurchased pursuant to cash-settled
swaps or other derivatives) to be surrendered to the trustee for
cancellation, and they will no longer be considered
“outstanding” under the Indenture upon their
repurchase.
Payments on the Notes; Paying Agent and Registrar; Transfer and
Exchange
Through
our paying agent, we will pay the principal of, and interest on,
Notes in global form registered in the name of or held by DTC or
its nominee by wire transfer in immediately available funds to DTC
or its nominee, as the case may be, as the registered holder of
such global Note.
Through
our paying agent, we will pay the principal of any certificated
Notes at the office or agency designated by us for that purpose. We
have initially designated the trustee as our paying agent and
registrar and its office in the contiguous United States as a place
where Notes may be presented for payment or for registration of
transfer. We may, however, change the paying agent or registrar
without prior notice to the holders of the Notes, and we may act as
paying agent or registrar. Interest on certificated Notes is
payable (i) to holders having an aggregate principal amount of
$5,000,000 or less, by check mailed to the holders of these Notes
and (ii) to holders having an aggregate principal amount of more
than $5,000,000, either by check mailed to each holder or, upon
application by such a holder to the trustee not later than the
relevant regular record date, by wire transfer in immediately
available funds to that holder’s account within the United
States, which application shall remain in effect until the holder
notifies, in writing, the registrar to the contrary.
A
holder of Notes may transfer or exchange Notes at the office of the
registrar in accordance with the Indenture. The registrar and the
trustee may require a holder, among other things, to offer
indemnity or security satisfactory to it and to furnish appropriate
endorsements and transfer documents. No service charge will be
imposed by us, the trustee or the registrar for any registration of
transfer or exchange of Notes, but we may require a holder to pay a
sum sufficient to cover any transfer tax or other similar
governmental charge required by law or permitted by the Indenture.
Holders of Notes may not sell or otherwise transfer Notes or any
Class B Common Stock issuable upon conversion of Notes except in
compliance with the provisions set forth below under
“Transfer Restrictions.” We are not required to
transfer or exchange any Note selected for redemption or
surrendered for conversion or required repurchase.
The
registered holder of a Note will be treated as its owner for all
purposes.
Interest
The
Notes bear cash interest at a rate of 6.75% per year until
maturity. Interest on the Notes accrues from, and including,
January 14, 2020 or from, and including, the most recent date on
which interest has been paid or duly provided for. Interest is
payable semiannually in arrears on January 1 and July 1 of each
year, beginning on July 1, 2020.
Interest will be
paid to the person in whose name a Note is registered at the close
of business on December 15 or June 15 (whether or not a business
day), as the case may be, immediately preceding the relevant
interest payment date (each, a “regular record date”).
Interest on the Notes is computed on the basis of a 360-day year
composed of twelve 30-day months and, for partial months, on the
basis of the number of days actually elapsed in a 30-day
month.
If any
interest payment date, the maturity date, any redemption date or
any earlier required repurchase date upon a fundamental change of a
Note falls on a day that is not a business day, the required
payment will be made on the next succeeding business day and no
interest on such payment will accrue in respect of the delay. The
term “business day” means, with respect to any note,
any day other than a Saturday, a Sunday or a day on which the
Federal Reserve Bank of New York is authorized or required by law
or executive order to close or be closed.
26
Unless
the context otherwise requires, all references to interest in this
prospectus include additional interest, if any, payable as
described under “—Registration Rights; Additional
Interest” and at our election as the sole remedy relating to
the failure to comply with our reporting obligations as described
under “—Events of Default.”
Ranking
The
Notes are our general unsecured obligations that rank senior in
right of payment to all of our indebtedness that is expressly
subordinated in right of payment to the Notes. The Notes rank equal
in right of payment with all of our liabilities that are not so
subordinated. The Notes effectively rank junior to any of our
secured indebtedness to the extent of the value of the assets
securing such indebtedness. In the event of our bankruptcy,
liquidation, reorganization or other winding up, our assets that
secure secured debt will be available to pay obligations on the
Notes only after all indebtedness under such secured debt has been
repaid in full from such assets. The Notes rank structurally junior
to all indebtedness and other liabilities of our subsidiaries
(including trade payables but excluding intercompany obligations
and liabilities of a type not required to be reflected on a balance
sheet of such subsidiaries in accordance with GAAP). A significant
portion of our operations are conducted through and a significant
portion of our assets are held by our subsidiaries. The Notes are
not be guaranteed by any of our current or future subsidiaries. Our
subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay amounts due with
respect to the Notes or to make any funds available therefor,
whether by dividends, loans or other payments. Our right to receive
any assets of any of our subsidiaries upon such subsidiary’s
bankruptcy, liquidation or reorganization, and, therefore, the
right of the holders of Notes to participate in those assets, will
be subject to prior claims of creditors of the subsidiary,
including trade creditors, and such subsidiary may not have
sufficient assets remaining to make any payments to us as a
shareholder or otherwise. We advise you that there may not be
sufficient assets remaining to pay amounts due on any or all the
Notes then outstanding.
As of
December 31, 2019, excluding operating lease liabilities and the
derivative liability, our total consolidated net indebtedness was
approximately $82,585,522, of which an aggregate of $60,494,304 was
secured indebtedness, and approximately $59,160,970 of such secured
indebtedness is directly attributable to the Company's vehicles in
inventory or held for sale, and the security of those lenders
includes all of the vehicles financed by such lenders as well as
all of the assets of our subsidiaries Wholesale Inc. and AutoSport
USA, Inc. As of December 31, 2019, approximately $80,092,280 of our
total consolidated indebtedness was senior
indebtedness.
The
ability of our subsidiaries to pay dividends and make other
payments to us may be restricted by, among other things, our future
debt instruments, applicable corporate and other laws and
regulations as well as agreements to which our subsidiaries may
become a party. We may not be able to pay the cash portions of any
settlement amount upon conversion of the Notes, or to pay cash for
the fundamental change repurchase price upon a fundamental change
if a holder requires us to repurchase Notes as described below. See
“Risk Factors—Risks Related to the Notes—We may
not have the ability to raise the funds necessary to settle the
Notes in cash on a conversion, to repurchase the Notes on a
fundamental change, or to repay the Notes at maturity. In addition,
the terms of our future debt may contain limitations on our ability
to pay cash on conversion or repurchase of the
Notes.”
Limitation on Liens Securing Indebtedness
We will
not, nor will we permit any of our subsidiaries to create, assume
or suffer to exist any Lien to secure Indebtedness (as defined
below) on any asset now owned or hereafter acquired by us or any of
our subsidiaries except for Permitted Liens; provided, however,
that any Lien on such asset shall be permitted notwithstanding that
it is not a Permitted Lien if all payments due under the Indenture
and the Notes are secured on an equal and ratable (or senior) basis
with the obligations so secured by such Lien until such time as
such obligations are no longer secured by a Lien.
The foregoing
covenant will immediately terminate, and any then existing default
thereof will immediately be deemed cured, upon the earliest to
occur of: (i) a fundamental change described in clause (1) or (2)
of the definition thereof, (ii) such time as less than $3.0 million
aggregate principal amount of Notes are outstanding and (iii) both
of (x) the conclusion of any 30 trading day period during which the
last reported sale price of our 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) and (y) the initial
effectiveness of the shelf registration statement described under
“—Registration Rights; Additional
Interest”.
Any Lien
created for the benefit of the holders pursuant to the foregoing
covenant shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the
earlier of (x) the termination of such Indebtedness and (y) the
termination of the foregoing covenant.
27
As used in this section, the following terms have the following
meanings:
“Capital
Lease Obligation” means, at the time any determination is to
be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance
sheet prepared in accordance with U.S. GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or
any other amount due under such lease prior to the first date upon
which such lease may be prepaid by the lessee without payment of a
penalty.
“Consumer
Warehouse Facilities” means a revolving credit or repurchase
facility intended to finance the loans made by us or any of our
subsidiaries to consumers acquiring vehicles of any nature from any
of our subsidiaries which facility may include Liens on the
accounts, documents and other property of the entity making or
acquiring or otherwise involved with such consumer
loans.
“Credit
Facilities” means one or more (i) debt facilities or
commercial paper facilities, providing for revolving credit loans,
term loans, receivables financing (including through the sale of
receivables to lenders or to special purpose entities formed to
borrow from lenders against such receivables), letters of credit,
(ii) debt securities, Indentures or other forms of debt financing
(including convertible or exchangeable debt instruments or bank
guarantees or bankers’ acceptances) or (iii) instruments or
agreements evidencing any other Indebtedness, in each case, as
amended, supplemented, modified, extended, restructured, renewed,
refinanced, restated, replaced or refunded in whole or in part from
time to time (including increasing the amount of available
borrowings thereunder or adding our subsidiaries as additional
borrowers or guarantors thereunder).
“Guarantee”
means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business,
direct or indirect, in any manner including, without limitation, by
way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of
any Indebtedness (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take or pay or to maintain
financial statement conditions or otherwise).
“Hedging
Obligations” means, with respect to any specified person, the
obligations of such person under:
(1)
interest rate swap
agreements (whether from fixed to floating or from floating to
fixed), interest rate cap agreements and interest rate collar
agreements;
(2)
other agreements or
arrangements designed to manage interest rates or interest rate
risk; and
(3)
other agreements or
arrangements designed to protect such person against fluctuations
in currency exchange rates or commodity prices.
“Indebtedness”
means, with respect to any specified person, any indebtedness of
such person (excluding accrued expenses and trade payables),
whether or not contingent:
(1)
in respect of
borrowed money;
(2)
evidenced by bonds,
Notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof);
(3)
in respect of
banker’s acceptances;
(4)
representing
Capital Lease Obligations;
(5)
representing the
balance deferred and unpaid of the purchase price of any property
or services (other than trade payables not overdue by more than 60
days incurred in the ordinary course of such person’s
business); or
(6)
representing any
Hedging Obligations,
if and
to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified person prepared in accordance with
U.S. GAAP. In addition, the term “Indebtedness”
includes all Indebtedness of others secured by a Lien on any asset
of the specified person (whether or not such Indebtedness is
assumed by the specified person) and, to the extent not otherwise
included, the Guarantee by the specified person of any Indebtedness
of any other person, to the extent, as applicable, of the amount of
Indebtedness covered by such Guarantee, or the lesser of the fair
market value (as determined in good faith by us) of the asset or
assets subject to such Lien or the principal (or accreted) amount
of the Indebtedness secured by such Lien; provided that
Indebtedness shall not include post-closing payment adjustments to
which the seller may become entitled to the extent such payment is
determined by a final closing balance sheet or such payment depends
on the performance of such business after the closing. Indebtedness
shall be calculated without giving effect to the effects of
Accounting Standards Codification 815 — Derivatives and
Hedging and related interpretations to the extent such effects
would otherwise increase or decrease an amount of Indebtedness for
any purpose under the Indenture governing the Notes as a result of
accounting for any embedded derivatives created by the terms of
such Indebtedness.
28
The
amount of any Indebtedness outstanding as of any date will
be:
(1)
the accreted value
of the Indebtedness, in the case of any Indebtedness issued with
original issue discount;
(2)
the principal
amount of the Indebtedness, in the case of any other
Indebtedness;
(3)
in the case of the
Guarantee by the specified person of any Indebtedness of any other
person where the amount of the Guarantee is less than the principal
amount of such Indebtedness, such lesser amount; and
(4)
in respect of
Indebtedness of another person secured by a Lien on the assets of
the specified person, the lesser of:
(a)
the fair market
value of such assets at the date of determination, as determined in
good faith by us; and
(b)
the amount of the
Indebtedness of the other person so secured.
“Inventory
Financing Agreement” means that certain Inventory Financing
and Security Agreement, by and among Inventory Financing Lenders
and RMBL Missouri, dated February 16, 2018, as it may be amended,
and any similar agreements entered into with any Inventory
Financing Lender.
“Inventory
Financing Lenders” means Ally Bank and Ally Financial Inc.,
collectively and each of their assigns or successors in interest,
and any additional or replacement lenders providing inventory
financing to us or any of our subsidiaries, provided that such
lender shall be domiciled in the United States and shall be in the
business of extending credit of such type in the ordinary course of
business.
“Liens”
means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in the nature
of a security interest in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement
or any lease in the nature thereof. For the avoidance of doubt, a
license shall not constitute a “Lien” for purposes of
this section.
“Permitted
Liens” means:
(1)
Liens on any or all
of our and our subsidiaries’ assets securing one or more
Credit Facilities (and borrowings thereunder) other than Inventory
Financing Agreements and Credit Facilities for Consumer Warehouse
Facilities; provided that the aggregate secured borrowings under
such Credit Facilities shall not at any one time exceed $5.0
million in the aggregate;
(2)
Liens on property
(including equity interests) existing at the time of acquisition of
the property and/or person by us or any of our subsidiaries (plus
improvements and accessions to such property or proceeds or
distributions thereof); provided that such Liens were in existence
prior to such acquisition and not incurred in contemplation of such
acquisition;
(3)
Liens arising under
the Indenture governing the Notes, including those that are for the
benefit of the trustee;
(4)
Liens securing
Hedging Obligations entered into by us and/or any of our
subsidiaries in the ordinary course of business and entered into
for bona fide hedging purposes (and not for speculative purposes)
as determined in good faith by us;
(5)
Liens securing
Indebtedness pursuant to a Qualified Inventory
Financing;
(6)
Liens securing
Indebtedness constituting Consumer Warehouse
Facilities;
(7)
Liens securing
Capital Lease Obligations in an amount not in excess of $1,000,000;
and
(8)
Liens securing
letters of credit (or reimbursement agreements in respect thereof)
in an amount not to exceed $500,000 at any time outstanding, and
Liens securing reimbursement obligations in connection with letters
of credit serving as a lease deposit.
“Qualified
Inventory Financing” means Indebtedness owing to Inventory
Financing Lenders pursuant to an Inventory Financing Agreement,
provided that, the aggregate outstanding amount of the aggregate
amount of such Indebtedness at any time outstanding shall not
exceed the aggregate book value of all inventory of us and our
subsidiaries, on a consolidated basis.
“U.S.
GAAP” means generally accepted accounting principles in the
United States as in effect on the date of the Indenture, without
giving effect to ASU 2016-02, Leases (Topic 842).
29
Optional Redemption on or after January 14, 2023
No
“sinking fund” is provided for the Notes, which means
that we are not required to redeem or retire the Notes
periodically. Prior to January 14, 2023, the Notes are not
redeemable. On or after January 14, 2023, we may redeem for cash
all or any portion of the Notes, at our option, if the last
reported sale price (as defined under “—Conversion
Rights—Settlement upon Conversion”) of our 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
we provide notice of redemption, during any 30 consecutive trading
day period ending on, and including, the trading day immediately
preceding the date on which we provide notice of redemption. In the
case of any optional redemption, we will provide not less than 50
nor more than 65 scheduled trading days’ notice before the
redemption date to the trustee, the paying agent and each holder of
Notes, and the redemption price will be equal to 100% of the
principal amount of the Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date (unless the
redemption date falls after a regular record date but on or prior
to the immediately succeeding interest payment date, in which case
we will pay the full amount of accrued and unpaid interest to the
holder of record as of the close of business on such regular record
date, and the redemption price will be equal to 100% of the
principal amount of the Notes to be redeemed). The redemption date
must be a business day, and we may not specify a redemption date
that falls on or after July 1, 2024.
If we
decide to redeem fewer than all of the outstanding Notes, the Notes
to be redeemed will be selected according to DTC’s applicable
procedures, in the case of Notes represented by a global note, or,
in the case of Notes in certificated form, the trustee shall
select, pro rata or by lot or in such other manner as it shall deem
appropriate and fair, Notes to be redeemed in whole or in
part.
If the
trustee selects a portion of a holder’s Note for partial
redemption and such holder converts a portion of the same note, the
converted portion will be deemed to be from the portion selected
for redemption.
In the
event of any redemption in part, we will not be required to
register the transfer of or exchange for other Notes any Note so
selected for redemption, in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
No
Notes may be redeemed if the principal amount of the Notes has been
accelerated, and such acceleration has not been rescinded, on or
prior to the redemption date (except in the case of an acceleration
resulting from a default by us in the payment of the redemption
price with respect to such Notes).
Conversion Rights
General
Prior
to the close of business on the business day immediately preceding
July 1, 2024, the Notes are convertible only upon satisfaction of
one or more of the conditions described under the headings
“—Conversion upon Satisfaction of Sale Price
Condition,” “—Conversion upon Satisfaction of
Trading Price Condition,” “—Conversion upon
Notice of Redemption” and “—Conversion upon
Specified Corporate Events.” On or after July 1, 2024 until
the close of business on the business day immediately preceding the
maturity date, holders may convert all or any portion of their
Notes at the conversion rate at any time irrespective of the
foregoing conditions.
The
conversion rate for the Notes is initially 25 shares of Class B
Common Stock per $1,000 principal amount of Notes (equivalent to an
initial conversion price of approximately $40.00 per share of Class
B Common Stock). Upon conversion of a note, subject to the blocker
provision to the extent applicable, we will satisfy our conversion
obligation by paying or delivering, as the case may be, cash,
shares of our Class B Common Stock or a combination of cash and
shares of our Class B Common Stock, at our election, all as set
forth below under “—Settlement upon Conversion.”
If we satisfy our conversion obligation solely in cash or through
payment and delivery, as the case may be, of a combination of cash
and shares of our Class B Common Stock, the amount of cash and
shares of Class B Common Stock, if any, due upon conversion will be
based on a daily conversion value (as defined below) calculated on
a proportionate basis for each trading day in a 40 trading day
observation period (as defined below under “—Settlement
upon Conversion”) and an interest make-whole payment, if
applicable. The trustee initially acts as the conversion
agent.
A
holder may convert fewer than all of such holder’s Notes so
long as the Notes converted are an integral multiple of $1,000
principal amount.
If we
call Notes for redemption, a holder of Notes may convert all or any
portion of its Notes only until the close of business on the
scheduled trading day immediately preceding the redemption date,
unless we fail to pay the redemption price (in which case a holder
of Notes may convert such Notes until the close of business on the
business day immediately preceding the date on which the redemption
price has been paid or duly provided for).
30
Upon
conversion, holders will not receive any separate cash payment for
accrued and unpaid interest, if any, except as described below and
under “Interest Make-Whole Payment upon Certain
Conversions.” We will not issue fractional shares of our
Class B Common Stock upon conversion of Notes. Instead, we will pay
cash in lieu of delivering any fractional share as described under
“—Settlement upon Conversion” and under
“Interest Make-Whole Payment upon Certain Conversions.”
Our payment and delivery, as the case may be, to holders of the
cash, shares of our Class B Common Stock or a combination thereof,
as the case may be, into which a Note is convertible will be deemed
to satisfy in full our obligation to pay:
●
the principal
amount of the note; and
●
accrued and unpaid
interest, if any, to, but not including, the relevant conversion
date.
As a
result, accrued and unpaid interest, if any, to, but not including,
the relevant conversion date will be deemed to be paid in full
rather than cancelled, extinguished or forfeited. Upon a conversion
of Notes into a combination of cash and shares of our Class B
Common Stock, accrued and unpaid interest will be deemed to be paid
first out of the cash paid upon such conversion.
Notwithstanding the
immediately preceding paragraph, if Notes are converted after the
close of business on a regular record date for the payment of
interest and prior to the open of business on the corresponding
interest payment date, holders of such Notes at the close of
business on such regular record date will receive the full amount
of interest payable on such Notes on the corresponding interest
payment date notwithstanding the conversion. Notes surrendered for
conversion during the period from the close of business on any
regular record date to the open of business on the immediately
following interest payment date must be accompanied by funds equal
to the amount of interest payable on the Notes so converted;
provided that no such
payment need be made:
●
for conversions
following the regular record date immediately preceding the
maturity date;
●
if we have
specified a redemption date that is after a regular record date and
on or prior to the second business day immediately following the
corresponding interest payment date (or, if such interest payment
date is not a business day, the third business day immediately
following such interest payment);
●
if we have
specified a fundamental change repurchase date that is after a
regular record date and on or prior to the business day immediately
following the corresponding interest payment date (or, if such
interest payment date is not a business day, the second business
day immediately following such interest payment);
●
for Notes in
respect of which an interest make-whole payment is payable upon
conversion; or
●
to the extent of
any overdue interest, if any overdue interest exists at the time of
conversion with respect to such note.
Therefore,
for the avoidance of doubt, all record holders after the close of
business on the regular record date immediately preceding the
maturity date, a redemption date or fundamental change repurchase
date described in the second and third bullets in the preceding
paragraph and any record holders entitled to receive an interest
make-whole payment upon conversion described in the fourth bullet
in the preceding paragraph will receive the full interest payment
due on the maturity date or other applicable interest payment date
regardless of whether their Notes have been converted following
such regular record date.
If a
holder converts Notes, we will pay any documentary, stamp or
similar issue or transfer tax due on any issuance of any shares of
our Class B Common Stock upon the conversion, unless the tax is due
because the holder requests such shares to be issued in a name
other than the holder’s name, in which case the holder will
pay that tax.
Neither
the trustee nor the conversion agent (if other than the trustee)
will have any duty to determine or verify our determination of
whether any of the conditions to conversion have been
satisfied.
Holders
may surrender their Notes to the conversion agent for conversion
only under the following circumstances:
31
Conversion upon Satisfaction of Sale Price Condition
Prior
to the close of business on the business day immediately preceding
July 1, 2024, a holder may surrender all or any portion of its
Notes for conversion at any time during any calendar quarter
commencing after the calendar quarter ending on March 31, 2020 (and
only during such calendar quarter), if the last reported sale price
of the Class B Common Stock for at least 20 trading days (whether
or not consecutive) during the period of 30 consecutive trading
days ending on, and including, the last trading day of the
immediately preceding calendar quarter is greater than or equal to
130% of the conversion price on each applicable trading day. If the
sale price condition has been met, we will so notify in writing the
holders, the trustee and the conversion agent (if other than the
trustee).
The
“last reported sale price” of our Class B Common Stock
on any date means the closing sale price per share (or if no
closing sale price is reported, the average of the bid and ask
prices or, if more than one in either case, the average of the
average bid and the average ask prices) on that date as reported in
composite transactions for the principal U.S. national or regional
securities exchange on which our Class B Common Stock is traded. If
our Class B Common Stock is not listed for trading on a U.S.
national or regional securities exchange on the relevant date, the
“last reported sale price” will be the last quoted bid
price for our Class B Common Stock in the over-the-counter market
on the relevant date as reported by OTC Markets Group Inc. or a
similar organization. If our Class B Common Stock is not so quoted,
the “last reported sale price” will be the average of
the mid-point of the last bid and ask prices for our Class B Common
Stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us for
this purpose. The “last reported sale price” will be
determined without regard to after-hours trading or any other
trading outside of regular trading session hours.
Except
for purposes of determining amounts due upon conversion and the
number of shares, if any, deliverable in respect of an interest
make-whole payment, “trading day” means a day on which
(i) trading in our Class B Common Stock (or other security for
which a closing sale price must be determined) generally occurs on
The NASDAQ Capital Market or, if our Class B Common Stock (or such
other security) is not then listed on The NASDAQ Capital Market, on
the principal other U.S. national or regional securities exchange
on which our Class B Common Stock (or such other security) is then
listed or, if our Class B Common Stock (or such other security) is
not then listed on a U.S. national or regional securities exchange,
on the principal other market on which our Class B Common Stock (or
such other security) is then traded, and (ii) a last reported sale
price for our Class B Common Stock (or closing sale price for such
other security) is available on such securities exchange or market.
If our Class B Common Stock (or such other security) is not so
listed or traded, “trading day” means a “business
day.”
Conversion upon Satisfaction of Trading Price
Condition
Prior
to the close of business on the business day immediately preceding
July 1, 2024, a holder of Notes may surrender all or any portion of
its Notes for conversion at any time during the five consecutive
business day period immediately following any five consecutive
trading day period (the “measurement period”) in which
the “trading price” per $1,000 principal amount of
Notes, as determined following a request by a holder of Notes in
accordance with the procedures described below, for each trading
day of the measurement period was less than 98% of the product of
the last reported sale price of our Class B Common Stock and the
conversion rate on each such trading day.
The
“trading price” of the Notes on any date of
determination means the average of the secondary market bid
quotations obtained by the bid solicitation agent for $2,000,000
principal amount of Notes at approximately 3:30 p.m., New York City
time, on such determination date from three independent nationally
recognized securities dealers we select for this purpose;provided
that if three such bids cannot reasonably be obtained by the bid
solicitation agent but two such bids are obtained, then the average
of the two bids shall be used, and if only one such bid can
reasonably be obtained by the bid solicitation agent, that one bid
shall be used. If the bid solicitation agent cannot reasonably
obtain at least one bid for $2,000,000 principal amount of Notes
from a nationally recognized securities dealer, then the trading
price per $1,000 principal amount of Notes will be deemed to be
less than 98% of the product of the last reported sale price of our
Class B Common Stock and the conversion rate. If we do not, when we
are required to, instruct the bid solicitation agent to obtain
bids, or if we give such instruction to the bid solicitation agent,
and the bid solicitation agent fails to make such determination,
then, in either case, the trading price per $1,000 principal amount
of Notes will be deemed to be less than 98% of the product of the
last reported sale price of our Class B Common Stock and the
conversion rate on each trading day of such failure.
The
bid solicitation agent shall have no obligation to determine the
trading price per $1,000 principal amount of Notes unless we have
requested such determination in writing; and we shall have no
obligation to make such request unless a holder of a Note provides
us with reasonable evidence that the trading price per $1,000
principal amount of Notes would be less than 98% of the product of
the last reported sale price of our Class B Common Stock and the
conversion rate. At such time, we shall instruct the bid
solicitation agent to determine the trading price per $1,000
principal amount of Notes beginning on the next trading day and on
each successive trading day until the trading price per $1,000
principal amount of Notes is greater than or equal to 98% of the
product of the last reported sale price of our Class B Common Stock
and the conversion rate, and we shall instruct the three
independent nationally recognized securities dealers to deliver
bids to the bid solicitation agent. If the trading price condition
has been met, we will so notify the holders, the trustee and the
conversion agent (if other than the trustee) in writing. If, at any
time after the trading price condition has been met, the trading
price per $1,000 principal amount of Notes is greater than or equal
to 98% of the product of the last reported sale price of our Class
B Common Stock and the conversion rate for such date, we will so
notify the holders, the trustee and the conversion agent (if other
than the trustee).
32
We
are initially acting as the bid solicitation agent.
Conversion upon Notice of Redemption
If we
call any or all of the Notes for redemption, holders may convert
all or any portion of their Notes at any time prior to the close of
business on the scheduled trading day prior to the redemption date,
even if the Notes are not otherwise convertible at such time. After
that time, the right to convert such Notes on account of our
delivery of the notice of redemption will expire, unless we default
in the payment of the redemption price, in which case a holder of
Notes may convert all or any portion of its Notes until the
business day immediately preceding the date on which the redemption
price has been paid or duly provided for.
Conversion upon Specified Corporate Events
Certain Distributions
If,
prior to the close of business on the business day immediately
preceding July 1, 2024, we elect to:
●
issue to all or
substantially all holders of our Class B Common Stock any rights,
options or warrants (other than pursuant to a stockholder rights
plan in respect of which the stockholder rights have not separated
from the shares of Class B Common Stock) entitling them, for a
period of not more than 45 calendar days after the announcement
date of such issuance, to subscribe for or purchase shares of our
Class B Common Stock at a price per share that is less than the
average of the last reported sale prices of our Class B Common
Stock for the 10 consecutive trading day period ending on, and
including, the trading day immediately preceding the date of
announcement of such issuance; or
●
distribute to all
or substantially all holders of our Class B Common Stock our
assets, securities or rights to purchase our securities (other than
pursuant to a stockholder rights plan in respect of which the
stockholder rights have not separated from the shares of Class B
Common Stock), which distribution has a per share value, as
reasonably determined by our Board of Directors (the "Board") or a
committee thereof, exceeding 10% of the last reported sale price of
our Class B Common Stock on the trading day preceding the date of
announcement for such distribution,
then, in either case, we must notify the holders of the Notes, the
trustee and the conversion agent (if other than the trustee) in
writing at least 50 scheduled trading days prior to the ex-dividend
date for such issuance or distribution. Once we have given such
notice, holders may surrender all or any portion of their Notes for
conversion at any time until the earlier of the close of business
on the business day immediately preceding the ex-dividend date for
such issuance or distribution and our announcement that such
issuance or distribution will not take place, even if the Notes are
not otherwise convertible at such time.
Certain Corporate Events
If
(i) a transaction or event that constitutes (x) a
“fundamental change” (as defined under
“—Fundamental Change Permits Holders to Require Us to
Repurchase Notes”) or (y) a “make-whole fundamental
change” (as defined under “—Increase in
Conversion Rate upon Conversion upon a Make-Whole Fundamental
Change or Notice of Redemption”) occurs prior to the close of
business on the business day immediately preceding July 1, 2024,
regardless of whether a holder has the right to require us to
repurchase the Notes as described under “—Fundamental
Change Permits Holders to Require Us to Repurchase Notes,” or
(ii) we are a party to a share exchange event (as defined under
“—Recapitalizations, Reclassifications and Changes of
Our Class B Common Stock”) that occurs prior to the close of
business on the business day immediately preceding July 1, 2024
(each such fundamental change, make-whole fundamental change or
share exchange event, a “corporate event”), then, in
each case, all or any portion of a holder’s Notes may be
surrendered for conversion at any time on or after the effective
date of the corporate event until 35 trading days after the
effective date of such corporate event or, if such corporate event
also constitutes a fundamental change, until the related
fundamental change repurchase date. We will notify holders, the
trustee and the conversion agent (if other than the trustee) in
writing no later than the effective date of such corporate
event.
Conversions on or after July 1, 2024
On or
after July 1, 2024, a holder may convert all or any portion of its
Notes at any time prior to the close of business on the business
day immediately preceding the maturity date regardless of the
foregoing conditions.
33
Conversion Procedures
If any
holder holds a beneficial interest in a global Note, to convert
such holder must comply with DTC’s procedures for converting
a beneficial interest in a global Note and, if required, pay funds
equal to interest payable on the next interest payment date to
which such holder is not entitled. As such, if any holder is a
beneficial owner of the Notes, such holder must allow for
sufficient time to comply with DTC’s procedures if such
holder wishes to exercise its conversion rights.
If a
holder holds a certificated note, to convert such holder
must:
●
complete and
manually sign the conversion notice on the back of the note, or a
facsimile of the conversion notice;
●
deliver the
conversion notice, which is irrevocable, and the Note to the
conversion agent;
●
if required,
furnish appropriate endorsements and transfer documents;
and
●
if required, pay
funds equal to interest payable on the next interest payment date
to which such holder is not entitled.
We
will pay any documentary, stamp or similar issue or transfer tax on
the issuance of any shares of our Class B Common Stock upon
conversion of the Notes, unless the tax is due because the holder
requests such shares to be issued in a name other than the
holder’s name, in which case the holder will pay the
tax.
We
refer to the date any holder complies with the relevant procedures
for conversion described above as the “conversion
date.”
If
a holder has already delivered a repurchase notice as described
under “—Fundamental Change Permits Holders to Require
Us to Repurchase Notes” with respect to a note, the holder
may not surrender that Note for conversion until the holder has
withdrawn the repurchase notice in accordance with the relevant
provisions of the Indenture. If a holder submits its Notes for
required repurchase, the holder’s right to withdraw the
fundamental change repurchase notice and convert the Notes that are
subject to repurchase will terminate at the close of business on
the business day immediately preceding the relevant fundamental
change repurchase date.
Settlement upon Conversion
Upon
conversion, we may choose to pay or deliver, as the case may be,
either cash (“cash settlement”), shares of our Class B
Common Stock (“physical settlement”) or a combination
of cash and shares of our Class B Common Stock (“combination
settlement”), as described below. We refer to each of these
settlement methods as a “settlement
method.”
All
conversions for which the relevant conversion date occurs on or
after July 1, 2024, and all conversions for which the relevant
conversion date occurs on or after our issuance of a notice of
redemption as described under “—Optional Redemption on
or after January 14, 2023” but prior to the related
redemption date (a “redemption period”), will be
settled using the same settlement method. Except for any
conversions for which the relevant conversion date occurs on or
after July 1, 2024, and any conversions for which the relevant
conversion date occurs during a redemption period, we will use the
same settlement method for all conversions with the same conversion
date, but we do not have any obligation to use the same settlement
method with respect to conversions with different conversion dates.
That is, prior to July 1, 2024 and other than during a redemption
period, we may choose for Notes converted on one conversion date to
settle conversions in physical settlement, and choose for Notes
converted on another conversion date cash settlement or combination
settlement.
If we
elect a settlement method, we will inform in writing holders so
converting, the trustee and the conversion agent (if other than the
trustee) of the settlement method we have selected no later than
the close of business on the scheduled trading day immediately
following the related conversion date (or in the case of any
conversions for which the relevant conversion date occurs (i)
during a redemption period, in the related notice of redemption or
(ii) on or after July 1, 2024, nolater than July 1, 2024). If we do
not timely elect a settlement method, we will no longer have the
right to elect cash settlement or physical settlement for such
conversion or during such period and we will be deemed to have
elected combination settlement in respect of our conversion
obligation, as described below, and the specified dollar amount (as
defined below) per $1,000 principal amount of Notes will be equal
to $1,000. If we timely elect combination settlement, but we do not
timely notify converting holders of the specified dollar amount per
$1,000 principal amount of Notes to be converted, such specified
dollar amount will be deemed to be $1,000. It is our current intent
to settle conversions of the Notes through combination settlement
with a specified dollar amount per $1,000 principal amount of Notes
of $1,000
34
Settlement amounts
will be computed as follows:
●
if we elect
physical settlement, subject to the blocker provision to the extent
applicable, we will deliver to the converting holder in respect of
each $1,000 principal amount of Notes being converted a number of
shares of Class B Common Stock equal to the conversion rate,
together with a cash payment in lieu of delivering any fractional
shares, and the interest make-whole payment, if
applicable;
●
if we elect cash
settlement, subject to the blocker provision to the extent
applicable, we will pay to the converting holder in respect of each
$1,000 principal amount of Notes being converted cash in an amount
equal to the sum of the daily conversion values for each of the 40
consecutive trading days during the related observation period,
together with a cash payment in lieu of delivering any fractional
shares, and the interest make-whole payment, if applicable;
and
●
if we elect (or are
deemed to have elected) combination settlement, subject to the
blocker provision to the extent applicable, we will pay or deliver,
as the case may be, to the converting holder in respect of each
$1,000 principal amount of Notes being converted a
“settlement amount” equal to the sum of the daily
settlement amounts for each of the 40 consecutive trading days
during the related observation period, together with a cash payment
in lieu of delivering any fractional shares, and the interest
make-whole payment, if applicable.
●
The “daily
settlement amount,” for each of the 40 consecutive trading
days during the observation period, shall consist of:
●
cash equal to the
lesser of (i) the maximum cash amount per $1,000 principal amount
of Notes to be received upon conversion as specified in the notice
specifying our chosen settlement method (or deemed specified as set
forth above) (the “specified dollar amount”), if any,
divided by 40 (such
quotient, the “daily measurement value”) and (ii) the
daily conversion value; and
●
if the daily
conversion value exceeds the daily measurement value, a number of
shares of our Class B Common Stock equal to (i) the difference
between the daily conversion value and the daily measurement value,
divided by (ii) the daily
VWAP for such trading day.
The
“daily conversion value” means, for each of the 40
consecutive trading days during the observation period,
one-fortieth (1/40th) of the product of (1) the conversion rate on
such trading day and (2) the daily VWAP for such trading
day.
The
“daily VWAP” means the per share volume-weighted
average price as displayed under the heading “Bloomberg
VWAP” on Bloomberg page “RMBL <equity> AQR”
(or its equivalent successor if such page is not available) in
respect of the period from the scheduled open of trading until the
scheduled close of trading of the primary trading session on such
trading day (or if such volume-weighted average price is
unavailable, the market value of one share of our Class B Common
Stock on such trading day determined, using a volume-weighted
average method, by a nationally recognized independent investment
banking firm retained for this purpose by us). The “daily
VWAP” will be determined without regard to after-hours
trading or any other trading outside of the regular trading session
trading hours.
The
“observation period” with respect to any Note
surrendered for conversion means:
●
subject to the
immediately succeeding bullet, if the relevant conversion date
occurs prior to July 1, 2024, the 40 consecutive trading day period
beginning on, and including, the second trading day immediately
succeeding such conversion date;
●
if the relevant
conversion date occurs during a redemption period with respect to
the Notes as described under “—Optional Redemption on
or after January 14, 2023,” the 40 consecutive trading days
beginning on, and including, the 41st scheduled trading day
immediately preceding such redemption date; and
●
if the relevant
conversion date occurs on or after July 1, 2024, the 40 consecutive
trading days beginning on, and including, the 41st scheduled
trading day immediately preceding the maturity date.
For the
purposes of determining amounts due upon conversion and the number
of shares, if any, deliverable in respect of an interest make-whole
payment only, “trading day” means a day on which (i)
there is no “market disruption event” (as defined
below) and (ii) trading in our Class B Common Stock generally
occurs on The NASDAQ Capital Market or, if our Class B Common Stock
is not then listed on The NASDAQ Capital Market, on the principal
other U.S. national or regional securities exchange on which our
Class B Common Stock is then listed or, if our Class B Common Stock
is not then listed on a U.S. national or regional securities
exchange, on the principal other market on which our Class B Common
Stock is then listed or admitted for trading. If our Class B Common
Stock is not so listed or admitted for trading, “trading
day” means a “business day.”
35
“Scheduled
trading day” means a day that is scheduled to be a trading
day on the principal U.S. national or regional securities exchange
or market on which our Class B Common Stock is listed or admitted
for trading. If our Class B Common Stock is not so listed or
admitted for trading, “scheduled trading day” means a
“business day.”
For the
purposes of determining amounts due upon conversion and the number
of shares, if any, deliverable in respect of an interest make-whole
payment, “market disruption event” means (i) a failure
by the primary U.S. national or regional securities exchange or
market on which our Class B Common Stock is listed or admitted for
trading to open for trading during its regular trading session or
(ii) the occurrence or existence prior to 1:00 p.m., New York City
time, on any scheduled trading day for our Class B Common Stock for
more than one half-hour period in the aggregate during regular
trading hours of any suspension or limitation imposed on trading
(by reason of movements in price exceeding limits permitted by the
relevant stock exchange or otherwise) in our Class B Common Stock
or in any options contracts or futures contracts relating to our
Class B Common Stock.
Except
as described under “—Increase in Conversion Rate upon
Conversion upon a Make-Whole Fundamental Change or Notice of
Redemption” and “—Recapitalizations,
Reclassifications and Changes of Our Class B Common Stock,”
we will deliver the consideration due in respect of conversion on
the second business day immediately following the relevant
conversion date, if we elect physical settlement, or on the second
business day immediately following the last trading day of the
relevant observation period, in the case of any other settlement
method.
We will
pay cash in lieu of delivering any fractional share of Class B
Common Stock issuable upon conversion based on the daily VWAP for
the relevant conversion date (in the case of physical settlement)
or based on the daily VWAP for the last trading day of the relevant
observation period (in the case of combination
settlement).
Each
conversion will be deemed to have been effected as to any Notes
surrendered for conversion on the conversion date; provided,
however, that the person in whose name any shares of our Class B
Common Stock shall be issuable upon such conversion will be treated
as the holder of record of such shares as of the close of business
on the conversion date (in the case of physical settlement) or the
last trading day of the relevant observation period (in the case of
combination settlement).
Conversion Rate Adjustments
The
conversion rate will be adjusted as described below, except that we
will not make any adjustments to the conversion rate if holders of
the Notes participate (other than in the case of (x) a share split
or share combination or (y) a tender or exchange offer), at the
same time and upon the same terms as holders of our Class B Common
Stock and solely as a result of holding the Notes, in any of the
transactions described below without having to convert their Notes
as if they held a number of shares of Class B Common Stock equal to
the conversion rate, multiplied
by the principal amount (expressed in thousands) of Notes
held by such holder. Neither the trustee nor the conversion agent
shall have any responsibility to monitor the accuracy of any
calculation of any adjustment to the conversion rate and the same
shall be conclusive and binding on the holders, absent manifest
error. Notice of such adjustment to the conversion rate will be
given by us promptly in writing to the holders, the trustee and the
conversion agent and shall be conclusive and binding on the
holders, absent manifest error.
(1)
If we exclusively
issue shares of our Class B Common Stock as a dividend or
distribution on shares of our Class B Common Stock, or if we effect
a share split or share combination in respect of our Class B Common
Stock, the conversion rate will be adjusted based on the following
formula:
|
CR1
= CR0
×
|
OS1
|
|
OS0
|
where,
CR0
=
the conversion rate
in effect immediately prior to the open of business on the
ex-dividend date of such dividend or distribution, or immediately
prior to the open of business on the effective date of such share
split or share combination, as applicable;
CR1
=
the conversion rate
in effect immediately after the open of business on such
ex-dividend date or effective date;
OS0
=
the number of
shares of our Class B Common Stock outstanding immediately prior to
the open of business on such ex-dividend date or effective date;
and
OS1
=
the number of
shares of our Class B Common Stock outstanding immediately after
giving effect to such dividend, distribution, share split or share
combination.
36
Any
adjustment made under this clause (1) shall become effective
immediately after the open of business on the ex-dividend date for
such dividend or distribution, or immediately after the open of
business on the effective date for such share split or share
combination, as applicable. If any dividend or distribution of the
type described in this clause (1) is declared but not so paid or
made, the conversion rate shall be immediately readjusted,
effective as of the date our Board or a committee thereof
determines not to pay such dividend or distribution, to the
conversion rate that would then be in effect if such dividend or
distribution had not been declared.
(2)
If
we issue to all or substantially all holders of our Class B Common
Stock any rights, options or warrants (other than in connection
with a stockholder rights plan) entitling them, for a period of not
more than 45 calendar days after the announcement date of such
issuance, to subscribe for or purchase shares of our Class B Common
Stock at a price per share that is less than the average of the
last reported sale prices of our Class B Common Stock for the 10
consecutive trading day period ending on, and including, the
trading day immediately preceding the date of announcement of such
issuance, the conversion rate will be increased based on the
following formula:
|
CR1
= CR0
×
|
OS0
+ X
|
|
OS0
+ Y
|
where,
CR0
=
the conversion rate
in effect immediately prior to the open of business on the
ex-dividend date for such issuance;
CR1
=
the conversion rate
in effect immediately after the open of business on such
ex-dividend date;
OS0
=
the number of
shares of our Class B Common Stock outstanding immediately prior to
the open of business on such ex-dividend date;
X
=
the total number of
shares of our Class B Common Stock issuable pursuant to such
rights, options or warrants; and
Y
=
the number of
shares of our Class B Common Stock equal to the aggregate price
payable to exercise such rights, options or warrants, divided by
the average of the last reported sale prices of our Class B Common
Stock over the 10 consecutive trading day period ending on, and
including, the trading day immediately preceding the date of
announcement of the issuance of such rights, options or
warrants.
Any
increase made under this clause (2) will be made successively
whenever any such rights, options or warrants are issued and shall
become effective immediately after the open of business on the
ex-dividend date for such issuance. To the extent that shares of
Class B Common Stock are not delivered after the expiration of such
rights, options or warrants, the conversion rate shall be decreased
to the conversion rate that would then be in effect had the
increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of
shares of Class B Common Stock actually delivered. If such rights,
options or warrants are not so issued, the conversion rate shall be
decreased to the conversion rate that would then be in effect if
such ex-dividend date for such issuance had not
occurred.
For the
purpose of this clause (2), and for the purpose of the first bullet
point under “—Conversion upon Specified Corporate
Events—Certain Distributions,” in determining whether
any rights, options or warrants entitle the holders of our Class B
Common Stock to subscribe for or purchase shares of Class B Common
Stock at less than such average of the last reported sale prices of
our Class B Common Stock for the 10 consecutive trading day period
ending on, and including, the trading day immediately preceding the
date of announcement of such issuance, and in determining the
aggregate offering price of such shares of Class B Common Stock,
there shall be taken into account any consideration received by us
for such rights, options or warrants and any amount payable on
exercise or conversion thereof, the value of such consideration, if
other than cash, to be determined by our Board or a committee
thereof.
(3)
If we distribute
shares of our capital stock, evidences of our indebtedness, other
assets or property of ours or rights, options or warrants to
acquire our capital stock or other securities, to all or
substantially all holders of our Class B Common Stock,
excluding:
●
dividends,
distributions or issuances as to which an adjustment was effected
pursuant to clause (1) or (2) above;
●
dividends or
distributions paid exclusively in cash as to which an adjustment
was effected pursuant to clause (4) below;
●
except as otherwise
described below, rights issued under a stockholder rights plan of
ours;
●
distributions of
reference property in exchange for or upon conversion of our Class
B Common Stock in a transaction described under
“—Recapitalizations, Reclassifications and Changes of
Our Class B Common Stock;” and
●
spin-offs as to
which the provisions set forth below in this clause (3) shall
apply;
37
then
the conversion rate will be increased based on the following
formula:
|
CR1
= CR0
×
|
SP0
|
|
SP0 −
FMV
|
where,
CR0
=
the conversion rate
in effect immediately prior to the open of business on the
ex-dividend date for such distribution;
CR1
=
the conversion rate
in effect immediately after the open of business on such
ex-dividend date;
SP0
=
the average of the
last reported sale prices of our Class B Common Stock over the 10
consecutive trading day period ending on, and including, the
trading day immediately preceding the ex-dividend date for such
distribution; and
FMV
=
the fair market
value (as determined by our Board or a committee thereof) of the
shares of capital stock, evidences of indebtedness, assets,
property, rights, options or warrants distributed with respect to
each outstanding share of our Class B Common Stock on the
ex-dividend date for such distribution.
Any
increase made under the portion of this clause (3) above will
become effective immediately after the open of business on the
ex-dividend date for such distribution. If such distribution is not
so paid or made, the conversion rate shall be decreased to be the
conversion rate that would then be in effect if such distribution
had not been declared. Notwithstanding the foregoing, if
“FMV” (as defined above) is equal to or greater than
“SP0” (as
defined above), in lieu of the foregoing increase, each holder of a
Note shall receive, in respect of each $1,000 principal amount
thereof, at the same time and upon the same terms as holders of our
Class B Common Stock, the amount and kind of our capital stock,
evidences of our indebtedness, other assets or property of ours or
rights, options or warrants to acquire our capital stock or other
securities that such holder would have received if such holder
owned a number of shares of Class B Common Stock equal to the
conversion rate in effect on the ex-dividend date for the
distribution.
With
respect to an adjustment pursuant to this clause (3) where there
has been a payment of a dividend or other distribution on our Class
B Common Stock of shares of capital stock of any class or series,
or similar equity interest, of or relating to any of our
subsidiaries or other business units, that are, or, when issued,
will be, listed or admitted for trading on a U.S. national
securities exchange, which we refer to as a “spin-off,”
the conversion rate will be increased based on the following
formula:
|
CR1
= CR0
×
|
FMV0
+ MP0
|
|
MP0
|
where,
CR0
=
the conversion rate
in effect immediately prior to the end of the valuation period (as
defined below);
CR1
=
the conversion rate
in effect immediately after the end of the valuation
period;
FMV0
=
the average of the
last reported sale prices of the capital stock or similar equity
interest distributed to holders of our Class B Common Stock
applicable to one share of our Class B Common Stock (determined by
reference to the definition of last reported sale price set forth
under “—Conversion upon Satisfaction of Sale Price
Condition” as if references therein to our Class B Common
Stock were to such capital stock or similar equity interest) over
the first 10 consecutive trading day period after, and including,
the ex-dividend date of the spin-off (the “valuation
period”); and
MP0
=
the average of the
last reported sale prices of our Class B Common Stock over the
valuation period.
The
adjustment to the conversion rate under the preceding paragraph
will occur at the close of business on the last trading day of the
valuation period; provided
that (x) in respect of any conversion of Notes for which physical
settlement is applicable, if the relevant conversion date occurs
during the valuation period, the reference to “10” in
the preceding paragraph shall be deemed replaced with such lesser
number of trading days as have elapsed between the ex-dividend date
for such spin-off and such conversion date in determining the
conversion rate and (y) in respect of any conversion of Notes for
which cash settlement or combination settlement is applicable, for
any trading day that falls within the relevant observation period
for such conversion and within the valuation period, the reference
to “10” in the preceding paragraph shall be deemed
replaced with such lesser number of trading days as have elapsed
between the ex-dividend date for such spin-off and such trading day
in determining the conversion rate as of such trading
day.
38
(4)
If any cash
dividend or distribution is made to all or substantially all
holders of our Class B Common Stock, the conversion rate will be
adjusted based on the following formula:
|
CR1
= CR0
×
|
SP0
|
|
SP0
− C
|
where,
CR0
=
the conversion rate
in effect immediately prior to the open of business on the
ex-dividend date for such dividend or distribution;
CR1
=
the conversion rate
in effect immediately after the open of business on the ex-dividend
date for such dividend or distribution;
SP0
=
the last reported
sale price of our Class B Common Stock on the trading day
immediately preceding the ex-dividend date for such dividend or
distribution; and
C
=
the amount in cash
per share we distribute to all or substantially all holders of our
Class B Common Stock.
Any
increase made under this clause (4) shall become effective
immediately after the open of business on the ex-dividend date for
such dividend or distribution. If such dividend or distribution is
not so paid, the conversion rate shall be decreased, effective as
of the date our Board or a committee thereof determines not to make
or pay such dividend or distribution, to be the conversion rate
that would then be in effect if such dividend or distribution had
not been declared. Notwithstanding the foregoing, if
“C” (as defined above) is equal to or greater than
“SP0” (as
defined above), in lieu of the foregoing increase, each holder of a
Note shall receive, for each $1,000 principal amount of Notes it
holds, at the same time and upon the same terms as holders of
shares of our Class B Common Stock, the amount of cash that such
holder would have received if such holder owned a number of shares
of our Class B Common Stock equal to the conversion rate in effect
on the ex-dividend date for such cash dividend or
distribution.
(5)
If we or any of our
subsidiaries make a payment in respect of a tender or exchange
offer for our Class B Common Stock, to the extent that the cash and
value of any other consideration included in the payment per share
of Class B Common Stock exceeds the average of the last reported
sale prices of our Class B Common Stock over the 10 consecutive
trading day period commencing on, and including, the trading day
next succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange offer, the conversion rate
will be increased based on the following formula:
|
CR1
= CR0
x
|
AC +
(SP1 x
OS1)
|
|
|
OS0
x SP1
|
where,
CR0
=
the conversion rate
in effect immediately prior to the close of business on the 10th
trading day immediately following, and including, the trading day
next succeeding the date such tender or exchange offer
expires;
CR1
=
the conversion rate
in effect immediately after the close of business on the 10th
trading day immediately following, and including, the trading day
next succeeding the date such tender or exchange offer
expires;
AC
=
the aggregate value
of all cash and any other consideration (as determined by our Board
or a committee thereof) paid or payable for shares purchased in
such tender or exchange offer;
OS0
=
the number of
shares of our Class B Common Stock outstanding immediately prior to
the date such tender or exchange offer expires (prior to giving
effect to the purchase of all shares accepted for purchase or
exchange in such tender or exchange offer);
OS1
=
the number of
shares of our Class B Common Stock outstanding immediately after
the date such tender or exchange offer expires (after giving effect
to the purchase of all shares accepted for purchase or exchange in
such tender or exchange offer); and
SP1
=
the average of the
last reported sale prices of our Class B Common Stock over the 10
consecutive trading day period commencing on, and including, the
trading day next succeeding the date such tender or exchange offer
expires.
39
The
increase to the conversion rate under the preceding paragraph will
occur at the close of business on the 10th trading day immediately
following, and including, the trading day next succeeding the date
such tender or exchange offer expires; provided that (x) in respect of any
conversion of Notes for which physical settlement is applicable, if
the relevant conversion date occurs during the 10 trading days
immediately following, and including, the trading day next
succeeding the expiration date of any tender or exchange offer,
references to “10” or “10th” in the
preceding paragraph shall be deemed replaced with such lesser
number of trading days as have elapsed between the expiration date
of such tender or exchange offer and such conversion date in
determining the conversion rate and (y) in respect of any
conversion of Notes for which cash settlement or combination
settlement is applicable, for any trading day that falls within the
relevant observation period for such conversion and within the 10
trading days immediately following, and including, the trading day
next succeeding the expiration date of any tender or exchange
offer, references to “10” or “10th” in the
preceding paragraph shall be deemed replaced with such lesser
number of trading days as have elapsed between the expiration date
of such tender or exchange offer and such trading day in
determining the conversion rate as of such trading
day.
Notwithstanding the
foregoing, if a conversion rate adjustment becomes effective on any
ex-dividend date as described above, and a holder that has
converted its Notes on or after such ex-dividend date and on or
prior to the related record date would be treated as the record
holder of shares of our Class B Common Stock as of the related
conversion date as described under “—Settlement upon
Conversion” based on an adjusted conversion rate for such
ex-dividend date, then, notwithstanding the foregoing conversion
rate adjustment provisions, the conversion rate adjustment relating
to such ex-dividend date will not be made for such converting
holder. Instead, such holder will be treated as if such holder were
the record owner of the shares of our Class B Common Stock on an
unadjusted basis and participate in the related dividend,
distribution or other event giving rise to such
adjustment.
Except
as stated herein, we will not adjust the conversion rate for the
issuance of shares of our Class B Common Stock or any securities
convertible into or exchangeable for shares of our Class B Common
Stock or the right to purchase shares of our Class B Common Stock
or such convertible or exchangeable securities.
As used
in this section, “ex-dividend date” means the first
date on which the shares of our Class B Common Stock trade on the
applicable exchange or in the applicable market, regular way,
without the right to receive the issuance, dividend or distribution
in question, from us or, if applicable, from the seller of our
Class B Common Stock on such exchange or market (in the form of due
bills or otherwise) as determined by such exchange or market, and
“effective date” means the first date on which the
shares of our Class B Common Stock trade on the applicable exchange
or in the applicable market, regular way, reflecting the relevant
share split or share combination, as applicable.
As used
in this section, “record date” means, with respect to
any dividend, distribution or other transaction or event in which
the holders of our Class B Common Stock (or other applicable
security) have the right to receive any cash, securities or other
property or in which our Class B Common Stock (or such other
security) is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for
determination of holders of our Class B Common Stock (or such other
security) entitled to receive such cash, securities or other
property (whether such date is fixed by our Board or a duly
authorized committee thereof, statute, contract or
otherwise).
Subject
to the applicable listing standards of The NASDAQ Capital Market,
we are permitted to increase the conversion rate of the Notes by
any amount for a period of at least 20 business days if our Board
or a committee thereof determines that such increase would be in
our best interest. Subject to the applicable listing standards of
The NASDAQ Capital Market, we may also (but are not required to)
increase the conversion rate to avoid or diminish income tax to
holders of our Class B Common Stock or rights to purchase shares of
our Class B Common Stock in connection with a dividend or
distribution of shares (or rights to acquire shares) or similar
event.
A
holder may, in some circumstances, including a distribution of cash
dividends to holders of our shares of Class B Common Stock, be
deemed to have received a distribution subject to U.S. federal
income tax as a result of an adjustment or the nonoccurrence of an
adjustment to the conversion rate. For a discussion of the U.S.
federal income tax treatment of an adjustment to the conversion
rate, see “Certain Material U.S. Federal Income Tax
Considerations.”
If we
have a rights plan in effect upon conversion of the Notes into
Class B Common Stock, holders will receive, in addition to any
shares of Class B Common Stock received in connection with such
conversion, the rights under the rights plan. We will not adjust
the conversion rate upon the adoption of a rights plan, so long as
the rights are not currently exercisable and have not separated
from the shares of Class B Common Stock in accordance with the
provisions of such rights plan. However, if, prior to any
conversion, the rights have separated from the shares of Class B
Common Stock in accordance with the provisions of the applicable
rights plan, the conversion rate will be adjusted at the time of
separation as if we distributed to all or substantially all holders
of our Class B Common Stock, shares of our capital stock, evidences
of indebtedness, assets, property, rights, options or warrants as
described in clause (3) above, subject to readjustment in the event
of the expiration, termination or redemption of such
rights.
40
Notwithstanding any
of the foregoing, the conversion rate will not be
adjusted:
●
upon the issuance
of any shares of our Class B Common Stock pursuant to any present
or future plan providing for the reinvestment of dividends or
interest payable on our securities and the investment of additional
optional amounts in shares of our Class B Common Stock under any
plan;
●
upon the issuance
of any shares of our Class B Common Stock or options or rights to
purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by us
or any of our subsidiaries (other than a rights plan as described
above);
●
upon the issuance
of any shares of our Class B Common Stock pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security
not described in the preceding bullet and outstanding as of the
date the Notes were first issued;
●
solely for a change
in the par value of the Class B Common Stock; or
●
for accrued and
unpaid interest, if any.
Adjustments to the
conversion rate will be calculated to the nearest 1/10,000th of a
share.
Recapitalizations, Reclassifications and Changes of Our Class B
Common Stock
In the
case of:
●
any
recapitalization, reclassification or change of our Class B Common
Stock (other than changes resulting from a subdivision or
combination or a change of par value or to no par
value),
●
any consolidation,
merger or combination involving us,
●
any sale, lease or
other transfer to a third party of the consolidated assets of ours
and our subsidiaries substantially as an entirety, or
●
any statutory share
exchange,
in each
case, as a result of which our Class B Common Stock would be
converted into, or exchanged for, stock, other securities, other
property or assets (including cash or any combination thereof) (any
such event, a “share exchange event”), then, at the
effective time of the share exchange event, we or the successor or
acquiring corporation, as the case may be, will execute with the
trustee a supplemental indenture, without the consent of holders,
providing that at and after the effective time of the share
exchange event, the right to convert each $1,000 principal amount
of Notes will be changed into a right to convert such principal
amount of Notes into the kind and amount of shares of stock, other
securities or other property or assets (including cash or any
combination thereof) that a holder of a number of shares of Class B
Common Stock equal to the conversion rate immediately prior to such
share exchange event would have owned or been entitled to receive
(the “reference property”) upon such share exchange
event. However, at and after the effective time of the share
exchange event, (i) we will continue to have the right to determine
the form of consideration to be paid or delivered, as the case may
be, upon conversion of Notes, as set forth under
“—Settlement upon Conversion” and (ii)(x) any
amount payable in cash upon conversion of the Notes as set forth
under “—Settlement upon Conversion” will continue
to be payable in cash, (y) any shares of our Class B Common Stock
that we would have been required to deliver upon conversion of the
Notes as set forth under “—Settlement upon
Conversion” will instead be deliverable in the amount and
type of reference property that a holder of that number of shares
of our Class B Common Stock would have received in such share
exchange event and (z) the daily VWAP will be calculated based on
the value of a unit of reference property that a holder of one
share of our Class B Common Stock would have received in such share
exchange event. If the share exchange event causes our Class B
Common Stock to be converted into, or exchanged for, the right to
receive more than a single type of consideration (determined based
in part upon any form of stockholder election), the reference
property into which the Notes will be convertible will be deemed to
be the weighted average of the types and amounts of consideration
received by the holders of our Class B Common Stock. If the holders
of our Class B Common Stock receive only cash in such share
exchange event, then for all conversions that occur after the
effective date of such share exchange event (i) the consideration
due upon conversion of each $1,000 principal amount of Notes shall
be solely cash in an amount equal to the conversion rate in effect
on the conversion date (as may be increased as described under
“—Increase in Conversion Rate upon Conversion upon a
Make-Whole Fundamental Change or Notice of Redemption”),
multiplied by the price
paid per share of Class B Common Stock in such share exchange
event, and, if applicable, an interest make-whole payment, which we
will pay in cash, and (ii) we will satisfy our conversion
obligation by paying cash to converting holders on the second
business day immediately following the conversion date. We will
notify holders, the trustee and the conversion agent (if other than
the trustee) of the weighted average of the types and amounts of
consideration received by the holders of our Class B Common Stock
as soon as practicable after such determination is
made.
41
The
supplemental indenture providing that the Notes will be convertible
into reference property will also provide for anti-dilution and
other adjustments that are as nearly equivalent as possible to the
adjustments described under “—Conversion Rate
Adjustments” above. If the reference property in respect of
any such share exchange event includes shares of stock, securities
or other property or assets of a company other than us or the
successor or acquiring corporation, as the case may be, in such
share exchange event, such other company will also execute such
supplemental indenture, and such supplemental indenture will
contain such additional provisions to protect the interests of the
holders, including the right of holders to require us to repurchase
their Notes upon a fundamental change as described under
“—Fundamental Change Permits Holders to Require Us to
Repurchase Notes” below, as the Board reasonably considers
necessary by reason of the foregoing. We will agree in the
Indenture not to become a party to any such share exchange event
unless its terms are consistent with the foregoing.
Adjustments of Prices
Whenever any
provision of the Indenture requires us to calculate the last
reported sale prices, the daily VWAPs, the daily conversion values
or the daily settlement amounts over a span of multiple days
(including, without limitation, an observation period and the
period, if any, for determining “stock price” for
purposes of a make-whole fundamental change or redemption), our
Board or a committee thereof will make appropriate adjustments to
each to account for any adjustment to the conversion rate that
becomes effective, or any event requiring an adjustment to the
conversion rate where the ex-dividend date, effective date or
expiration date of the event occurs, at any time during the period
when the last reported sale prices, the daily VWAPs, the daily
conversion values or the daily settlement amounts are to be
calculated.
Increase in Conversion Rate upon Conversion upon a Make-Whole
Fundamental Change or Notice of Redemption
If (i)
the “effective date” (as defined below) of a
“fundamental change” (as defined below and determined
after giving effect to any exceptions to or exclusions from such
definition, but without regard to the proviso in clause (2) of the definition
thereof, a “make-whole fundamental change”) occurs
prior to the maturity date of the Notes or (ii) we give a notice of
redemption with respect to any or all of the Notes as provided for
under “—Optional Redemption on or after January 14,
2023” and, in each case, a holder elects to convert its Notes
in connection with such make-whole fundamental change or redemption
notice, as applicable, we will, under certain circumstances,
increase the conversion rate for the Notes so surrendered for
conversion by a number of additional shares of Class B Common Stock
(the “additional shares”), as described below. A
conversion of Notes will be deemed for these purposes to be
“in connection with” such make-whole fundamental change
if the relevant notice of conversion of the Notes is received by
the conversion agent from, and including, the effective date of the
make-whole fundamental change up to, and including, the business
day immediately prior to the related fundamental change repurchase
date (or, in the case of a make-whole fundamental change that would
have been a fundamental change but for the proviso in clause (2) of the definition
thereof, the 35th trading day immediately following the effective
date of such make-whole fundamental change) (such period, the
“make-whole fundamental change period”). A conversion
of Notes will be deemed for these purposes to be “in
connection with” a redemption notice if the notice of
conversion of the Notes is received by the conversion agent from,
and including, the date of the redemption notice until the close of
business on the scheduled trading day immediately preceding the
redemption date.
Upon
surrender of Notes for conversion in connection with a make-whole
fundamental change or redemption notice, we will, at our option,
satisfy our conversion obligation by physical settlement, cash
settlement or combination settlement, based on the conversion rate
as increased to reflect the additional shares pursuant to the table
set forth below, as described under “—Conversion
Rights—Settlement upon Conversion.” However, if the
consideration for our Class B Common Stock in any make-whole
fundamental change described in clause (2) of the definition of
fundamental change is composed entirely of cash, for any conversion
of Notes following the effective date of such make-whole
fundamental change, the conversion obligation will be calculated
based solely on the “stock price” (as defined below)
for the transaction and will be deemed to be an amount of cash per
$1,000 principal amount of converted Notes equal to the conversion
rate (including any increase to reflect the additional shares as
described in this section), multiplied by such stock price. In such
event, the conversion obligation will be determined and paid to
holders in cash on the second business day following the conversion
date. We will notify holders, the trustee and the conversion agent
(of other than the trustee) in writing of the effective date of any
make-whole fundamental change and issue a press release announcing
such effective date no later than five business days after such
effective date.
The
number of additional shares, if any, by which the conversion rate
will be increased will be determined by reference to the table
below, based on the date on which the make-whole fundamental change
occurs or becomes effective, or the date of the redemption notice,
as the case may be (in each case, the “effective
date”), and the price paid (or deemed to be paid) per share
of our Class B Common Stock in the make-whole fundamental change or
with respect to the redemption, as the case may be (the
“stock price”). If the holders of our Class B Common
Stock receive in exchange for their Class B Common Stock only cash
in a make-whole fundamental change described in clause (2) of the
definition of fundamental change, the stock price will be the cash
amount paid per share. Otherwise, the stock price will be the
average of the last reported sale prices of our Class B Common
Stock over the five consecutive trading day period ending on, and
including, the trading day immediately preceding the effective date
of the make-whole fundamental change or the date of the redemption
notice, as the case may be. In the event that a conversion in
connection with a redemption notice would also be deemed to be in
connection with a make-whole fundamental change, a holder of the
Notes to be converted will be entitled to a single increase to the
conversion rate with respect to the first to occur of the date of
the applicable redemption notice or the effective date of the
applicable make-whole fundamental change, and the later event will
be deemed not to have occurred for purposes of this
section.
42
The
stock prices set forth in the column headings of the table below
will be adjusted as of any date on which the conversion rate for
the Notes is otherwise adjusted. The adjusted stock prices will
equal the stock prices immediately prior to such adjustment,
multiplied by a fraction,
the numerator of which is the conversion rate immediately prior to
the adjustment giving rise to the stock price adjustment and the
denominator of which is the conversion rate as so adjusted. The
number of additional shares as set forth in the table below will be
adjusted in the same manner and at the same time as the conversion
rate as set forth under “—Conversion Rate
Adjustments.”
The
following sets forth the number of Additional Shares by which the
Conversion Rate shall be increased:
(i) If
the Stock Price is greater than $1.00 (subject to adjustment in the
same manner as the Stock Prices pursuant to subsection (d)
above) (as so adjusted, the “Make-Whole Adjustment Reference
Price”), a number of
Additional Shares shall be added to the Conversion Rate equal to
the following (rounded to the nearest
ten-thousandth):
|
AS =
|
1000 +
(600 x (SP-MWRP))
|
-
CR0
|
|
SP
|
|
where,
AS
= the number of Additional Shares calculated pursuant
to the Indenture;
CR0
= the Conversion Rate in effect immediately
prior to adjustment pursuant to the Indenture;
MWRP
= the Make-Whole Adjustment Reference Price in
effect as of the calculation of the number of Additional Shares
pursuant to the Indenture; and
SP
= the Stock Price; and
(ii) if
the Stock Price is less than or equal to the Make-Whole Adjustment
Reference Price, no Additional Shares shall be added to the
Conversion Rate; provided, however, that, notwithstanding anything
in the Indenture to the contrary, the
Company’s Conversion Obligation in connection with such
conversion shall be, and the Company shall settle such Conversion
Obligation solely by, the payment or delivery to the converting
Holder in respect of each $1,000 principal amount of Notes being
converted of either (A) $1,000 in cash or (B) subject to the
Ownership Limitation, a number of shares of Common Stock equal to
$1,000 divided
by the Make-Whole Fundamental Change VWAP, in either
case together with the amount of cash payable in lieu of delivering
any fractional share of Common Stock, and an Interest Make-Whole
Payment, if applicable; provided, further, that if the number of
shares of Common Stock deliverable pursuant to the Indenture is
reduced as a result of the immediately following sentence, then the
Company shall settle such Conversion Obligation through clause (A)
above.
Notwithstanding the
foregoing, in no event shall the Conversion Rate per $1,000
principal amount of Notes, or the number of shares of Common Stock
per $1,000 principal amount of Notes delivered by the Company in
settlement of the Conversion Obligation pursuant to the Indenture,
exceed 61.6523 shares of Common Stock, subject to adjustment in the
same manner as the Conversion Rate pursuant the
Indenture.
Our
obligation to increase the conversion rate for Notes converted in
connection with a make-whole fundamental change or during a
redemption period could be considered a penalty, in which case the
enforceability thereof would be subject to general principles of
reasonableness and equitable remedies. Neither the trustee nor any
of the agents shall have any duty to monitor the accuracy of any of
the calculations made by us which will be conclusive and binding on
the holders, absent manifest error.
Interest Make-Whole Payment upon Certain Conversions
On or
after the date that is one year after the last date of original
issuance of the Notes offered hereby or after the occurrence of any
30 trading day period during which the last reported sale price of
our 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), we will make an interest make-whole payment to a
converting holder equal to the sum of the present values of the
scheduled payments of interest that would have been made on the
Notes to be converted had such Notes remained outstanding from the
conversion date through the earlier of (i) the date that is two
years after the conversion date and (ii) February 15, 2023 if the
Notes had not been so converted. The present values of the
remaining interest payments will be computed using a discount rate
equal to 2.0%. Such present value shall be computed by us in good
faith.
43
If a
conversion date occurs after the close of business on a regular
record date but prior to the open of business on the interest
payment date corresponding to such regular record date, we will not
pay accrued interest to any converting holder and will instead pay
the full amount of the relevant interest payment on such interest
payment date to the holder of record on such regular record date.
In such case, the interest make-whole payment to such converting
holder will equal the present value of all remaining interest
payments, starting with the next interest payment date for which
interest has not been provided for until the earlier of (i) the
date that is two years after the conversion date and (ii) February
15, 2023 if the Notes had not been so converted, computed in the
manner described above using a discount rate equal to
2.0%.
We may
pay any interest make-whole payment either in cash or in shares of
our Class B Common Stock, at our election. In order to make an
election to pay any interest make-whole payment in cash or in
shares of our Class B Common Stock, we will be required to send
notice of our election to the holders of the Notes, the trustee,
the paying agent and the conversion agent no later than 15
scheduled trading days prior to the date that is one year after the
last date of original issuance of the Notes offered hereby.
Thereafter, we will be permitted to make an election no earlier
than 30 scheduled trading days prior to, but no later than 15
scheduled trading days before, the first scheduled trading day of
each calendar quarter that begins on or after July 1, 2020, which
election will be effective from the period that begins at the open
of business on the first scheduled trading day of such calendar
quarter and ends immediately prior to the open of business on the
first scheduled trading day of the immediately succeeding calendar
quarter. If we do not make such election, the payment of any
interest make-whole payment shall be in shares of our Class B
Common Stock. Our election with respect to any interest make-whole
payment required to be paid prior to the date that is one year
after the last date of original issuance of the Notes offered
hereby is to pay in shares of our Class B Common Stock. If we
elect, or are deemed to have elected, to pay any interest
make-whole payment by delivering shares of our Class B Common
Stock, the number of shares of Class B Common Stock a converting
holder of Notes will receive will be equal to the amount of the
interest make-whole payment due divided by the greater of (A) the
product of (x) 95.0% and (y) the simple average of the daily VWAP
of our Class B Common Stock for the 10 trading days ending on and
including the trading day immediately preceding the conversion date
and (B) the conversion price (rounded to the nearest
ten-thousandth) on the applicable conversion date. We will pay cash
in lieu of delivering any fractional share as described under
‘‘— Settlement upon Conversion.’’ If
we elect to pay any interest make-whole payment in cash we will pay
cash in an amount equal to the interest make-whole
payment.
Notwithstanding the
foregoing, (x) if we elect or are deemed to have elected to pay any
interest make-whole payment in shares of our Class B Common Stock,
the number of shares of our Class B Common Stock we may deliver in
connection with a conversion of the Notes, including those
delivered in connection with an interest make-whole payment, will
not exceed 61.6523 shares of Class B Common Stock per $1,000
principal amount of Notes, subject to adjustment at the same time
and in the same manner as the conversion rate as set forth under
‘‘— Conversion Rate Adjustments’’ and
(y) if we elect to pay any interest make-whole payment in cash, the
amount of cash we may deliver in connection with an interest
make-whole payment will not exceed 61.6523 shares per $1,000
principal amount of Notes. We will not be required to make any cash
payments in lieu of any fractional shares or have any further
obligation to deliver any shares of our Class B Common Stock or pay
any cash in excess of the threshold described above. In addition,
if in connection with any conversion the conversion rate is
adjusted as described under ‘‘—Increase in
Conversion Rate upon Conversion upon a Make-Whole Fundamental
Change or Notice of Redemption,’’ then such holder will
not receive the interest make-whole payment with respect to such
note. None of the trustee, paying agent or conversion agent shall
be responsible for determining or calculating or verifying our
calculations of the interest make-whole payment.
Fundamental Change Permits Holders to Require Us to Repurchase
Notes
If a
“fundamental change” (as defined below in this section)
occurs at any time, holders will have the right, at their option,
to require us to repurchase for cash all of their Notes, or any
portion of the principal amount thereof that is equal to $1,000 or
an integral multiple of $1,000. The fundamental change repurchase
date will be a date specified by us that is not less than 20 or
more than 35 calendar days following the date of our fundamental
change notice as described below.
The
fundamental change repurchase price we are required to pay will be
equal to 100% of the principal amount of the Notes to be
repurchased, plus accrued and unpaid interest to, but excluding,
the fundamental change repurchase date (unless the fundamental
change repurchase date falls after a regular record date but on or
prior to the interest payment date to which such regular record
date relates, in which case we will instead pay the full amount of
accrued and unpaid interest to the holder of record on such regular
record date, and the fundamental change repurchase price will be
equal to 100% of the principal amount of the Notes to be
repurchased).
44
A
“fundamental change” will be deemed to have occurred at
the time after the Notes are originally issued if any of the
following occurs:
(1)
a
“person” or “group” within the meaning of
Section 13(d) of the Exchange Act, other than us, our wholly owned
subsidiaries and our and their employee benefit plans, has become
the direct or indirect “beneficial owner,” as defined
in Rule 13d-3 under the Exchange Act, of (i) our Class B
Common Stock representing more than 50% of the voting power of our
Class B Common Stock or (ii) our common equity representing more
than 50% of the voting power of our common equity on an aggregate
basis; provided that, for purposes of both clauses (i) and
(ii), the voting power of our Class A Common Stock and our Class B
Common Stock directly or indirectly “beneficially
owned,” as defined in Rule 13d-3 under the Exchange Act, by a
Permitted Holder (as defined below) or a “group”
(composed solely of Permitted Holders) will exclude (A) any shares
of our Class A Common Stock and our Class B Common Stock directly
or indirectly beneficially owned by such Permitted Holder on the
date of the Indenture for so long as such shares of our Class A
Common Stock or Class B Common Stock, as the case may be, are
directly or indirectly beneficially owned by such Permitted Holder
and (B) any shares of our Class B Common Stock directly or
indirectly beneficially owned by such Permitted Holder that are
acquired after the date of the Indenture by such Permitted Holder
pursuant to equity grants (or the exercise, vesting, settlement or
conversion thereof by such Permitted Holder outstanding on the date
of the Indenture or subsequently granted under one or more of our
equity incentive plans;
(2)
the consummation of
(A) any recapitalization, reclassification or change of our Class B
Common Stock (other than changes resulting from a subdivision or
combination) as a result of which our Class B Common Stock would be
converted into, or exchanged for, stock, other securities, other
property or assets; (B) any share exchange, consolidation or merger
of us pursuant to which our Class B Common Stock will be converted
into cash, securities or other property or assets; or (C) any sale,
lease or other transfer in one transaction or a series of
transactions of all or substantially all of the consolidated assets
of us and our subsidiaries, taken as a whole, to any person other
than one of our direct or indirect wholly owned subsidiaries;
provided, however, that a transaction described in clause (B) in
which the holders of all classes of our common equity immediately
prior to such transaction own, directly or indirectly, more than
50% of all classes of common equity of the continuing or surviving
corporation or transferee or the parent thereof immediately after
such transaction in substantially the same proportions as such
ownership immediately prior to such transaction shall not be a
fundamental change pursuant to this clause (2);
(3)
our stockholders
approve any plan or proposal for the liquidation or dissolution of
us; or
(4)
our Class B Common
Stock (or other common stock underlying the Notes) ceases to be
listed or quoted on any of The New York Stock Exchange, The NASDAQ
Global Select Market, The NASDAQ Global Market or The NASDAQ
Capital Market (or any of their respective
successors).
A
transaction or transactions described in clause (1) or clause (2)
above will not constitute a fundamental change, however, if at
least 90% of the consideration received or to be received by our
Class B Common Stockholders, excluding cash payments for fractional
shares, in connection with such transaction or transactions
consists of shares of common stock that are listed or quoted on any
of The New York Stock Exchange, The NASDAQ Global Select Market,
The NASDAQ Global Market or The NASDAQ Capital Market (or any of
their respective successors) or will be so listed or quoted when
issued or exchanged in connection with such transaction or
transactions and as a result of such transaction or transactions
the Notes become convertible into such consideration, excluding
cash payments for fractional shares (subject to the provisions set
forth above under “—Conversion Rights—Settlement
upon Conversion”).
If any
transaction in which our Class B Common Stock is replaced by the
securities of another entity occurs, following completion of any
related make-whole fundamental change period (or, in the case of a
transaction that would have been a fundamental change or a
make-whole fundamental change but for the immediately preceding
paragraph, following the effective date of such transaction),
references to us in the definition of “fundamental
change” above shall instead be references to such other
entity.
‘‘Permitted
Holder’’ means any of (1) Marshall Chesrown, our Chief
Executive Officer as of the date of this prospectus, (2) Steven
Berrard, our Chief Financial Officer as of the date of this
prospectus and (3) each of the Affiliated Holders (as defined
below) of either of the natural persons referred to in clauses (1)
and (2) of this definition.
“Affiliated
Holders’’ means, (1) with respect to any specified
natural person, any company, partnership, trust, foundation or
other entity or investment vehicle for which such specified natural
person (or such specified person’s estate) retains sole
dispositive and exclusive voting power with respect to the Class A
Common Stock and/or the Class B Common Stock, as the case may be,
held by such company, partnership, trust, foundation or other
entity or investment vehicle, and the trustees, legal
representatives, beneficiaries and/or beneficial owners, but solely
in such capacity, of such company, partnership, trust, foundation
or other entity or investment vehicle and (2) the estates of such
specified natural person (it being understood, for the avoidance of
doubt, that this clause (2) will not cover any person to whom any
securities are transferred from any such
estate).”
45
For
purposes of the definition of “fundamental change”
above, any transaction that constitutes a fundamental change
pursuant to both clause (1) and clause (2) of such definition
(without giving effect to the proviso to clause (2)) shall be
deemed a fundamental change solely under clause (2) of such
definition (subject to the proviso to clause (2)).
On or
before the 20th day after the occurrence of a fundamental change,
we will provide to all holders of the Notes, the trustee, the
paying agent and the conversion agent a notice of the occurrence of
the fundamental change and of the resulting repurchase right. Such
notice shall state, among other things:
●
the events causing
a fundamental change;
●
the date of the
fundamental change;
●
the last date on
which a holder may exercise the repurchase right;
●
the fundamental
change repurchase price;
●
the fundamental
change repurchase date;
●
the name and
address of the paying agent and the conversion agent, if
applicable;
●
if applicable, the
conversion rate and any adjustments to the conversion
rate;
●
that the Notes with
respect to which a fundamental change repurchase notice has been
delivered by a holder may be converted only if the holder withdraws
the fundamental change repurchase notice in accordance with the
terms of the Indenture; and
●
the procedures that
holders must follow to require us to repurchase their
Notes.
Simultaneously with
providing such notice, we will publish a notice containing this
information in a newspaper of general circulation in The City of
New York or publish the information on our website or through such
other public medium as we may use at that time.
To
exercise the fundamental change repurchase right, a holder must
deliver, on or before the business day immediately preceding the
fundamental change repurchase date, the Notes to be repurchased,
duly endorsed for transfer, together with a written repurchase
notice, to the paying agent. Each repurchase notice must
state:
●
if certificated,
the certificate numbers of such holder’s Notes to be
delivered for repurchase;
●
the portion of the
principal amount of Notes to be repurchased, which must be $1,000
or an integral multiple thereof; and
●
that the Notes are
to be repurchased by us pursuant to the applicable provisions of
the Notes and the Indenture.
If the
Notes are not in certificated form, such repurchase notice must
comply with appropriate DTC procedures.
Holders
may withdraw any repurchase notice (in whole or in part) by a
written notice of withdrawal delivered to the paying agent prior to
the close of business on the business day immediately preceding the
fundamental change repurchase date. The notice of withdrawal shall
state:
●
the principal
amount of the withdrawn Notes, which must be $1,000 or an integral
multiple thereof;
●
if certificated
Notes have been issued, the certificate numbers of the withdrawn
Notes; and
●
the principal
amount, if any, which remains subject to the repurchase notice,
which must be a minimum of $1,000 or an integral multiple
thereof.
If the
Notes are not in certificated form, such notice of withdrawal must
comply with appropriate DTC procedures.
46
We will
be required to repurchase the Notes on the fundamental change
repurchase date. Holders who have exercised the repurchase right
will receive payment of the fundamental change repurchase price on
the later of (i) the fundamental change repurchase date and (ii)
the time of book-entry transfer or the delivery of the Notes. If
the paying agent holds money sufficient to pay the fundamental
change repurchase price of the Notes on the fundamental change
repurchase date, then, with respect to the Notes that have been
properly surrendered for repurchase to the paying agent and have
not been validly withdrawn:
●
the Notes will
cease to be outstanding and interest will cease to accrue (whether
or not book-entry transfer of the Notes is made or whether or not
the Notes are delivered to the paying agent); and
●
all other rights of
the holder will terminate (other than the right to receive the
fundamental change repurchase price).
In
connection with any repurchase offer pursuant to a fundamental
change repurchase notice, we will, if required:
●
comply with the
provisions of Rule 13e-4, Rule 14e-1 and any other tender offer
rules under the Exchange Act that may then be
applicable;
●
file a Schedule TO
or any other required schedule under the Exchange Act;
and
●
otherwise comply
with all federal and state securities laws in connection with any
offer by us to repurchase the Notes;
in each
case, so as to permit the rights and obligations under this
“—Fundamental Change Permits Holders to Require Us to
Repurchase Notes” to be exercised in the time and in the
manner specified in the Indenture.
No
Notes may be repurchased on any date at the option of holders upon
a fundamental change if the principal amount of the Notes has been
accelerated, and such acceleration has not been rescinded, on or
prior to such date (except in the case of an acceleration resulting
from a default by us in the payment of the fundamental change
repurchase price with respect to such Notes).
The
repurchase rights of the holders could discourage a potential
acquirer of us. The fundamental change repurchase feature, however,
is not the result of management’s knowledge of any specific
effort to obtain control of us by any means or part of a plan by
management to adopt a series of anti-takeover
provisions.
The
term fundamental change is limited to specified transactions and
may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer to
repurchase the Notes upon a fundamental change may not protect
holders in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving
us.
Furthermore,
holders may not be entitled to require us to repurchase their Notes
or be entitled to an increase in the conversion rate upon
conversion as described under “—Increase in Conversion
Rate upon Conversion upon a Make-Whole Fundamental Change or Notice
of Redemption” in circumstances involving a significant
change in the composition of our board unless such change is in
connection with a fundamental change or make-whole fundamental
change as described herein.
The
definition of fundamental change includes a phrase relating to the
sale, lease or other transfer of “all or substantially
all” of our consolidated assets. There is no precise,
established definition of the phrase “substantially
all” under applicable law. Accordingly, the ability of a
holder of the Notes to require us to repurchase its Notes as a
result of the sale, lease or other transfer of less than all of our
assets may be uncertain.
If a
fundamental change were to occur, we may not have enough funds to
pay the fundamental change repurchase price. Our ability to
repurchase the Notes for cash may be limited by restrictions on our
ability to obtain funds for such repurchase through dividends from
our subsidiaries, the terms of our then existing borrowing
arrangements or otherwise. See “Risk Factors—Risks
Related to the Notes—We may not have the ability to raise the
funds necessary to settle the Notes in cash on a conversion, to
repurchase the Notes on a fundamental change, or to repay the Notes
at maturity. In addition, the terms of our future debt may contain
limitations on our ability to pay cash on conversion or repurchase
of the Notes.” If we fail to repurchase the Notes when
required following a fundamental change, we will be in default
under the Indenture. In addition, we have, and may in the future
incur, other indebtedness with similar change in control provisions
permitting our holders to accelerate or to require us to repurchase
our indebtedness upon the occurrence of similar events or on some
specific dates.
Consolidation, Merger or Sale of Assets
The
Indenture provides that we shall not consolidate with or merge with
or into, or sell, convey, transfer or lease all or substantially
all of the consolidated properties and assets of us and our
subsidiaries, taken as a whole, to, another person, unless (i) the
resulting, surviving or transferee person (if not us) is a
corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia,
and such corporation (if not us) expressly assumes (A) by
supplemental indenture all of our obligations under the Notes and
the Indenture and, (B) to the extent the registration rights
agreement is then still operative, all of our obligations under the
registration rightsagreement; and (ii) immediately after giving
effect to such transaction, no default or event of default has
occurred and is continuing under the Indenture. Upon any such
consolidation, merger or sale, conveyance, transfer or lease, the
resulting, surviving or transferee person (if not us) shall succeed
to, and may exercise every right and power of, ours under the
Indenture, and we shall be discharged from our obligations under
the Notes and the Indenture except in the case of any such
lease.
47
Although these
types of transactions are permitted under the Indenture, certain of
the foregoing transactions could constitute a fundamental change
permitting each holder to require us to repurchase the Notes of
such holder as described above.
Events of Default
Each of
the following is an event of default with respect to the
Notes:
(1)
default in any
payment of interest on any Note when due and payable and the
default continues for a period of 30 days;
(2)
default in the
payment of principal of any Note when due and payable at its stated
maturity, upon optional redemption, upon any required repurchase,
upon declaration of acceleration or otherwise;
(3)
our failure to
comply with our obligation to convert the Notes in accordance with
the Indenture upon exercise of a holder’s conversion right,
including the payment of any interest make-whole
payment;
(4)
our failure to give
a fundamental change notice as described under
“—Fundamental Change Permits Holders to Require Us to
Repurchase Notes,” notice of a make-whole fundamental change
as described under “Conversion Rights—Increase in
Conversion Rate upon Conversion upon a Make-Whole Fundamental
Change or Notice of Redemption” or notice of a specified
distribution or specified corporate event as described under
“—Conversion Rights—Conversion upon Specified
Corporate Events,” in each case when due;
(5)
our failure to
comply with our obligations under “—Consolidation,
Merger or Sale of Assets”;
(6)
our failure for 60
days after written notice from the trustee or the holders of at
least 25% in principal amount of the Notes then outstanding has
been received to comply with any of our other agreements contained
in the Notes or Indenture;
(7)
default by us or
any of our significant subsidiaries (as defined in Article 1, Rule
1-02 of Regulation S-X) with respect to any mortgage, agreement or
other instrument under which there may be outstanding, or by which
there may be secured or evidenced, any indebtedness for money
borrowed in excess of $5,000,000 (or its foreign currency
equivalent) in the aggregate of us and/or any such subsidiary,
whether such indebtedness now exists or shall hereafter be created
(i) resulting in such indebtedness becoming or being declared
due and payable or (ii) constituting a failure to pay the
principal or interest of any such debt when due and payable at its
stated maturity, upon required repurchase, upon declaration of
acceleration or otherwise;
(8)
certain events of
bankruptcy, insolvency, or reorganization of us or any of our
significant subsidiaries; or
(9)
a final judgment or
judgments for the payment of $5,000,000 (or its foreign currency
equivalent) or more (excluding any amounts covered by insurance) in
the aggregate rendered against us or any of our subsidiaries, which
judgment is not discharged, bonded, paid, waived or stayed within
90 days after (i) the date on which the right to appeal thereof has
expired if no such appeal has commenced, or (ii) the date on which
all rights to appeal have been extinguished.
The
trustee shall not be deemed to have knowledge of an event of
default unless and until an officer within the corporate trust
department of the trustee responsible for the administration of the
Indenture (a "responsible officer of the trustee") receives written
notification of such event of default describing the circumstances
of such, and identifying the circumstances constituting such events
of default.
If an
event of default occurs and is continuing (other than an event of
default described in clause (8) above), the trustee by notice to
us, or the holders of at least 25% in principal amount of the
outstanding Notes by notice to us and the trustee may declare 100%
of the principal of and accrued and unpaid interest, if any, on all
the Notes to be due and payable. In case of certain events of
bankruptcy, insolvency or reorganization involving us or a
significant subsidiary, 100% of the principal of and accrued and
unpaid interest on the Notes will automatically become due and
payable. Upon such a declaration of acceleration, such principal
and accrued and unpaid interest, if any, will be due and payable
immediately.
Notwithstanding the
foregoing, the Indenture provides that, to the extent we elect, the
sole remedy for an event of default relating to: (i) our failure to
deliver to the trustee pursuant to Section 314(a)(1) of the Trust
Indenture Act any documents or reports that we are required to file
with the SEC pursuant to Section 13 or 15(D) of the Exchange Act or
(ii) our failure to comply with our obligations as set forth under
“—Reports” below, will after the occurrence of
such an event of default consist exclusively of the right to
receive additional interest on the Notes at a rate equal to 0.25%
per annum of the principal amount of the Notes outstanding for each
day during the 60-day period on which such event of default is
continuing beginning on, and including, the date on which such an
event of default first occurs (in addition to any additional
interest that may accrue as a result of a registration default as
described below under the caption “—Registration
Rights; Additional Interest”).
48
If we
so elect, such additional interest will be payable in the same
manner and on the same dates as the stated interest payable on the
Notes. On the 61st day after such event of default (if the event of
default relating to the reporting obligations or the failure to
comply with the requirements of Section 314(a)(1) of the Trust
Indenture Act is not cured or waived prior to such 61st day), the
Notes will be subject to acceleration as provided above. The
provisions of the Indenture described in this paragraph do not
affect the rights of holders of Notes in the event of the
occurrence of any other event of default. In the event we do not
elect to pay the additional interest following an event of default
in accordance with this paragraph or we elected to make such
payment but do not pay the additional interest when due, the Notes
will be immediately subject to acceleration as provided
above.
In
order to elect to pay the additional interest as the sole remedy
during the first 60 days after the occurrence of an event of
default relating to the failure to comply with the reporting
obligations or the failure to comply with the requirements of
Section 314(a)(1) of the Trust Indenture Act in accordance with the
two immediately preceding paragraphs, we must notify all holders of
Notes, the trustee and the paying agent of such election prior to
the beginning of such 60-day period. Upon our failure to timely
give such notice, the Notes will be immediately subject to
acceleration as provided above.
If any
portion of the amount payable on the Notes upon acceleration is
considered by a court to be unearned interest (through the
allocation of the value of the instrument to the embedded warrant
or otherwise), the court could disallow recovery of any such
portion.
The
holders of a majority in principal amount of the outstanding Notes
may waive all past defaults (except with respect to nonpayment of
principal or interest or with respect to the failure to deliver the
consideration due upon conversion) and rescind any such
acceleration with respect to the Notes and its consequences if (i)
rescission would not conflict with any judgment or decree of a
court of competent jurisdiction and (ii) all existing events of
default, other than the nonpayment of the principal of and interest
on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived.
Each
holder shall have the right to receive payment or delivery, as the
case may be, of:
●
the principal
(including the redemption price and the fundamental change
repurchase price, if applicable) of;
●
accrued and unpaid
interest, if any, on; and
●
the consideration
due upon conversion of,
its
Notes, on or after the respective due dates expressed or provided
for in the Indenture, or to institute suit for the enforcement of
any such payment or delivery, as the case may be, and such right to
receive such payment or delivery, as the case may be, on or after
such respective dates shall not be impaired or affected without the
consent of such holder.
If an
event of default occurs and is continuing, the trustee will be
under no obligation to exercise any of the rights or powers under
the Indenture at the request or direction of any of the holders
unless such holders have offered to the trustee indemnity or
security satisfactory to the trustee against any loss, liability or
expense. Except to enforce the right to receive payment of
principal or interest when due, or the right to receive payment or
delivery of the consideration due upon conversion, no holder may
pursue any remedy with respect to the Indenture or the Notes
unless:
(1)
such holder has
previously given the trustee notice that an event of default is
continuing;
(2)
holders of at least
25% in principal amount of the outstanding Notes have requested the
trustee to pursue the remedy;
(3)
such holders have
offered the trustee security or indemnity reasonably satisfactory
to it against any loss, liability or expense;
(4)
the trustee has not
complied with such request within 60 days after the receipt of the
request and the offer of such security or indemnity;
and
(5)
the holders of a
majority in principal amount of the outstanding Notes have not
given the trustee a direction that, in the opinion of the trustee,
is inconsistent with such request within such 60-day
period.
Subject
to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the trustee or of exercising any trust or power
conferred on the trustee. However, the trustee may refuse to follow
any direction that conflicts with law or the Indenture, that may
involve the trustee in personal liability, or if it is not provided
with security and/or indemnity to its satisfaction and may take any
other action it deems proper that is not inconsistent with any such
direction received from holders. In addition, the trustee will not
be required to expend its own funds under any
circumstances.
49
The
Indenture provides that in the event an event of default has
occurred and is continuing and a responsible officer has written
notice or actual knowledge of such event, the trustee will be
required in the exercise of its powers to use the degree of care
that a prudent person would use in the conduct of its own affairs.
The trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the trustee determines
is unduly prejudicial to the rights of any other holder or that
would involve the trustee in personal liability. Prior to taking
any action under the Indenture, the trustee will be entitled to
security or indemnification satisfactory to it in its sole
discretion against any loss, liability or expense caused by taking
or not taking such action.
The
Indenture provides that if a default occurs and is continuing and
is actually known to a responsible officer of the trustee, the
trustee must deliver to each holder notice of the default within 90
days after the responsible officer has written notice or actual
knowledge. Except in the case of a default in the payment of
principal of or interest on any Note or a default in the payment or
delivery of the consideration due upon conversion, the trustee may
withhold notice if and so long as the trustee in good faith
determines that withholding notice is in the interests of the
holders. In addition, we are required to deliver to the trustee,
within 120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any default that
occurred during the previous year. We are also required to deliver
to the trustee, within 30 days after the occurrence thereof,
written notice of any event which would constitute a default under
the Indenture, its status and what action we are taking or
proposing to take in respect thereof.
Payments of the
redemption price, the fundamental change repurchase price,
principal and interest that are not made when due will accrue
interest per annum at the then-applicable interest rate from the
required payment date.
Modification and Amendment
Subject
to certain exceptions, the Indenture or the Notes may be amended
with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding (including without limitation,
consents obtained in connection with a repurchase of, or tender or
exchange offer for, Notes) and, subject to certain exceptions, any
past default or compliance with any provisions may be waived with
the consent of the holders of a majority in principal amount of the
Notes then outstanding (including, without limitation, consents
obtained in connection with a repurchase of, or tender or exchange
offer for, Notes). However, without the consent of each holder of
an outstanding Note affected, no amendment may, among other
things:
(1)
reduce
the amount of Notes whose holders must consent to an
amendment;
(2)
reduce
the rate of or extend the stated time for payment of interest on
any note;
(3)
reduce
the principal of or extend the stated maturity of any
note;
(4)
make
any change that adversely affects the conversion rights of any
Notes;
(5)
reduce
the redemption price or the fundamental change repurchase price of
any Note or amend or modify in any manner adverse to the holders of
Notes our obligation to make such payments, whether through an
amendment or waiver of provisions in the covenants, definitions or
otherwise;
(6)
make
any Note payable in money, or at a place of payment, other than
that stated in the note;
(7)
change
the ranking of the Notes;
(8)
impair
the right of any holder to receive payment of principal and
interest (including any interest make-whole payment, if applicable)
on such holder’s Notes on or after the due dates therefor or
to institute suit for the enforcement of any payment on or with
respect to such holder’s Notes; or
(9)
make
any change in the amendment provisions that require each
holder’s consent or in the waiver provisions.
Without
the consent of any holder, we and the trustee may amend the
Indenture to:
(1)
cure
any ambiguity, omission, defect or inconsistency;
(2)
provide
for the assumption by a successor corporation of our obligations
under the Indenture;
(3)
add
guarantees with respect to the Notes;
(4)
secure
the Notes;
(5)
add to
our covenants or events of default for the benefit of the holders
or surrender any right or power conferred upon us;
(6)
make
any change that does not adversely affect the rights of any
holder;
(7)
in
connection with any share exchange event described under
“—Conversion Rights—Recapitalizations,
Reclassifications and Changes of Our Class B Common Stock”
above, provide that the Notes are convertible into reference
property, subject to the provisions described under
“—Conversion Rights—Settlement upon
Conversion” above, and make certain related changes to the
terms of the Notes to the extent expressly required by the
Indenture;
(8)
irrevocably elect a
settlement method or a specified dollar amount, or eliminate our
right to elect a settlement method; or
(9)
comply with any
requirement of the SEC in connection with the qualification of the
Indenture under the Trust Indenture Act, to the extent that the
Indenture is required to comply with the Trust Indenture
Act.
50
Holders
do not need to approve the particular form of any proposed
amendment. It will be sufficient if such holders approve the
substance of the proposed amendment. After an amendment under the
Indenture becomes effective, we are required to deliver to the
holders (with a copy to the trustee) a notice briefly describing
such amendment. However, the failure to give such notice to all the
holders, or any defect in the notice, will not impair or affect the
validity of the amendment.
Discharge
We may
satisfy and discharge our obligations under the Indenture by
delivering to the securities registrar for cancellation all
outstanding Notes or by depositing with the trustee or delivering
to the holders, as applicable, after the Notes have become due and
payable, whether at maturity, at any redemption date, at any
fundamental change repurchase date, upon conversion or otherwise,
cash and/or shares of Class B Common Stock (which shall be
delivered directly to the holders and not to the trustee), solely
to satisfy outstanding conversions, as applicable, sufficient to
pay all of the outstanding Notes and paying all other sums payable
under the Indenture by us. Such discharge is subject to terms
contained in the Indenture.
Calculations in Respect of Notes
Except
as otherwise provided above, we are responsible for making all
calculations called for under the Notes. These calculations
include, but are not limited to, determinations of the stock price,
the last reported sale prices of our Class B Common Stock, the
daily VWAPs, the daily conversion values, the daily settlement
amounts, accrued interest payable on the Notes, any interest
make-whole payment and the conversion rate of the Notes. We will
make all these calculations in good faith and, absent manifest
error, our calculations will be final and binding on holders of
Notes. We will provide a schedule of our calculations to each of
the trustee, the paying agent and the conversion agent, and each of
the trustee and the conversion agent is entitled to rely
conclusively upon the accuracy of our calculations without
independent verification. The trustee will forward our calculations
to any registered holder of Notes upon the request of that
holder.
Reports
The
Indenture provides that any documents or reports that we are
required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act must be delivered by us to the trustee within 15
days after the same are required to be filed with the SEC (giving
effect to any grace period provided by Rule 12b-25 under the
Exchange Act). Documents filed by us with the SEC via the EDGAR
system will be deemed to be filed with the trustee as of the time
such documents are filed via EDGAR, it being understood that the
trustee shall not be responsible for determining whether such
filings have been made.
Rule 144A Information
At any
time we are not subject to Section 13 or 15(d) of the Exchange Act,
we will, so long as any of the Notes or any shares of our Class B
Common Stock issuable upon conversion thereof will, at such time,
constitute “restricted securities” within the meaning
of Rule 144(a)(3) under the Securities Act, promptly provide to the
trustee and will, upon written request, provide to any holder,
beneficial owner or prospective purchaser of such Notes or any
shares of our Class B Common Stock issuable upon conversion of such
Notes the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act to facilitate the resale of
such Notes or shares of our Class B Common Stock pursuant to Rule
144A under the Securities Act. We will take such further action as
any holder or beneficial owner of such Notes may reasonably request
to the extent from time to time required to enable such holder or
beneficial owner to sell such Notes or shares of our Class B Common
Stock in accordance with Rule 144A under the Securities Act, as
such rule may be amended from time to time.
Trustee
Wilmington Trust,
National Association, is the trustee, security registrar, paying
agent and conversion agent. Wilmington Trust, National Association,
in each of its capacities, including without limitation as trustee,
security registrar, paying agent and conversion agent, assumes no
responsibility for the accuracy or completeness of the information
concerning us or our affiliates or any other party contained in
this document or the related documents or for any failure by us or
any other party to disclose events that may have occurred and may
affect the significance or accuracy of such
information.
51
We
maintain banking relationships in the ordinary course of business
with the trustee and its affiliates.
Governing Law
The
Indenture provides that it and the Notes, and any claim,
controversy or dispute arising under or related to the Indenture or
the Notes, is governed by and construed in accordance with the laws
of the State of New York.
Registration Rights; Additional Interest
The
following summary of the registration rights to be provided in the
registration rights agreement, the Indenture and the Notes is not
complete. You should refer to the registration rights agreement,
the Indenture and the Notes for a full description of the
registration rights that apply to the Notes.
We
agreed to file, and use our commercially reasonable efforts to have
declared effective, within 120 days after January 14, 2020, a shelf
registration statement under the Securities Act to register resales
of the registrable securities, and use our commercially reasonable
efforts to keep such shelf registration statement effective until
the earlier of:
●
the date by which
all registrable securities have been sold pursuant to such shelf
registration statement; and
●
the date on which
none of the securities available for sale under such shelf
registration statement constitute registrable
securities.
We are
permitted to suspend the use of the prospectus that is a part of
such shelf registration statement for a period not to exceed an
aggregate of 45 days in any 90-day period or an aggregate of 90
days in any 12-month period under certain circumstances relating to
pending corporate developments, public filings with the SEC and
other material events.
A
holder of registrable securities that sells registrable securities
pursuant to this shelf registration statement is required to
provide information about itself and the specifics of the sale, be
named as a selling securityholder in this prospectus, deliver this
prospectus to purchasers, be subject to relevant civil liability
provisions under the Securities Act in connection with such sales
and be bound by the provisions of the registration rights agreement
which are applicable to such holder.
If
after the day that is 120 days after January 14, 2020 (which date
has been adjusted to June 29, 2020 for certain intervening events,
including the COVID-19 pandemic), registrable securities are held
by any holder of Notes and a shelf registration statement has
either not been filed with and declared effective by the SEC or
ceases to be effective, or the prospectus contained therein ceases
to be usable (subject to certain exceptions) in connection with
resales of Notes and any Class B Common Stock issuable upon the
conversion of the Notes in accordance with, and during, the periods
specified in the registration rights agreement and (A) unless we
declare a suspension period to be in effect, we do not cure such
registration default within five business days by a post-effective
amendment or a report filed pursuant to the Exchange Act or (B) if
applicable, we do not terminate the suspension period described
above by the 45th day or 90th day, as the case may be (we refer to
each event described above in this sentence as a registration
default), interest (over and above the interest set forth in the
title of the Notes) at the rate of 0.50% per year will accrue on
the principal amount of any outstanding Notes that are registrable
securities from, and including, the date on which any such
registration default occurs to, but excluding, the date on which
the registration default has been cured. We will have no other
liabilities for monetary damages with respect to our registration
obligations. Additional interest will not be payable with respect
to any shares of Class B Common Stock issued upon conversion of the
Notes.
We
agreed to pay all registration expenses of any shelf registration,
provide each holder that is selling registrable securities pursuant
to any shelf registration statement copies of the related
prospectus and take other commercially reasonable actions as are
required to permit, subject to the foregoing, unrestricted resales
of the registrable securities. Selling securityholders remain
responsible for all selling expenses (i.e., commissions and
discounts).
For
purposes of the discussion above, “registrable
securities” refers to the Notes and any shares of Class B
Common Stock into which the Notes are convertible and shares of our
Class B Common stock, if any, issued as an interest make-whole
payment, but excluding any such securities that have been resold in
accordance with an effective registration statement or that have
otherwise been transferred in a transaction in which we have
delivered a new security that (1) is not subject to transfer
restrictions under the Securities Act, (2) does not include a
restrictive legend and (3) is assigned an unrestricted
CUSIP.
52
Under
Rule 144 under the Securities Act (“Rule 144”) as
currently in effect, a person who acquired Notes from us or our
affiliate and who has beneficially owned Notes or shares of our
Class B Common Stock issued upon conversion of the Notes for at
least six months is entitled to sell such Notes or shares of our
Class B Common Stock without registration, so long as (i) such
person is not deemed to have been our affiliate at the time of, or
at any time during three months immediately preceding, the sale and
(ii) we have filed all required reports under Section 13 or
15(d) of the Exchange Act, as applicable, during the twelve months
preceding such sale (other than current reports on Form 8-K). If we
are not current in filing our Exchange Act reports, a person who
owns Notes or shares of our Class B Common Stock issued upon
conversion of the Notes could be required to hold such Notes or
shares of our Class B Common Stock indefinitely.
If, at
any time during the six-month period beginning on, and including,
the date that is six months after January 14, 2020, we fail to
timely file any document or report that we are required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act,
as applicable (after giving effect to all applicable grace periods
thereunder and other than reports on Form 8-K), or the Notes
offered hereby are not otherwise freely tradable pursuant to Rule
144 by holders other than our affiliates or holders that were our
affiliates at any time during the three months immediately
preceding (as a result of restrictions pursuant to U.S. securities
laws or the terms of the Indenture or the Notes), we will pay
additional interest on such Notes. Additional interest will accrue
on such Notes at the rate of 0.50% per annum of the principal
amount of such Notes outstanding for each day during such period
for which our failure to file has occurred and is continuing or
such Notes are not otherwise freely tradable as described above by
holders other than our affiliates (or holders that were our
affiliates at any time during the three months immediately
preceding).
Any
Note or Class B Common Stock issued upon the conversion or exchange
of a Note that is repurchased or owned by any affiliate of us may
not be resold by such affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction
that results in such Note or Class B Common Stock, as the case may
be, no longer being a “restricted security” (as defined
in Rule 144). We will cause any Note that is repurchased or owned
by us to be surrendered to the trustee for cancellation as
described under “—Purchase and Cancellation”
above.
The
Notes were issued with a restricted CUSIP number.
Additional interest
pursuant to the foregoing provisions will be payable in arrears on
each interest payment date following accrual in the same manner as
regular interest on the Notes and will be in addition to any
additional interest that may accrue at our election as the sole
remedy relating to the failure to comply with our reporting
obligations as described under “—Events of
Default.”
Book-Entry, Settlement and Clearance
The Global Notes
The
Notes were initially issued in the form of one or more registered
Notes in global form, without interest coupons (the “global
Notes”). Upon issuance, each of the global Notes was
deposited with the trustee as custodian for DTC and registered in
the name of Cede & Co., as nominee of DTC.
Ownership of
beneficial interests in a global Note will be limited to persons
who have accounts with DTC (“DTC participants”) or
persons who hold interests through DTC participants. We expect that
under procedures established by DTC:
●
upon deposit of a
global Note with DTC’s custodian, DTC will credit portions of
the principal amount of the global Note to the accounts of the DTC
participants designated by the initial purchaser; and
●
ownership of
beneficial interests in a global Note will be shown on, and
transfer of ownership of those interests will be effected only
through, records maintained by DTC (with respect to interests of
DTC participants) and the records of DTC participants (with respect
to other owners of beneficial interests in the global
note).
Beneficial
interests in global Notes may not be exchanged for Notes in
physical, certificated form except in the limited circumstances
described below.
The
global Notes and beneficial interests in the global Notes are
subject to restrictions on transfer as described under
“Transfer Restrictions.”
Book-Entry Procedures for the Global Notes
All
interests in the global Notes are subject to the operations and
procedures of DTC and, therefore, holders of Notes must allow for
sufficient time in order to comply with these procedures if they
wish to exercise any of their rights with respect to the Notes. We
provide the following summary of those operations and procedures
solely for the convenience of investors. The operations and
procedures of DTC are controlled by that settlement system and may
be changed at any time. Neither we, the trustee, the agents nor the
initial purchaser are responsible for those operations or
procedures.
53
DTC has
advised us that it is:
●
a limited purpose
trust company organized under the laws of the State of New
York;
●
a “banking
organization” within the meaning of the New York State
Banking Law;
●
a member of the
Federal Reserve System;
●
a “clearing
corporation” within the meaning of the Uniform Commercial
Code; and
●
a “clearing
agency” registered under Section 17A of the Exchange
Act.
DTC was
created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between its
participants through electronic book-entry changes to the accounts
of its participants. DTC’s participants include securities
brokers and dealers, including the initial purchaser; banks and
trust companies; clearing corporations and other organizations.
Indirect access to DTC’s system is also available to others
such as banks, brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship
with a DTC participant, either directly or indirectly. Investors
who are not DTC participants may beneficially own securities held
by or on behalf of DTC only through DTC participants or indirect
participants in DTC.
So long
as DTC’s nominee is the registered owner of a global note,
that nominee will be considered the sole owner or holder of the
Notes represented by that global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests
in a global Note:
●
will not be
entitled to have Notes represented by the global Note registered in
their names;
●
will not receive or
be entitled to receive physical, certificated Notes;
and
●
will not be
considered the owners or holders of the Notes under the Indenture
for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee under the
Indenture.
As a
result, each investor who owns a beneficial interest in a global
Note must rely on the procedures of DTC to exercise any rights of a
holder of Notes under the Indenture (and, if the investor is not a
participant or an indirect participant in DTC, on the procedures of
the DTC participant through which the investor owns its
interest).
Payments of
principal and interest with respect to the Notes represented by a
global Note will be made by the paying agent (to the extent funded
by us) to DTC’s nominee as the registered holder of the
global note. Neither we nor the trustee (in any of its capacities)
will have any responsibility or liability for the payment of
amounts to owners of beneficial interests in a global note, for any
aspect of the records relating to or payments made on account of
those interests by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to those
interests.
Payments by
participants and indirect participants in DTC to the owners of
beneficial interests in a global Note will be governed by standing
instructions and customary industry practice and will be the
responsibility of those participants or indirect participants and
DTC.
Transfers between
participants in DTC will be effected under DTC’s procedures
and will be settled in same-day funds.
Certificated Notes
Notes
in physical, certificated form were issued and delivered to each
person that DTC identifies as a beneficial owner of the related
Notes only if:
●
DTC notifies us at
any time that it is unwilling or unable to continue as depositary
for the global Notes and a successor depositary is not appointed
within 90 days;
●
DTC ceases to be
registered as a clearing agency under the Exchange Act and a
successor depositary is not appointed within 90 days;
or
●
an event of default
with respect to the Notes has occurred and is continuing and such
beneficial owner requests that its Notes be issued in physical,
certificated form.
54
DESCRIPTION OF CAPITAL STOCK
Common Stock
Our
Articles of Incorporation authorize the issuance of 5,000,000
shares of common stock, $0.001 par value per share, of which 50,000
shares are designated as Class A Common Stock and all other shares
of common stock are designated as Class B Common Stock. The Class A
Common Stock ranks pari passu with all of the rights and privileges
of the Class B Common Stock, except that holders of the Class A
Common Stock are entitled to ten votes per share of Class A Common
Stock issued and outstanding. The Class B Common Stock are
identical to the Class A Common Stock in all material respects,
except that holders of the Class B Common Stock will be entitled to
one vote per share of Class B Common Stock issued and outstanding.
Our Class B Common Stock is registered pursuant to Section 12(b) of
the Exchange Act. The number of shares of Class B Common Stock,
$0.001 par value, outstanding on June 22, 2020 was 2,179,407
shares. In addition, 50,000 shares of Class A Common Stock, $0.001
par value, were outstanding on June 22, 2020.
Holders of shares
of Class A Common Stock and Class B Common Stock are entitled to
share ratably in dividends, if any, as may be declared, from time
to time by our Board, in its discretion, from funds legally
available to be distributed. In the event of a liquidation,
dissolution or winding up of our company, the holders of shares of
Class A Common Stock and Class B Common Stock are entitled to share
pro rata all assets remaining after payment in full of all
liabilities and the prior payment to the preferred stockholders if
any. Holders of Class A Common Stock and Class B Common Stock have
no preemptive rights to purchase our Class A Common Stock and Class
B Common Stock. There are no conversion rights or redemption or
sinking fund provisions with respect to the Class A Common Stock or
Class B Common Stock.
Preferred Stock
Our Articles of
Incorporation authorize the issuance of 10,000,000 shares of
preferred stock, $0.001 par value per share, in one or more classes
or series. The rights, preferences, privileges and restrictions of
the preferred stock of each series or class will be determined by
our Board and set forth in a certificate of designations relating
to such series or class that will amend our Articles of
Incorporation. As of June 22, 2020, no shares of preferred stock
were issued and outstanding.
Nevada Laws
The
Nevada Business Corporation Law contains a provision governing
“Acquisition of Controlling Interest.” This law
provides generally that any person or entity that acquires 20% or
more of the outstanding voting shares of a publicly-held Nevada
corporation in the secondary public or private market may be denied
voting rights with respect to the acquired shares, unless a
majority of the disinterested stockholders of the corporation
elects to restore such voting rights in whole or in part. The
control share acquisition act provides that a person or entity
acquires “control shares” whenever it acquires shares
that, but for the operation of the control share acquisition act,
would bring its voting power within any of the following three
ranges:
●
20% to
33%;
●
33% to 50%;
and
●
more than
50%.
A
“control share acquisition” is generally defined as the
direct or indirect acquisition of either ownership or voting power
associated with issued and outstanding control shares. The
stockholders or board of directors of a corporation may elect to
exempt the stock of the corporation from the provisions of the
control share acquisition act through adoption of a provision to
that effect in the articles of incorporation or bylaws of the
corporation. Our Articles of Incorporation and bylaws do exempt our
Class A Common Stock and Class B Common Stock from the control
share acquisition act.
Exclusive Forum
Our
Articles of Incorporation and bylaws do not contain an exclusive
forum provision.
Market Information
Our
Class B Common Stock Is Traded on the Nasdaq Capital Market under
the symbol “RMBL.”
Holders
As
of June 22, 2020, we had approximately 52 stockholders of record of
2,179,407 issued and outstanding shares of Class B Common Stock and
two holders of record of 50,000 issued and outstanding shares of
Class A Common Stock.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A
Common Stock and Class B Common Stock is West Coast Stock Transfer,
Inc.
55
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to “incorporate
by reference” information
into this prospectus, which means that we can disclose important
information about us by referring to another document filed
separately with the SEC. The information incorporated by reference
is considered to be a part of this prospectus. This prospectus
incorporates by reference the documents and reports listed below
other than portions of these documents that are furnished under
Item 2.02 or Item 7.01 of a Current Report on Form 8–K:
●
The Annual Report
on Form 10–K for the
fiscal year ended December 31, 2019, filed on May 29, 2020, as
amended on Form 10-K/A, filed on June 2, 2020;
●
The Current Reports
on Form 8–K filed on
January 9, 2020, January 10, 2020, January 14, 2020, January 16,
2020, January 17, 2020, January 21, 2020, March 4, 2020, March 30,
2020, April 15, 2020, May 7, 2020, May 14, 2020, and May 19, 2020;
and
●
The description of
the Company’s common
stock contained in the Company’s Registration Statement on Form
8-A, filed with the SEC on October 18, 2017.
In
addition, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, shall be
deemed to be incorporated by reference in this prospectus and to be
a part hereof from the date of filing of such documents. In
addition, all reports and other documents filed by us pursuant to
the Exchange Act after the date of the initial registration
statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this
prospectus. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any subsequently
filed document that also is or is deemed to be incorporated by
reference herein, as the case may be, modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this prospectus.
We will
provide, without charge, to any person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon oral or
written request of such person, a copy of any or all of the
documents that have been incorporated by reference in this
prospectus but not delivered with the prospectus, including any
exhibits to such documents that are specifically incorporated by
reference in those documents.
Please
make your request by writing or telephoning us at the following
address or telephone number:
RumbleOn,
Inc.
901 W
Walnut Hill Lane
Irving,
Texas 75038
Tel:
(469) 250-1185
56
WHERE YOU CAN FIND MORE INFORMATION
We are
currently subject to the information requirements of the Exchange
Act and in accordance therewith file periodic reports, proxy
statements and other information with the Securities and Exchange
Commission. Our SEC filings will also be available to you on the
SEC’s website
at http://www.sec.gov.
We have filed with the SEC a registration statement on Form
S–3 under the Securities
Act for the Notes and the shares of Class B Common Stock being
offered by the selling securityholders. This prospectus does not
contain all of the information in the registration statement and
the exhibits and schedules that were filed with the registration
statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the
exhibits that were filed with the registration statement. Anyone
may obtain the registration statement and its exhibits and
schedules from the SEC as described above.
57
LEGAL MATTERS
The
validity of the securities offered through this prospectus has been
passed on by Akerman LLP, Fort Lauderdale, Florida and Snell &
Wilmer L.L.P., Las Vegas, Nevada.
58
EXPERTS
The
financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement have been so
incorporated by reference in reliance upon the report of Grant
Thornton LLP, independent registered public accountants, upon the
authority of said firm as experts in accounting and
auditing.
The
consolidated financial statements of RumbleOn, Inc. as of December
31, 2018 and for the year ended December 31, 2018 incorporated by
reference in this prospectus have been so incorporated in reliance
on the report of Scharf Pera & Co., PLLC, incorporated herein
by reference, given the authority of said firm as experts in
accounting and auditing.
59
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and
Distribution.
|
SEC registration
fee
|
$5,029.75
|
|
Legal fees and
expenses
|
$30,000
|
|
Accounting fees and
expenses
|
$30,000
|
|
Miscellaneous
expenses
|
$10, 000
|
|
Total
|
$75,029.75
|
_________________
All
amounts are estimates, other than the SEC’s registration fee.
We are
paying all expenses of the offering listed above. No portion of
these expenses will be borne by the selling securityholders. The
selling securityholders, however, will pay all underwriting
discounts and selling commissions, if any.
Item 15. Indemnification of Directors and
Officers.
No
director of RumbleOn will have personal liability to us or any of
our stockholders for monetary damages for breach of fiduciary duty
as a director involving any act or omission of any such director
since provisions have been made in our Articles of Incorporation
limiting such liability. The foregoing provisions shall not
eliminate or limit the liability of a director for:
●
any breach of the
director’s duty of
loyalty to us or our stockholders;
●
acts or omissions
not in good faith or, which involve intentional misconduct or a
knowing violation of law;
●
the payment of
dividends in violation of Section 78.300 of the Nevada Revised
Statutes; or
●
for any transaction
from which the director derived an improper personal
benefit.
We are
a corporation organized under the laws of the State of Nevada.
Section 78.138 of the Nevada Revised Statutes (“NRS”) provides that, unless the
corporation’s articles of
incorporation provide otherwise, a director or officer will not be
individually liable unless it is proven that (i) the
director’s or
officer’s acts or
omissions constituted a breach of his or her fiduciary duties, and
(ii) such breach involved intentional misconduct, fraud, or a
knowing violation of the law.
Section
78.7502 of the NRS permits a company to indemnify its directors and
officers against expenses, judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with a
threatened, pending, or completed action, suit, or proceeding, if
the officer or director (i) is not liable pursuant to NRS 78.138,
or (ii) acted in good faith and in a manner the officer or director
reasonably believed to be in or not opposed to the best interests
of the corporation and, if a criminal action or proceeding, had no
reasonable cause to believe the conduct of the officer or director
was unlawful. Section 78.7502 of the NRS requires a corporation to
indemnify a director or officer that has been successful on the
merits or otherwise in defense of any action or suit. Section
78.7502 of the NRS precludes indemnification by the corporation if
the officer or director has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals, to be liable to the
corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court determines that in
view of all the circumstances, the person is fairly and reasonably
entitled to indemnity for such expenses and requires a corporation
to indemnify its officers and directors if they have been
successful on the merits or otherwise in defense of any claim,
issue, or matter resulting from their service as a director or
officer.
Section
78.751 of the NRS permits a Nevada company to indemnify its
officers and directors against expenses incurred by them in
defending a civil or criminal action, suit, or proceeding as they
are incurred and in advance of final disposition thereof, upon
determination by the stockholders, the disinterested board members,
or by independent legal counsel. If so provided in the
corporation’s articles of
incorporation, bylaws, or other agreement, Section 78.751 of the
NRS requires a corporation to advance expenses as incurred upon
receipt of an undertaking by or on behalf of the officer or
director to repay the amount if it is ultimately determined by a
court of competent jurisdiction that such officer or director is
not entitled to be indemnified by the company. Section 78.751 of
the NRS further permits the company to grant its directors and
officers additional rights of indemnification under its articles of
incorporation, bylaws, or other agreement.
60
Section
78.752 of the NRS provides that a Nevada company may purchase and
maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee, or agent
of the company, or is or was serving at the request of the company
as a director, officer, employee, or agent of another company,
partnership, joint venture, trust, or other enterprise, for any
liability asserted against him and liability and expenses incurred
by him in his capacity as a director, officer, employee, or agent,
or arising out of his status as such, whether or not the company
has the authority to indemnify him against such liability and
expenses.
Article
VI of our amended Bylaws provide for indemnification of our
directors, officers, and employees in most cases for any liability
suffered by them or arising out of their activities as directors,
officers, and employees if they were not engaged in willful
misfeasance or malfeasance in the performance of his or her duties;
provided that in the event of a settlement the indemnification will
apply only when the Board of Directors approves such settlement and
reimbursement as being for our best interests. Our Bylaws,
therefore, limit the liability of directors to the maximum extent
permitted by Nevada law (Section 78.751).
Our
officers and directors are accountable to us as fiduciaries, which
means they are required to exercise good faith and fairness in all
dealings affecting RumbleOn. In the event a stockholder believes
the officers or directors have violated their fiduciary duties, the
stockholder may, subject to applicable rules of civil procedure, be
able to bring a class action or derivative suit to enforce the
stockholder’s rights,
including rights under certain federal and state securities laws
and regulations to recover damages from and require an accounting
by management. Stockholders who have suffered losses in connection
with the purchase or sale of their interest in RumbleOn in
connection with such sale or purchase, including the misapplication
by any such officer or director of proceeds from a sale of
securities may be able to recover such losses from us.
At
present, there is no pending litigation or proceeding involving any
of our directors or officers in which indemnification or
advancement is sought. We are not aware of any threatened
litigation that may result in claims for advancement or
indemnification.
We have
been advised that in the opinion of the SEC, insofar as
indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and other persons
pursuant to the foregoing provisions, or otherwise, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event a claim
for indemnification against such liabilities (other than payment of
expenses incurred or paid by a director or officer in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or other person in connection with the
securities being registered, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
Item
16. Exhibits.
|
Exhibit Number
|
|
Exhibit Description
|
|
|
Articles
of Incorporation filed on October 24, 2013 (Incorporated by
reference to Exhibit 3(i)(a) in the Company’s Registration Statement on Form
S-1/A, filed on March 20, 2014).
|
|
|
|
Certificate
of Amendment to Articles of Incorporation, filed on February 13,
2017 (Incorporated by reference to Exhibit 3.3 in the
Company’s Annual Report
on Form 10-K, filed on February 14, 2017).
|
|
|
|
Certificate
of Amendment to Articles of Incorporation, filed on June 25, 2018.
(Incorporated by reference to Exhibit 3.1 in the
Company’s Current Report
on Form 8-K, filed on June 28, 2018).
|
|
|
|
Certificate
of Designation for the Series B Preferred Stock (Incorporated by reference to Exhibit
3.1 in the Company’s
Current Report on Form 8-K, filed on October 31, 2018).
|
|
|
|
By-Laws,
as Amended (Incorporated by reference to Exhibit 3.2 in the
Company’s Annual Report
on Form 10-K, filed on February 14, 2017).
|
|
|
|
Certificate
of Change. (Incorporated by reference to Exhibit 3.1 in the
Company's Current Report on Form 8-K, filed on May 19,
2020).
|
|
|
|
Indenture,
dated January 14, 2020, between the Company and Wilmington Trust,
N.A. (Incorporated by
reference to Exhibit 4.1 in the Company’s Current Report on Form 8-K, filed
on January 16, 2020).
|
|
|
4.2
|
|
Form
6.75% Convertible Senior Note due 2025 (incorporated by reference
to Exhibit A of Exhibit 4.1)
|
|
|
Form of
Registration Rights Agreement, dated January 14, 2020.
(Incorporated by reference to Exhibit 4.3 in the
Company’s Current Report
on Form 8-K, filed on January 16, 2020)
|
|
|
5.1
|
|
Opinion
of Akerman LLP.*
|
|
5.2
|
|
Opinion
of Snell & Wilmer L.L.P.*
|
|
|
Form of
Note Exchange & Subscription Agreement, dated January 10, 2020
(Incorporated by reference to Exhibit 10.1 in the
Company’s Current Report
on Form 8-K, filed on January 16, 2020)
|
|
|
|
Consent
of Grant Thornton LLP**
|
|
|
|
Consent
of Scharf Pera & Co., PLLC**
|
|
|
23.3
|
|
Consent
of Akerman LLP (included in Exhibit 5.1) *
|
|
23.4
|
|
Consent
of Snell & Wilmer L.L.P. (included with Exhibit
5.2)*
|
|
|
Power
of Attorney (included on signature page of the Form S-1
Registration Statement (Commission File No.: 333-239285) previously
filed with the SEC on June 19, 2020. *
|
*
Previously filed.
** Filed herewith.
61
Item 17. Undertakings.
The
undersigned registrant hereby undertakes:
(a)(1)
To file, during any
period in which offers or sales are being made, a post–effective amendment to this
registration statement:
(i)
To include any
prospectus required by section 10(a)(3) of the Securities Act of
1933;
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in the volume and price represent no
more than 20 percent change in the maximum aggregate offering price
set forth in the “Calculation of Registration
Fee” table in the
effective registration statement;
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material
change to such information in the registration
statement;
Provided, however,
that:
paragraphs
(a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this section do not apply
if the registration statement is on Form S-3 or Form F-3 and the
information required to be included in a post–effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
(2)
That, for the
purpose of determining any liability under the Securities Act of
1933, each such post–effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3)
To remove from
registration by means of a post–effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(4)
That, for the
purpose of determining liability under the Securities Act of 1933
to any purchaser, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other
than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(b)
That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan’s annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering
thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
62
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Irving, State
of Texas, on this 26th day of June,
2020.
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RUMBLEON, INC.
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By:
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/s/ Marshall
Chesrown
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Marshall
Chesrown
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Chief
Executive Officer and Chairman
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Pursuant to the
requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the
capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Marshall
Chesrown
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Chief
Executive Officer and Chairman
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June
26, 2020
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Marshall
Chesrown
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(Principal Executive Officer)
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/s/ Steven R.
Berrard
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Chief
Financial Officer and Director
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June
26, 2020
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Steven
R. Berrard
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(Principal Financial Officer and Principal Accounting
Officer)
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*
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Director
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June
26, 2020
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Denmar
Dixon
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*
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Director
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June
26, 2020
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Richard
A. Gray, Jr.
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*
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Director
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June
26, 2020
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Kartik
Kakarala
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*
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Director
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June
26, 2020
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Michael
Marchlik
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*
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Director
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June
26, 2020
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Kevin
Westfall
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*
By:
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/s/ Steven
R. Berrard
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Steven
R. Berrard
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Attorney-In-Fact
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63
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We have issued our report dated May 29, 2020, with respect to the
consolidated financial statements of RumbleOn Inc. included
in the Annual Report on Form 10-K for the year ended December 31,
2019, which are incorporated by
reference in this Registration Statement. We consent to the
incorporation by reference of the
aforementioned report in this Registration Statement, and to the
use of our name as it appears under the caption
“Experts.”
/s/ GRANT THORNTON LLP
Dallas, Texas
June 26, 2020
Exhibit
23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We
consent to the incorporation by reference in this Registration
Statement on Form S-3 (the “Registration Statement”) of
our report dated April 1, 2019, on the financial statements of
RumbleOn, Inc. as of December 31, 2018 and for the year ended
December 31, 2018 appearing in RumbleOn, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2019. We further
consent to the inclusion of our name under the heading
“Experts” in this Registration Statement.
/s/
Scharf Pera & Co., PLLC
Charlotte,
North Carolina
June
26, 2020