CONNECTURE, INC. (NASDAQ:CNXR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
Series B Preferred Stock
On March 10, 2017, Connecture, Inc. (the Company) entered into an
Investment Agreement (the Investment Agreement) with Francisco
Partners IV, L.P., Francisco Partners IV-A, L.P. (collectively,
Francisco Partners) and Chrysalis Ventures II, L.P. (Chrysalis
and collectively with Francisco Partners, the Investors), to
which the Company issued and sold as of such date (the Closing)
to the Investors an aggregate of 17,500 shares of the Companys
newly created Series B Convertible Preferred Stock, par value
$0.001 per share (the Series B Preferred Stock), at a purchase
price of $1,000 per share, for an aggregate purchase price of
$17,500,000 (the Financing).
Under the terms of the Investment Agreement, the Series B
Preferred Stock issued and purchased in the Financing, and the
shares of the Companys common stock (the Common Stock) issuable
upon conversion of the Series B Preferred Stock (the Conversion
Shares), were issued in a transaction not involving any public
offering and will not be registered under the Securities Act of
1933, as amended (the Securities Act). However, in connection
with the Closing of the Financing, the Company entered into an
Investor Rights Agreement with the Investors (the Investor Rights
Agreement) whereby the Company granted the Investors rights with
respect to registration of the Series B Preferred Stock and the
Conversion Shares.
Each of the material agreements relating to the Financing is
summarized below.
The terms of the Financing were negotiated by a special committee
of independent directors of the Board.In addition, because Ezra
Perlman, a member of the Companys Board of Directors (the Board),
is a Co-President of the managing companies of Francisco Partners
and David A. Jones, Jr., the chairman of the Board, is a member
of the general partner of Chrysalis, the Financing constituted a
related party transaction and was reviewed and approved by the
Audit Committee of the Board.
Investment Agreement
As described above, on March 10, 2017, the Company and the
Investors entered into the Investment Agreement, to which the
Company sold and issued to the Investors, and the Investors
purchased from the Company, 17,500 shares of newly designated
Series B Preferred Stock at a purchase price of $1,000 per share.
The Investment Agreement contained customary representations and
warranties by the Company.The Investment Agreement is filed as
Exhibit 10.1 to this Current Report on Form 8K and incorporated
into this Item 1.01 by reference, and the foregoing summary of
the Investment Agreement is qualified in its entirety by
reference to Exhibit 10.1.
Certificate of Designations
Immediately prior to the Closing on March 10, 2017, the Company
filed a Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock (the Certificate of
Designations) with the Secretary of State of Delaware. to the
Certificate of Designations, 17,500 shares of the Companys
preferred stock were designated as Series B Preferred Stock. The
shares of Series B Preferred Stock, among other things:
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have a stated value of $1,000.00 (the Stated Value) and a |
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will be convertible into such number of shares of Common |
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will be entitled to vote with the Common Stock on an |
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will be entitled to dividends at the annual rate of 15.0% |
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upon any liquidation, will be entitled to receive, on a |
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will be required to approve the following actions by the
otherwise pari passu with, the Series B Preferred Stock, |
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beginning on the second anniversary of the Closing, may |
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will be redeemable (i) at the option of the Investors |
The Certificate of Designations is filed as Exhibit 3.1 to this
Current Report on Form 8-K and incorporated into this Item 1.01
by reference, and the foregoing summary of the Certificate of
Designations is qualified in its entirety by reference to Exhibit
3.1.
Investor Rights Agreement
In connection with the execution of the Investment Agreement, at
Closing, the Company entered into an Investor Rights Agreement
with the Investors, granting the Investors the right to require
the Company to file with the Securities and Exchange Commission a
registration statement to register for resale the Investors
shares of Series B Preferred Stock and any Conversion Shares
(collectively, the Registrable Securities). The Investors were
granted the right to request three underwritten offerings per
year and were granted unlimited piggy-back registration rights
with respect to the Registrable Securities. The obligation to
register the Registrable Securities continues until those
securities have been sold by the holders of the registration
rights, may be sold without limitation under Rule 144 or, in the
case of the Series B Preferred Stock, have been redeemed.
The Investor Rights Agreement also provides that for so long as
Francisco Partners owns at least 10% of the aggregate shares of
Series B Preferred Stock, Series A Preferred Stock and Common
Stock (collectively, the Securities) that it held as of the
Closing, it can: (i) for so long as it holds at least 5% of the
aggregate outstanding Securities of the Company (on an
as-converted basis) designate a proportionate share of the Board
based upon its percentage ownership of the Companys outstanding
Securities on an as-converted basis, rounded up to the nearest
whole director, which designees shall be entitled to serve on
each committee of the Board, subject to applicable legal and
Nasdaq requirements, and (ii) if no director designated by
Francisco Partners is serving on the Board, designate one Board
observer. As of the Closing, Francisco Partners held, on an
as-converted basis, approximately 56% of the Companys outstanding
Securities.
In connection with Francisco Partners rights with respect to the
designation of directors, a new committee of the Board (the
Investor Committee) was formed as of the Closing, which Investor
Committee has the sole authority to effect the exercise of
Francisco Partners rights with respect to the designation of
directors by increasing the size of the Board and appointing
directors designated by Francisco Partners to fill vacancies on
the Board and committees thereof.Only directors designated by
Francisco Partners will serve on the Investor Committee, which as
of the Closing consists solely of Ezra Perlman.In addition, as of
the Closing, the size of the Board was increased from seven to
eight directors, with the eighth seat initially vacant and to be
filled by a Francisco Partners designated director appointed to
the Board by the Investor Committee.The rights granted to
Francisco Partners with respect to the designation of directors
supersede all similar prior rights granted to Francisco Partners
to the Investor Rights Agreement entered into as of May 2, 2016
in connection with the closing of the issuance of the Series A
Preferred Stock.
The Investor Rights Agreement is filed as Exhibit 4.1 to this
Current Report on Form 8-K and incorporated into this Item 1.01
by reference, and the foregoing summary of the Investment
Agreement is qualified in its entirety by reference to Exhibit
4.1.
Credit Facility Amendment
On March 10, 2017, the Company and its wholly owned subsidiary,
DestinationRx, Inc., (collectively the Borrowers) entered into
Amendment No. 2 to the Amended and Restated Credit Agreement (the
Amendment) with Wells Fargo Bank, National Association, as
administrative agent for the lenders named therein (the Agent).
The Amendment amended the Borrowers existing Amended and Restated
Credit Agreement with the Agent, dated June 8, 2016, (the Amended
Credit Facility), to among other things (i) defer scheduled Term
Loan principal repayments until March 31, 2018, at which time
quarterly principal repayments of $1.3 million will resume
through March 31, 2021; (ii) replace the existing covenants with
(a) a trailing twelve month covenant of negative $12.0 million as
of December 31, 2016 and a quarterly building EBITDA covenant
through December 31, 2017 and a trailing twelve month EBITDA from
March 31, 2018 forward, as defined in the Amendment, and (b) a
minimum liquidity requirement of $1.5 million at all times from
March 1, 2017 through March 31, 2018, and
$15.0 million thereafter; and (iii) provide for an incremental
2.50% per annum paid-in-kind interest on all obligations from
March 10, 2017 through the maturity date, which shall increase
the outstanding principal balance of the Term Loan.
The Amendment is filed as Exhibit 10.2 to this Current Report on
Form 8-K and incorporated into this Item 1.01 by reference, and
the foregoing summary of the Amendment is qualified in its
entirety by reference to Exhibit 10.2.
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Item 2.02 |
Results of Operations and Financial Condition |
On March 14, 2017, the Company issued a press release regarding
its financial results for the fourth quarter and fiscal year
ended December 31, 2016. A copy of the Companys press release is
attached hereto as Exhibit 99.1.
The information furnished in this Current Report under Item 2.02
and Exhibit 99.1 attached hereto shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the Exchange Act), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
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Item 3.02 |
Unregistered Sales of Equity Securities. |
The information disclosed in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item 3.02. The
sale and issuance of the Series B Preferred Stock to the
Investors at the Closing, and the issuance of shares of Common
Stock upon exercise and conversion thereof, have been determined
to be exempt from registration under the Securities Act in
reliance on Section 4(a)(2) of the Securities Act and Rule 506(b)
of Regulation D promulgated thereunder as transactions by an
issuer not involving a public offering. The Investors have
represented that they are accredited investors, as that term is
defined in Regulation D, and that they are acquiring the
securities for investment purposes only and not with a view to or
in connection with any distribution thereof.
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Item 3.03 |
Material Modification of Rights of Security Holders. |
The information disclosed in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item 3.03.
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Item 5.01 |
Changes in Control of Registrant |
The information disclosed in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item 5.01. At the
Closing, Francisco Partners paid an aggregate of $16.5 million
for its shares of Series B Preferred Stock. Prior to the Closing,
Francisco Partners beneficially owned approximately 44% of the
Companys voting securities and was entitled to designate one
member of the Board.Immediately following the Closing, Francisco
Partners beneficially owned approximately 56% of the Companys
voting securities as set forth above and had the right to
designate a proportional share of the Board.As a result, a change
in control of the Company may be deemed to have occurred.
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Item 5.03 |
Amendments to Articles of Incorporation or Bylaws; Change |
The information about the Certificate of Designations contained
in Item 1.01 of this Current Report on Form 8-K is incorporated
by reference into this Item 5.03.
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Item 8.01 |
Other Events |
As noted above, in connection with the Closing, the Board
approved an increase in the size of the Board from seven to eight
directors, with the newly created seat initially remaining
vacant.In addition, the Board formed the Investor Committee, with
the authority and responsibility to, among other items, fill the
newly created vacancy on the Board.An additional Current Report
on Form 8-K will be filed if and when such vacancy is filled. The
charter of the Investor Committee adopted by the Board in
connection with the Closing is attached hereto as Exhibit 99.2.
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Item 9.01 |
Financial Statements and Exhibits. |
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(d) |
Exhibits |
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Exhibit No. |
Description |
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3.1 |
Certificate of Designations, Preferences and Rights of |
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4.1 |
Investor Rights Agreement dated March 10, 2017, among the |
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10.1 |
Investment Agreement dated March 10, 2017, among the |
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10.2 |
Amendment No. 2 to the Amended and Restated Credit |
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99.1 |
Press Release dated March 14, 2017 |
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99.2 |
Charter of the Investor Committee of the Board |
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About CONNECTURE, INC. (NASDAQ:CNXR)
Connecture, Inc. provides a Web-based consumer shopping, enrollment and retention platform for health insurance distribution. The Company caters its services to health insurance marketplace operators, such as health plans, brokers and exchange operators. It operates through four segments: Enterprise/Commercial, Enterprise/State, Medicare and Private Exchange. The Enterprise/Commercial segment offers insurance distribution solutions to health plans. The Enterprise/State segment offers the sales automation solutions to state Governments, which allow its customers to offer customized individual and small group exchanges. The Medicare segment offers Web-based Medicare plan comparison, prescription drug comparison and enrollment tools for health plans, pharmacy benefit managers, pharmacies, field marketing organizations and call centers. The Private Exchange segment offers defined-contribution benefit exchange solutions to benefit consultants, brokers, exchange operators and aggregators. CONNECTURE, INC. (NASDAQ:CNXR) Recent Trading Information
CONNECTURE, INC. (NASDAQ:CNXR) closed its last trading session down -0.04 at 1.91 with 25,254 shares trading hands.
