Upland Software, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated August 23, 2022, reports the closing of a previously announced investment transaction by Upland Software, Inc. (the "Company"). The Company is a Delaware corporation with its principal executive offices in Austin, Texas.
Key Financial Metrics and Transaction Details
- Investment Amount: $115,000,000 aggregate purchase price.
- Instrument: 115,000 shares of newly designated Series A Convertible Preferred Stock.
- Purchase Price: $1,000 per share (Initial Liquidation Preference).
- Purchaser: Ulysses Aggregator, LP, an affiliate of HGGC, LLC.
- Use of Proceeds: General corporate purposes and transaction-related fees and expenses.
- Dividend Rate: 4.5% per annum for the first seven years; 7% per annum thereafter. Dividends may be paid in cash or accrued (PIK).
- Conversion Price: $17.50 per share of Common Stock, subject to adjustments.
- Liquidity: No established trading market exists for the Series A Preferred Stock.
Material Changes and Governance
The closing of the investment resulted in the following material changes:
- Board Expansion: The Board of Directors increased from five to six members.
- New Director: David Chung, a Partner and Co-Chief Investment Officer of HGGC, LLC, was appointed to the Board effective August 23, 2022. He serves as a Class II director with a term expiring at the 2025 annual meeting.
- Capital Structure: The Series A Preferred Stock ranks senior to Common Stock regarding liquidation and distribution rights but junior to existing and future indebtedness.
- Issuance Limitation: Conversion into Common Stock is capped at 19.9% of outstanding shares until Nasdaq stockholder approval is obtained.
Outlook, Risks, and Contingencies
- Redemption Rights: The Company may redeem the stock beginning seven years after closing at 105% of the Liquidation Preference plus accrued dividends. Holders have a right to require redemption upon a "Fundamental Change" (change of control).
- Voting and Consent Rights: Holders possess significant consent rights regarding amendments to charter documents, issuance of senior or parity securities, incurrence of indebtedness, and fundamental corporate changes.
- Liquidity Risk: The filing explicitly states there is no established trading market for the Series A Preferred Stock, and the Company does not expect one to develop, limiting liquidity for this security.
- Dividend Restrictions: The ability to pay cash dividends is subject to restrictions under the Company's existing credit agreement.
Investor Verification Checklist
- Verify the impact of the 4.5% to 7% dividend obligation on future cash flow and earnings.
- Review the Company's existing credit agreement to understand specific covenants restricting cash dividend payments.
- Monitor the timeline for obtaining Nasdaq stockholder approval to lift the 19.9% issuance limitation on conversion.
- Assess the dilution impact of the conversion price ($17.50) relative to the current trading price of Common Stock.
- Confirm the Company's ability to service the new preferred equity alongside existing indebtedness.