As filed with the Securities and Exchange Commission on August 30, 2021.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Remitly Global, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 7372 | 83-2301143 | ||||||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) | ||||||
1111 Third Avenue, Suite 2100
Seattle, WA 98101
(888) 736-4859
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Matthew Oppenheimer
Chief Executive Officer
Remitly Global, Inc.
1111 Third Avenue, Suite 2100
Seattle, WA 98101
(888) 736-4859
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
William Bromfield James Evans Katherine Duncan Aman Singh Fenwick & West LLP 1191 Second Avenue 10th Floor Seattle, WA 98101 (206) 389-4510 | Saema Somalya General Counsel Remitly Global, Inc. 1111 Third Avenue Suite 2100 Seattle, WA 98101 (888) 736-4859 | Byron B. Rooney Shane Tintle Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 (212) 450-4000 | ||||||
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
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, as amended, or Securities Act, 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 post-effective amendment filed pursuant to Rule 462(d) 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. ☐
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 Securities Exchange Act of 1934, as amended.
Large accelerated filer ☐ | Accelerated filer ☐ | ||||
Non-accelerated filer ☒ | Smaller reporting company ☐ | ||||
Emerging growth company ☒ | |||||
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
| Title of Each Class of Securities to be Registered | Proposed Maximum Aggregate Offering Price(1)(2) | Amount of Registration Fee | ||||||
| Common stock, $0.0001 par value per share | $100,000,000 | $10,910 | ||||||
(1)Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) of the Securities Act.
(2)Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.
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 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and neither we nor the selling stockholders seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated August 30, 2021.
Shares
Common Stock
This is the initial public offering of our common stock. We are offering shares of our common stock and the selling stockholders identified in this prospectus are offering an additional shares of common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.
Prior to this offering, there has been no public market for our shares of common stock. It is currently estimated that the initial public offering price per share will be between $ and $ per share.
We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “RELY.”
We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced public company reporting requirements. For more information, see the section titled “Prospectus Summary—Implications of Being an Emerging Growth Company.”
See the section titled “Risk Factors” beginning on page 22 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
| Price to Public | Underwriting Discounts and Commissions(1) | Proceeds to Remitly Global, Inc. | Proceeds to Selling Stockholders | ||||||||||||||||||||
| Per share | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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(1)See the section titled “Underwriting” of this prospectus for additional information regarding total underwriting compensation.
The underwriters have an option to purchase up to an additional shares from the selling stockholders at the initial public offering price, less the underwriting discount. We will not receive any proceeds from the sale of shares by the selling stockholders.
The underwriters expect to deliver the shares against payment in New York, New York, on or about , 2021.
| Goldman Sachs & Co. LLC | J.P. Morgan | ||||||||||
| Barclays | Citigroup | William Blair | |||||||||
| JMP Securities | KeyBanc Capital Markets | Nomura | |||||||||
Prospectus dated , 2021
TABLE OF CONTENTS
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Neither we, nor the selling stockholders, nor any of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we, nor the selling stockholders, nor any of the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock.
For investors outside the United States: Neither we, the selling stockholders, nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside the United States.
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Remitly, the Clasped Hand logo, Passbook by Remitly, Hui Mei Yi (Remitly in Chinese characters), Remitly Promises Delivered + Clasped Hand logo, Remitly + Clasped Hand logo are the trademarks and service marks of Remitly. Other trade names, trademarks and service marks appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us, by these other companies. Solely for convenience, our trademarks, trade names and service marks referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, trade names and service marks.
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GLOSSARY OF TERMS USED IN THIS PROSPECTUS
Throughout this prospectus, we use a number of key terms and provide a number of key business metrics used by management and other terms commonly used in the industry. Some of these key business metrics are discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measure.” We define these terms as follows:
“Active customers” is defined as the number of distinct customers that have successfully completed at least one transaction using Remitly during a given calendar quarter. We identify customers through unique account numbers.
“Corridor” is a pairing of a send country, from which a customer can send a remittance, with a specific receive country to which such remittance can be sent. We analyze our business at the corridor level because customer behavior and needs, fees and exchange rates, distribution partners and a variety of other factors are specific to the pairing of particular countries and cannot be generalized across other broader groupings. When we establish a new send country, we typically enable customers in that send country to send to new corridors representing all the established receive countries in our network; conversely, when we launch a new receive country, we enable customers from any of our established send countries to send to new corridors represented by the new receive country.
“Customer Acquisition Cost” or “CAC” refers to direct marketing expenses deployed to acquire new customers. Direct marketing expenses exclude experimental spend used to test new marketing channels, creative production expenses, endorser costs, customer research expenses, agency fees, personnel costs, or other fixed operating expenses that support the marketing team.
“Customer liabilities” are defined as transactions processed from customers but not yet disbursed to recipients. Customer liabilities are typically funds in-transit and the duration is typically one to two days.
“Lifetime value” or “LTV” is the projected average revenue, net of transaction expenses, during five years of a customer’s relationship with the business, though data suggests customers continue to transact beyond this time. When actual data is not available, future periods are projected based on robust statistical models that source thousands of existing customer observations.
“LTV/CAC” is defined as the ratio of Lifetime value to Customer Acquisition Cost and is calculated as the Lifetime value divided by CAC. We use this metric to assess return on marketing spend. For the customers acquired during the year ended December 31, 2019, the five-year LTV/CAC ratio was over 6x, representing an estimated 5-year LTV of $195.1 million divided by a CAC of $29.7 million.
“Order completion rate” is defined as the sum of daily unique customers who complete a transaction over the sum of daily unique customers who sign-in.
“Send volume” is defined as the sum of all customer’s principal, measured in U.S. dollars, related to transactions completed during a given period. The customer’s principal is net of cancellations, does not include transaction fees from customers, and does not include any credits, offers, or bonuses applied to the transaction by us.
“Sidelining” is defined as pausing a remittance transaction for further risk review prior to disbursement of funds.
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PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read this prospectus in its entirety before investing in our common stock, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the accompanying notes, included elsewhere in this prospectus. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See the section titled “Special Note Regarding Forward-Looking Statements.” Unless the context otherwise requires, the terms “Remitly Global,” “Remitly,” “the Company,” “we,” “us,” and “our” in this prospectus refer to Remitly Global, Inc. and our consolidated subsidiaries, taken as a whole. References in this prospectus to “selling stockholders” refer to those individuals and entities identified as selling stockholders in “Principal and Selling Stockholders.” Unless otherwise stated, all references to “$” in this prospectus refer to U.S. dollars.
Our Vision
Transform the lives of immigrants and their families by providing the most trusted financial services on the planet.
Our Beginning
The inspiration behind Remitly came when Matt, our co-founder and Chief Executive Officer, was working in Kenya. There, Matt realized how reliant some families were on the money sent from their loved ones working abroad. He also saw how difficult it was to send and receive money overseas – the process was painful, opaque, and expensive. This first-hand look at cross-border remittances was an eye-opener, and Matt became convinced there was a better way.
In 2011, Josh and Shivaas, our two other co-founders, joined Matt to start Remitly and began working on the problem immediately. Their goal was to make a difference for immigrant communities by using technology to initially disrupt traditional cross-border remittances.
Ten Years Later
Today, Remitly is a leading digital financial services provider for immigrants and their families in over 135 countries around the world. Looking back over the last ten years, we have remained committed to our initial goal: to help millions of immigrants send money home in a safe, reliable, and transparent manner. The long-term, trusted relationships we foster with our customers have enabled us to expand our core cross-border remittance product to over 1,700 corridors worldwide and extend our offering to a broader suite of financial services.
Our customers are at the heart of everything we do. They are primarily immigrants from developing countries who have moved away from their families to seek new opportunities and build a better life for themselves and their loved ones. While our customers may be physically distant, they remain closely connected with and deeply committed to their family and friends back home – often sending money home multiple times per month. Through their individual experiences, they help us define how we design and build best-in-class services. Our relentless focus on our customers underpins our commitment to do everything in our power to ensure their hard-earned money reaches their families back home.
Our Opportunity
Cross-border remittance and banking are two of the largest financial services markets in the world. The cross-border remittance market alone is estimated to be approximately $1.5 trillion in total migrant remittance inflow volume in 2020 (including both formal and informal person-to-person channels) and generates over $40 billion in
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transaction fees globally. The scale of this industry is an indicator of the essential role remittance plays in our economy and society.
However, the traditional approach has been challenged by both the lack of innovation and financial inclusivity. Dominated by banks, operators of brick-and-mortar locations, and informal channels, the players in these markets typically rely on disparate legacy systems and processes. This results in a poor customer experience and additional operating costs that are passed down to the customer. When technology is used, these players typically utilize solutions that may not be scalable, integrated, or built to address cultural and local market requirements of the diverse immigrant communities that they serve.
Today, there are over 280 million immigrants world-wide who may be excluded from fair access to everyday financial services used to build wealth and financial security. For them, sending money internationally is often unreliable, inconvenient, and expensive. The experience can also be daunting – they risk having their identity stolen, losing their money or having no way to ask a service question at a moment in need. Additional financial services, even when available to them, such as savings, credit, investments, and insurance products, often come with high fees, and can be deceptive.
What Sets Us Apart
Our core proposition is to bring trust, reliability, and a fair and transparent price to cross-border remittances and broader financial services.
To deliver our proposition, we have a differentiated approach that aligns with the specific needs and interests of our customers and solves the problems immigrant communities often face in making remittances. There are four core elements to our differentiated approach:
•Providing a simple and reliable way of sending money with our mobile-centric suite of products,
•Conveniently putting money in the hands of our customers’ families, wherever they are, by relying on our global network,
•Creating trusted and personalized experiences with our localization expertise at scale, and
•Using our data-driven approach to better serve our customers and provide more value.
Providing a Simple and Reliable Way of Sending Money with Our Mobile-Centric Suite of Products
On June 30, 2021, over 85% of our customers engaged with us via our mobile app, shifting what traditionally required waiting in line to speak with an agent to the palm of their hands. Also as of June 30, 2021, our mobile app had a 4.9 iOS App Store rating with more than 450,000 reviewers and a 4.8 Android Google Play rating with more than 170,000 reviewers.
We have achieved this level of engagement and these high ratings by designing mobile-centric products that make the customer experience simple and convenient and give our customers complete peace of mind.
Our mobile app for cross-border remittances provides an easy-to-use, end-to-end process. From the moment a customer connects their banking information to our app, they can send money home in minutes with just five taps for repeat transactions. Our customers and their families can also track the status of their transactions in real-time. This mobile-centric experience enables us to engage beyond the initial transaction, generating strong repeat usage and high customer loyalty.
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Key features of our services, which fuel our customer value proposition, include:
•Trusted and intuitive digital experience. Our digitally-native app is both easy to use and designed with security in mind. Customer onboarding and repeat logins are quick and easy, and we strive to keep customer data secure across log-in and transactions by leveraging multiple security layers.
•Simple onboarding process. Our simple step-by-step onboarding flow was designed to minimize friction and ensure our customers have to enter their profile information only during their first transaction. Our electronic Know Your Customer (“KYC”), machine learning-based fraud scoring and payment authentication processes all take place in real-time to give our customers immediate feedback.
•Centralized portal for easy account management. MyRemitly is a one-stop hub for customers to manage their account and access a consolidated and detailed view of current and past transaction details. Customers can self-serve documentation requirements without contacting us.
•Best-in-class customer support. We offer contextual help, customized for a variety of scenarios that our customers may experience, which allows them to self-resolve issues on their own terms. We believe that our multilingual 365x24x7 integrated in-app support combined with our agents and local partner relationships provides our customers with the quality and speed of service that we believe is unique to our customers.
In 2020, we launched Passbook in partnership with Sunrise Bank N.A. (“Sunrise”), a digital banking service available through a mobile app and uniquely designed for immigrants. With tailored KYC and identity verification processes using our existing technology platform, they can sign up for a Passbook account in under ten minutes. Since the launch of Passbook in February 2020, we have seen encouraging early adoption and we continue to build out our suite of offerings.
While Passbook is still in early stages, we believe that, over time, we will be able to utilize the data and insights gathered from our remittance customers to tailor meaningful financial services for the needs of our immigrant customers, which will give us broad access to shared revenue and fees from the bank partners to whom we market these financial services. We expect this will broaden our customers’ options for accessing financial services while also diversifying our revenue base across multiple products serving the same core customers. We also believe we will be able to drive marketing synergy with our remittance product enabling more efficient customer acquisition.
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Conveniently Putting Money Safely in the Hands of Our Customers’ Families, Wherever They Are, by Relying on Our Global Network
Our global network of funding and disbursement partnerships enables us to complete money transfers in over 1,700 corridors without the need to deploy local operations in each country. We are able to do this while complying with global and local licensing and regulatory requirements.
We have relationships with more than 15 top tier banks including Barclays, Chase, HSBC, and Wells Fargo, and leading global payment providers including a direct relationship with Visa. These relationships provide our customers an array of payment (or pay-in) options to fund remittances with a bank account, card-based payment, or alternative payment method. Our disbursement network provides our customers with a choice of various digital and traditional delivery methods and enables us to disburse (or pay-out) funds within minutes, or even seconds, to more than 3.5 billion bank accounts, over 630 million mobile wallets and alternative payment methods, and over 355,000 cash pickup locations (including retail outlets and banks). These partner relationships help drive a better customer experience, including faster transfers, higher acceptance rates, and enhanced reliability.
The map below illustrates the breadth of our global presence. Today, our customers primarily send money from the United States, Canada, the United Kingdom, other countries in Europe, and Australia, and our largest send country by revenue is the United States. Revenue from the United States represented $199.0 million for the year ended December 31, 2020, which was 77% of total revenue for the year. On the other end of our global network, our customers’ recipients are located in over 115 countries around the world; our largest receive countries include India, the Philippines, and Mexico.
The quality and diversity of our global network result in the following key advantages:
•Global reach: Today, our network enables us to complete cross-border payments in over 1,700 corridors from 17 countries to over 115 countries, in over 75 currencies.
•Local expertise: We designed our global network to leverage local relationships for access into some of the hardest-to-reach markets around the world and to serve the unique financial needs of diverse immigrant communities. We help our customers send money and their families receive money in the manner they prefer and to which they are individually or culturally accustomed.
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•Control over the transaction lifecycle: Our ability to manage each transaction from pay-in to pay-out is made possible with our direct integrations to 100 partners around the globe. These direct integrations help drive faster availability of funds to our customers’ families, with more than 75% of total transactions in 2020 completed in less than one hour. Additionally, we have tools to reduce transaction declines or exceptions which help enhance conversion and facilitate faster processing. We can also optimize transaction routing for cost and risk and compliance management.
•Security and compliance: Our artificial intelligence (“AI”) and machine learning-driven fraud detection and risk management engine is a foundational element that underpins our global network. We apply KYC and anti-money laundering standards that are tailored to meet local requirements of the jurisdictions where we operate. In addition, we leverage our in-depth knowledge of the markets in which we operate to execute tactically while complying with local licensing, compliance, and regulatory requirements.
In 2020, we began serving business customers with the launch of Remitly For Developers, our remittance-as-a-service offering that strategically leverages our custom-built global network and compliance and regulatory infrastructure. With Remitly for Developers, businesses and their developers can integrate this network and infrastructure into their existing applications and websites through our Application Programming Interface (“API”). This enables them to offer digital cross-border remittances to their customers and introduce new digital banking solutions in emerging markets.
Creating Trusted and Personalized Experiences with Our Localization Expertise at Scale
Localization can mean many things. To us, it means speaking with our customers in their preferred language, reaching them through the media channels they frequent, and being culturally relevant throughout their journey.
While our business is global, we recognize the importance of a culturally-relevant experience being delivered to our customers and their families in the over 135 countries we serve.
Our early success can, in part, be attributed to our localized approach within our initial corridors. As we have grown to over 1,700 corridors, we have found the appropriate balance of localization and scale by combining our customer-centric culture, investments in technology platforms, and data-driven decision making.
Our localization approach enables us to provide customers with a personalized experience that drives peace of mind. We strive to deliver marketing, product, and support experiences that connect with them in meaningful ways:
•Localized marketing at scale. We achieve localized marketing at scale through a blend of deep cultural insights, consistent branding, rigorous analytics, and sophisticated channel management. We do this efficiently through our proprietary marketing technology stack and multi-faceted targeting techniques. As a mobile-centric business, we have the ability to leverage native app capabilities such as language preference, geolocation, and communication preferences to tailor the customer experience and fine-tune programs like promotions, referral campaigns, and activation campaigns.
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•Localized remittance product at scale. We strive to deliver an exceptional product experience for not just our customers (on the send side), but also for their families (on the receive side). For our customers, we localize the experience based on their preferred language, the receive country, and the specific payment options from the send country. Based on those factors, we also tailor promotional offers, delivery speeds, foreign exchange (“FX”) rates, and delivery method preferences. This means understanding local payment and pricing norms, as well as customer and recipient expectations, and incorporating them into our services and prices.
•Localized customer support at scale. We deliver localized, and effective support and risk management to our customers around the world. We have a rich self-help center in-app and on the web with solutions to most customer issues available in 14 languages. Approximately 50% of our customer service questions are handled via self-help and automation. We also serve customers via direct messaging in various social media channels. In order to best localize our support experience, our service centers are located in certain key receive countries or countries with language capabilities that are relevant to our customers.
Using Our Data-Driven Approach to Better Serve Our Customers and Provide More Value
Leveraging data is at the core of how we grow our business, optimize our customer economics, and prioritize our investments. We possess a unique, rich data asset with over ten years of transaction data. We monitor metrics at each step of the customer journey, and use this data to constantly improve the end-to-end customer experience.
•Data-driven platform. We have built a data platform that fuels analytics and drives meaningful customer insights. This platform enables us to aggregate data from multiple sources, including customer interactions on our app and the entire transaction processing life cycle. In addition to a robust data platform, we have a “build-measure-iterate” mentality that further aims to optimize our customer experience.
•Data-driven approach to customer acquisition. Establishing sustainable and attractive customer economics fuels our customer acquisition strategy. We manage our Customer Acquisition Costs (“CAC”) to corridor-specific targets, which are based on customer lifetime value. We set our targets based on data that we collect in each corridor including market maturity and opportunity, market awareness of our brand, and the incremental CAC we are seeing in our marketing channels. As we improve customer lifetime value through product enhancements and changes to operating costs and pricing, we are able to invest more in marketing while maintaining our marketing efficiency.
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•Data-driven approach to managing the customer experience. Removing friction and ensuring a smooth onboarding process are key pillars to acquiring new customers and ensuring they become loyal customers who refer others. We utilize machine learning and data science to identify areas of friction, provide fair and transparent corridor-specific pricing, and optimize our compliance process:
◦Risk management. Our sophisticated risk management system enables us to identify and cancel fraudulent transactions efficiently, often in real-time. This allows us to mitigate our exposure to fraud loss while providing a low-friction customer experience and minimize the sidelining of our good customers. We also constantly evaluate and integrate new risk management tools to provide our immigrant customers with onboarding options that are tailored to their unique circumstances.
◦Pricing. We strive to set prices that deliver a great value to every single customer, while simultaneously accurately estimating our customer long term value (“LTV”). To achieve this, we incorporate corridor-specific customer behavior, competitor data, and market dynamics to manage prices through a proprietary pricing engine.
◦Treasury. Our pricing is closely aligned with our robust treasury program, which minimizes our trading costs and mitigates currency risk, while ensuring that funds are delivered on time. The treasury program leverages a proprietary platform that incorporates advanced currency-level forecasting algorithms to estimate future demand and optimize our trading.
◦Customer support. While maintaining a high-level of multilingual customer support, we measure and set reduction goals for support contacts per transaction, and we analyze that data in detail to prioritize improvements to our policies and services.
•Data-driven approach to customer loyalty. We analyze our customer’s behavior from sign-up to first send to becoming a repeat customer. We manage customers by cohort including sign ups, active customers, inactive customers and lapsed customers to spot trends in behavior.
We Benefit from a Powerful Flywheel
As we grow our customer base and complete more transactions, we collect more data. This data enables us to refine our marketing strategy, improve the customer experience, and accelerate our pace of innovation including introducing new services to our customers, or the recipient. Having a broader suite of services attracts more customers and enhances the experience, which could drive more transactions to Remitly and fuel further compounding organic growth.
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We are in the early stages of capturing our addressable market opportunity. Our send volume of approximately $16.1 billion for the twelve months ended June 30, 2021 represented approximately 1% of the $1.5 trillion in estimated total migrant remittance inflow volume in 2020 (including both formal and informal person-to-person channels) and approximately 3% of our $540 billion core serviceable available market of formal remittance flows to low- and middle-income countries. We see a significant opportunity to grow our customer base, expand into new corridors, and continue extending our product offering into broader financial services. We believe the first player to reach significant scale with a trusted, mobile-first approach will have a profound brand, data, product, and cost advantage to take disproportionate market share.
While we are just getting started, we are proud of the scale we have achieved to date. In 2020 our customers completed approximately 31 million remittance transactions using Remitly. A majority of our active customers send money for non-discretionary needs multiple times per month, providing high customer engagement and a reoccurring revenue stream with high visibility and predictability. We believe our customers consistently return to Remitly and use our services given our relentless focus on fostering long-term, trusted relationships from day one. The combination of our low acquisition costs, overall payback period of approximately 10 months, and high repeat transactions leads to attractive customer economics. For customers acquired during the year ended December 31, 2019, the five-year LTV/CAC ratio was greater than 6x.
The chart below shows annual revenue contributions from customer cohorts acquired during a particular year ended December 31, and includes the revenue associated with those cohorts for each year thereafter. A customer is included in a particular cohort based on the year in which that customer first completes a transaction with us. The first year of each annual cohort is the smallest bar shown, as we add new customers throughout the year. As a result, revenue in the first full calendar year for an annual cohort on average grows more than 160% compared to the acquisition year. In subsequent years, cohorts typically retain over 90% of the revenue generated in the preceding year. We believe that this analysis supports our strategy of making the initial investments to build long-term, trusted customer relationships, illustrates that our products and services continue to provide value to our customers on an ongoing basis, and demonstrates our ability to grow our business over time.
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Our Revenue Model
For our core remittance product, which represents the vast majority of our revenue, we generate revenue from transaction fees charged to customers and foreign exchange spreads applied to the customer’s principal.
For the fiscal years ended December 31, 2019 and 2020, we generated revenue of $126.6 million and $257.0 million, respectively, representing year-over-year growth of approximately 103%. We incurred net losses of $51.4 million and $32.6 million, respectively, for those same years. For the six months ended June 30, 2020 and 2021, we generated revenue of $105.1 million and $202.1 million, respectively, representing year-over-year growth of approximately 92%. We incurred net losses of $21.1 million and $9.2 million, respectively, for those same periods.
Our Industry and Key Secular Trends in Our Favor
The personal financial services industry is one of the oldest, largest, and most critical markets in the world, touching everyone across the globe, and providing a means for buying, selling, saving, investing, and more. Until recently, the industry had experienced little innovation, and it continues to suffer from significant gaps in inclusion, leaving potentially millions of immigrants on the outside of the full protections and advantages of the formal financial system. Now with the rise of modern mobile technologies and the digitization of consumer products, we believe a fundamental shift is underway in how financial services are built for, available to, and accessed by consumers. Crucially, these services are able to offer inclusion to immigrants and others that previously were not welcomed by the formal financial system.
There are a number of important secular megatrends and market dynamics supporting our growth:
•The global immigrant community is large, growing and critically important.
•Global money movement is complex.
•Legacy solutions are inadequate, inefficient, and inconvenient.
•Digital offerings proliferate, resulting in better customer propositions.
•Imperative to drive financial inclusion.
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Our Long-Term Growth Strategy
Our strategy is designed to invest in our key strengths and create new opportunities that generate even greater value for our customers. The key elements of our strategy include:
•Gain share in existing corridors.
◦Grow our customer base. We plan on expanding our marketing efforts across existing corridors to increase brand awareness with customers and highlight the value of our products and services. We believe this will attract new customers to try Remitly. As we grow our customer base, we expect to benefit from increased operating leverage in the business and more data and insight to enhance our models.
◦Increase customer engagement and drive repeat use. The majority of our customers use our products and services multiple times per month. To further strengthen our customer relationships and brand loyalty, we will continue to enhance our products and services and develop new features to tailor and personalize our customers’ experiences. We will also continue to establish new disbursement partnerships and add new payment methods to enhance our cross-border payment remittance experience for current and potential customers in our existing corridors. We expect these initiatives will attract new customers and lead to larger and more frequent transactions across our growing customer base.
•Expand to new corridors and partner networks. While our global network spans across 1,700 corridors around the world, we have plans to increase our reach to thousands of additional corridors. We see an opportunity to generate value by expanding our remittance services, Passbook and Remitly For Developers more broadly in this way. We expect to leverage our data-driven approach to optimize our pricing, product features, marketing strategies, and customer economics as we expand and grow in these new geographies. Additionally, we expect to leverage our localization expertise and our technology platform to grow the number of disbursement, payment and other partners in our global network and increase the number of direct integrations with such partners.
•Continue expanding into broader financial services. We believe there is an enormous opportunity to create a more inclusive financial system that not only encompasses, but caters to the needs of immigrants. We believe that the insights we gain about immigrant customers through our data-driven platform will enable us to play an important role in developing products and services that meet this opportunity.
We will continue to invest in our platform, expanding our product and service offerings and our overall technological lead to actualize our opportunities in this area.
For example, our Passbook app started with deposit services, but we plan to build new products and features within the app in order to provide solutions to a broader array of our customers’ problems.
We will also continue to leverage our global network and infrastructure. We believe that empowering businesses to build on top of our leading distribution and compliance infrastructure, such as through Remitly For Developers, attracts a new set of potential customers and expands economic opportunities in developing markets.
•Pursue strategic partnerships and acquisitions. While our main growth strategy has historically been organic, we may selectively pursue strategic partnerships and acquisitions to accelerate our growth objectives or to enhance our competitive position within existing and new products and markets. For example, in March 2021, we extended our partnership with Visa and integration of Visa Direct1 within our
1 Visa Direct capability enabled through Remitly’s financial institution partner.
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global network, providing our customers with real-time2 cross-border payments options to more countries around the world.
Our Culture
Our customer-focused vision gives us purpose and motivates us to consistently think bigger, act more boldly, and deliver exceptional services for our customers. Our ability to deliver on our vision begins with our culture and values.
Our values are embedded into everything we do; they shape our culture, drive engagement, and act as a blueprint for how we get things done. Our founders took great care in defining Remitly’s “how” before ever executing on the “what”. Our values are living – they evolve as our customers’ needs evolve so we can continue delivering on promises to our customers. The one constant, and single most important of these values, is customer centricity, which serves as our north star in all that we do. Our other core values fall broadly into three categories:
•Our purpose: Be joyful, aim for the stars, be an owner, hire and develop exceptional people, and don’t be afraid to fail;
•Building relationships: Lead authentically, act with integrity, be constructively direct, and be an empathetic partner; and
•Taking action: Have a bias for action, be data-driven, sweat the details, deliver on promises, and continuously improve.
These values influence our actions every day. They help us attract, inspire and retain a diverse, world-class team. Living up to our values builds customer trust, inspires employee engagement, and makes “Promises Delivered” our fundamental ethos and not merely a tagline.
Recent Developments
New Revolving Credit Facility
Prior to the completion of this offering, we may enter into a revolving credit facility (the “New Revolving Credit Facility”) arranged by certain syndicate lenders that will provide for borrowings in an amount equal to or greater than our existing Revolving Credit Facility, in which case we would then terminate our existing Revolving Credit Facility described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving Credit Facility.” Proceeds are expected to be available to us for general corporate purposes, including funding working capital. We have not yet entered into any commitments with respect to such credit facility, and, accordingly, the terms of our financing arrangements have not yet been determined, remain under discussion, and are subject to change, including as a function of market conditions.
Risk Factors
Our business is subject to numerous risks and uncertainties, including those described in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, but are not limited to, the following:
Business and Strategic Risks
•If we fail to retain or grow our customer base, number of payment corridors, or scope of send and receive countries, our business and operating results will be harmed.
2 Actual fund availability depends on the receiving financial institution and region.
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•We partner with third parties to support fulfillment of our service, including risk management, payment processing, customer support, and disbursement, which exposes us to risks outside our direct control.
•If we are not able to innovate, improve existing products, and develop new products that achieve market acceptance, our growth, business, operating results, financial condition, and future prospects could be materially and adversely affected.
•We operate in a highly competitive and evolving market and may be unable to compete successfully against existing and future competitors which employ a variety of existing business models and technologies or new innovations.
•Any failure to obtain or maintain necessary money transmission licenses across our global footprint could adversely affect our operations.
•We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our business and operating results may be materially and adversely affected. We also may not be able to sustain our growth rate in the future.
•If we or our industry generally are unable to provide a high-quality and secure customer experience in the various locales in which we operate, our brand could suffer reputational damage and our business results could be harmed.
•We transfer large sums of customer funds daily, and are subject to the risk of loss due to errors or fraudulent or illegitimate activities of customers or third parties, any of which could result in financial losses or damage to our reputation and trust in our brand, which would harm our business and financial results.
•We have a history of operating losses and there is no assurance that our business will become profitable or that, if we achieve profitability, we will be able to sustain it.
•Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
Intellectual Property, Technology, Privacy and Security Risks
•Cyberattacks or data security breaches could result in serious harm to our business, reputation and financial condition.
•We are subject to privacy and cybersecurity laws across multiple jurisdictions which are highly complex, overlapping and frequently changing and create compliance challenges that may expose us to substantial costs, liabilities or loss of customer trust. Our actual or perceived failure to comply with these laws could harm our business.
•Any significant interruption or failure of our system availability, including failure to successfully implement upgrades or new technologies to our mobile app or website, could adversely affect our business, financial, and operating results.
Legal and Compliance Risks
•Use of our platform for illegal or fraudulent activities could harm our business, reputation, financial condition, and operating results.
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•Our platform is susceptible to fraud and our business, reputation, financial condition and operating results could be harmed as a result.
Operational Risk
•We are exposed to the risk of loss or insolvency if our disbursement partners fail to disburse funds according to our instructions or were to become insolvent unexpectedly or funds are disbursed before customer funds are guaranteed to be sufficient.
Financial Risks
•We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements. If we fail to remediate any material weaknesses or otherwise fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
•If one or more of our counterparties, including financial institutions, aggregators, and local cash pick-up institutions where we have cash on deposit, our lenders and potential hedging counterparties, default on their financial or performance obligations to us or fail, we may incur significant losses.
•Fluctuations in currency exchange rates could harm our operating results and financial condition.
General Risks
•Our customers and business operations are exposed to macroeconomic conditions and geopolitical forces in developing regions and regions that account for a significant amount of our send volume, which exposes us to risk of loss.
Risks Related to Ownership of Our Common Stock
•This initial public offering will be the first time our common stock has been available on a public market, and the stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
•Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.
Channels for Disclosure of Information
Following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission (the “SEC”), the investor relations page on our website (www.remitly.com), blog posts on our website, press releases, public conference calls, public webcasts, our Twitter feed (@Remitly) and our LinkedIn page (https://www.linkedin.com/company/remitly). The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock.
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Corporate Information
Remitly Global, Inc., a Delaware corporation, was formed in October 2018. Remitly Global, Inc. is a holding company and holds all of the equity interests of Remitly, Inc. and our other operating subsidiaries. Beamit, Inc. was initially formed in May 2011 as an Idaho corporation, reincorporated in Delaware in October 2011 and subsequently changed its name to Remitly, Inc. in December 2012. In October 2018, we completed a corporate reorganization whereby Remitly, Inc. became a subsidiary of Remitly Global, Inc., which became effective January 1, 2019. Our principal executive offices are located at 1111 Third Avenue, Suite 2100, Seattle, WA 98101. Our telephone number is (888) 736-4859. Our website address is www.remitly.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:
•being permitted to present only two years of audited financial statements, and correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in registration statements, including this prospectus, subject to certain exceptions;
•an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”);
•an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
•reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements, including this prospectus;
•exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and
•extended transition periods for complying with new or revised accounting standards.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of June 30th, our second fiscal quarter, of such fiscal year; (3) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (4) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.
We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. Further, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and consolidated financial statements may not be comparable to the operating results and financial
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statements of other companies who have adopted the new or revised accounting standards. It is possible that some investors will find our common stock less attractive as a result, which may result in a less active trading market for our common stock and higher volatility in our stock price.
For certain risks related to our status as an emerging growth company, see the section titled “Risk Factors—Risks Related to Ownership of Our Common Stock—We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.”
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THE OFFERING
| Common stock offered by us | shares | ||||
| Common stock offered by the selling stockholders | shares of common stock ( shares if the underwriters exercise their option to purchase additional shares in full) | ||||
| Option to purchase additional shares of common stock | The underwriters have an option to purchase an additional shares from the selling stockholders. The underwriters can exercise this option at any time within 30 days from the date of this prospectus. | ||||
| Common stock to be outstanding immediately after this offering | shares | ||||
| Use of proceeds | We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $ million, based upon an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses. We will not receive any proceeds from the sale of shares by the selling stockholders. We currently intend to use the net proceeds we receive from this offering for working capital and other general corporate purposes, which may include marketing, technology and product development, geographic or product expansions, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions, or businesses that complement our business. However, we do not have agreements or commitments for any acquisitions or investments outside the ordinary course of business at this time. See the section titled “Use of Proceeds” for additional information. | ||||
| Risk factors | See the section titled “Risk Factors” and other information included in this prospectus for a discussion of some of the risk factors you should consider before deciding to purchase shares of our common stock. | ||||
| Nasdaq Global Select Market (“Nasdaq”) trading symbol | “RELY” | ||||
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The number of shares of our common stock to be outstanding after this offering is based on 153,796,274 shares of our common stock outstanding as of June 30, 2021 and excludes:
•25,355,906 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2021, with a weighted-average exercise price of $3.13 per share under our 2011 Equity Incentive Plan (the “2011 Plan”);
•231,500 shares of our common stock issuable upon the exercise of stock options granted between June 30, 2021 and July 31, 2021 under our 2011 Plan, with a weighted average exercise price of $9.65 per share;
•617,696 shares of our common stock issuable upon the settlement of restricted stock units (“RSUs”), outstanding as of June 30, 2021 under our 2011 Plan;
•no shares of our common stock issuable upon the settlement of RSUs granted between June 30, 2021 and July 31, 2021 under our 2011 Plan;
•256,250 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock outstanding as of June 30, 2021, with a weighted-average exercise price of $0.42 per share;
• shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,934,742 shares of our common stock reserved for future issuance under our 2011 Plan, as of June 30, 2021 (which number of shares does not include the stock options to purchase shares of our common stock granted after June 30, 2021), (2) shares of our common stock reserved for future issuance under our 2021 Equity Incentive Plan (the “2021 Plan”), which will become effective on the date immediately prior to the date of this prospectus, and (3) shares of our common stock reserved for issuance under our 2021 Employee Stock Purchase Plan (the “ESPP”), which will become effective on the date of this prospectus; and
•1,819,609 shares of our common stock reserved to be issued pursuant to the Pledge 1% campaign, of which we expect to issue approximately 181,961 shares of our common stock at or around the completion of this offering pursuant to the Pledge 1% campaign. See the section titled “Business—Corporate Philanthropy” for more information.
On the date immediately prior to the date of this prospectus, any remaining shares available for issuance under our 2011 Plan will be added to the shares of our common stock reserved for issuance under our 2021 Plan, and we will cease granting awards under the 2011 Plan. Our 2021 Plan and ESPP also provide for automatic annual increases in the number of shares reserved thereunder. See the section titled “Executive Compensation—Employee Benefit and Stock Plans” for additional information.
Unless otherwise noted, the information in this prospectus reflects and assumes the following:
•the automatic conversion of all shares of our redeemable convertible preferred stock outstanding as of June 30, 2021 into an aggregate of 127,410,631 shares of common stock in connection with the completion of this offering;
•the filing of our amended and restated certificate of incorporation and the effectiveness of our restated bylaws, each of which will occur immediately prior to the completion of this offering;
•no exercise of outstanding stock options or warrants subsequent to June 30, 2021;
•no settlement of outstanding RSUs subsequent to June 30, 2021; and
•no exercise of the underwriters’ option to purchase additional shares of our common stock in this offering from the selling stockholders.
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables summarize our consolidated financial and other data. We derived our summary statements of operations data for the years ended December 31, 2019 and 2020 from our audited consolidated financial statements included elsewhere in this prospectus. Our audited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). We derived our summary statements of operations data for the six months ended June 30, 2020 and 2021, and our summary balance sheet data as of June 30, 2021 from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited interim condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. Our unaudited interim condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statements of our financial position and the results for the interim periods presented. Our historical results are not necessarily indicative of the results that may be expected in any future period and results for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ended December 31, 2021 or any other period. The following summary consolidated financial and other data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.
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| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||||||||||
| Revenue | $ | 126,567 | $ | 256,956 | $ | 105,149 | $ | 202,106 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
Transaction expenses(1) | 55,858 | 110,414 | 46,210 | 87,615 | |||||||||||||||||||
Customer Support and Operations(1) (2) | 17,445 | 25,428 | 10,163 | 20,430 | |||||||||||||||||||
Marketing(1) (2) | 43,542 | 73,804 | 32,107 | 52,274 | |||||||||||||||||||
Technology and Development(1) (2) | 32,008 | 40,777 | 19,059 | 26,842 | |||||||||||||||||||
General and Administrative(1) (2) | 25,658 | 31,656 | 14,341 | 22,890 | |||||||||||||||||||
| Depreciation and Amortization | 2,658 | 4,060 | 1,857 | 2,571 | |||||||||||||||||||
| Total costs and expenses | 177,169 | 286,139 | 123,737 | 212,622 | |||||||||||||||||||
| Loss from operations | (50,602) | (29,183) | (18,588) | (10,516) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 1,111 | 273 | 174 | 10 | |||||||||||||||||||
| Interest expense | (1,608) | (1,189) | (780) | (536) | |||||||||||||||||||
| Other expense (income), net | (34) | (1,302) | (1,496) | 2,648 | |||||||||||||||||||
| Loss before provision for income taxes | (51,133) | (31,401) | (20,690) | (8,394) | |||||||||||||||||||
| Provision for income taxes | 259 | 1,163 | 440 | 824 | |||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Deemed dividend on redeemable convertible preferred stock | (12,134) | — | — | — | |||||||||||||||||||
| Net loss attributable to common stockholders | $ | (63,526) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Net loss per share attributable to common stockholders: | |||||||||||||||||||||||
Basic and diluted(3) | $ | (2.98) | $ | (1.52) | $ | (1.01) | $ | (0.40) | |||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders: | |||||||||||||||||||||||
Basic and diluted(3) | 21,290,784 | 21,459,062 | 20,840,834 | 23,216,865 | |||||||||||||||||||
Pro forma net loss per share attributable to common stockholders, basic and diluted (4) | $ | (0.22) | $ | (0.06) | |||||||||||||||||||
Pro forma weighted-average common shares outstanding, basic and diluted (4) | 150,015,556 | 152,030,340 | |||||||||||||||||||||
_______________
(1)Exclusive of depreciation and amortization, shown separately, above
(2)Includes stock-based compensation expense as follows:
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Customer support and operations | 25 | 22 | 9 | 37 | |||||||||||||||||||
| Marketing | 541 | 869 | 411 | 721 | |||||||||||||||||||
| Technology and development | 1,486 | 2,130 | 1,015 | 1,824 | |||||||||||||||||||
| General and administrative | 1,596 | 2,243 | 1,088 | 1,643 | |||||||||||||||||||
| Total | $ | 3,648 | $ | 5,264 | $ | 2,523 | $ | 4,225 | |||||||||||||||
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(3)See Notes 2 and 7 to our audited consolidated financial statements and Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net loss per share attributable to common stockholders, basic and diluted.
(4)The unaudited pro forma net loss per share attributable to common stockholders and pro forma weighted-average common shares outstanding have been computed to give effect to the automatic conversion of our redeemable convertible preferred stock outstanding as of June 30, 2021 into an aggregate of 127,410,631 shares of common stock in connection with the completion of this offering as if such conversion had occurred at the beginning of the most recent annual period, as well as stock-based compensation expense of approximately $0.7 million associated with restricted stock units subject to service-based and performance-based vesting conditions, which we will recognize upon the completion of this offering, as further described in Note 10 in the notes to our consolidated financial statements, included elsewhere in this prospectus.
| As of June 30, 2021 | |||||||||||||||||
| Actual | Pro Forma (1) | Pro Forma As Adjusted (2) | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Consolidated Balance Sheet Data: | |||||||||||||||||
| Cash and cash equivalents | $ | 173,363 | $ | 173,363 | |||||||||||||
| Working capital | 165,880 | 165,880 | |||||||||||||||
| Total assets | 312,633 | 312,633 | |||||||||||||||
| Redeemable convertible preferred stock | 390,687 | — | |||||||||||||||
| Total stockholders’ deficit | $ | (212,135) | $ | 178,522 | |||||||||||||
_________________
(1)The pro forma column reflects (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock as of June 30, 2021 into 127,410,631 shares of our common stock, (ii) stock based compensation expense of approximately $0.7 million associated with restricted stock units subject to service-based and performance-based vesting conditions, which we will recognize upon the completion of this offering, as further described in Note 10 in the notes to our consolidated financial statements, included elsewhere in this prospectus, and (iii) the filing and effectiveness of our amended and restated certificate of incorporation.
(2)The pro forma as adjusted column reflects the items described in footnote (1) and the sale by us of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by $ million, assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discount. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by approximately $ million, assuming the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount.
Key Business Metrics
We monitor the following key business metrics to help us measure our business and our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. We believe these key business metrics enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.
Our active customers for the periods presented were as follows:
| Three Months Ended December 31, | Three Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Active customers | 948 | 1,891 | 1,525 | 2,397 | |||||||||||||||||||
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Our send volume for the periods presented was as follows:
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Send volume | $ | 7,087 | $ | 12,055 | $ | 5,185 | $ | 9,249 | |||||||||||||||
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Business and Strategic Risks
If we fail to retain or grow our customer base, number of payment corridors, or scope of send and receive countries, our business and operating results will be harmed.
We must continually retain and grow our base of customers, number of payment corridors and the scope of our global networks to grow our business. Our ability to do so depends on the quality and successful execution of our business strategy, as well as factors outside our control, including the macroeconomic context, geopolitical forces, evolving consumer preferences, and regulatory costs and requirements in key jurisdictions. It also will depend on the quality and speed of competitor innovation and marketing and the reliability and quality of services provided by the third parties that we partner with to provide our integrated service. These areas are all complex and evolving regularly and any significant failure to anticipate and successfully manage these areas in relation to either traditional or emerging developed to developing corridors could significantly impair our ability to retain and grow our base of customers or the scope of our send and receive markets. If we are unable to retain and grow our base of customers or the scope of our send and receive markets, our business and operating results may be harmed.
We partner with third parties to support fulfillment of our service, including risk management, payment processing, customer support, and disbursement, which exposes us to risks outside our direct control.
We partner with a variety of third parties to fulfill our services. For example, we integrate third-party technologies into our proprietary KYC and risk management systems and information security program and we also partner with an extensive network of third parties to deliver payment processing for customers and disbursement of funds to recipients. Any failure or disruption to the services provided by these third parties could cause disruption or delay the delivery of our services and negatively impact our customer experience. For example, any natural disaster that affects the ability of our payment processors to process funds could cause delays to our disbursement process and thereby negatively impact our customer experience and cause our express or economy delivery guarantees to fail. Additionally, if a payment processor experiences a service outage or service interruption that results in our being unable to collect funds from customers, our liquidity could be harmed and we may not meet our capital requirements.
Our third-party partners also support our business operations and processes, including customer support services, from their various locations around the world. If such third-party partners choose to cease or otherwise become unable to provide the business process support services for which they are contracted by us, we risk having delays in customer service or other interruptions in our business operations, which can have a detrimental effect on our reputation and ultimately lead to a loss of customers.
In addition, some of these third parties process personally identifiable information and customer payments subject to our security requirements. Any failure of these parties to implement and operate adequate cybersecurity, data privacy, business continuity, fraud controls or other internal controls, or any failure of ours to identify and require remediation of weaknesses in these areas, could result in significant liability or financial loss to our customers and us. We could face regulatory or governmental consequences for any significant failure caused by such partners as well as substantial costs associated with remediation of harm, either due to legal requirements or
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customer experience management. In many cases, we may elect to correct such errors even where not legally or contractually required to do so in order to retain customer loyalty and maintain our brand.
If we are not able to innovate, improve existing products, and develop new products that achieve market acceptance, our growth, business, operating results, financial condition and future prospects could be materially and adversely affected.
Our solution is a technology-driven platform that relies on innovation to remain competitive. Our process of developing new features and products is complex and relies upon both internally developed and third-party technologies and services, including AI and machine learning, and cloud-based technologies. We may not be able to make product or technological improvements as quickly as demanded by our customers, or to market them effectively, which could harm our ability to attract or retain customers. For example, we have recently launched new products such as Passbook and Remitly for Developers, each of which required investments by us, and may continue to require investments. It is possible that these new products may not result in a return of our investment or be profitable, which may have an adverse effect on our business and financial results. Additionally, the majority of our customers access our products through our mobile website and mobile app, and we must ensure that our offerings are optimized for mobile devices and that our mobile apps are interoperable with popular third-party mobile operating systems such as Google Android and Apple iOS. If we are unable to successfully and in a timely fashion innovate and improve our existing products that achieve market acceptance, and continue to deliver a superior customer experience, our growth, business, operating results, financial condition, and future prospects could be materially and adversely affected.
We operate in a highly competitive and evolving market and may be unable to compete successfully against existing and future competitors which employ a variety of existing business models and technologies or new innovations.
The market for remittances is global, highly competitive, and fragmented and includes a mix of traditional and digital players, including traditional banks, digital-first cross-border payment providers, online-only banks, and cryptocurrency providers. Some of the competitors are significantly larger than we are, have longer operating histories, have more scale and name recognition, and more resources to deploy. We also compete against smaller, country-specific companies, banks, and informal person-to-person money transfer service providers that may have more ability to effectively tailor products and services, marketing and regulatory compliance to local preferences and requirements.
For example, some of these competitors may introduce new products or services that render us unable to retain our existing customers or attract new customers at prices that are consistent with our pricing model and operating budget. Our pricing strategy for our cross-border payments may prove to be unappealing to our customers, and our competitors could choose to bundle certain products and services that are competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could harm our revenue, gross profits, and operating results.
In addition, the broader financial services sector is also experiencing rapid evolution in technologies and there has recently been significant advancement in the development of neobanking and the exchange of digital assets, or cryptocurrency, that could materially impact the financial services industry in the future. The advancement in the development of cryptocurrencies has led to new entrants in the market for remittances and financial services more generally, including companies that have traditionally focused on social networks. Although still in early stages, cryptocurrency usage is growing, and, if we are unable to integrate cryptocurrency or other new financial technologies into our services, we may be unable to compete successfully.
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Any failure to obtain or maintain necessary money transmission licenses across our global footprint could adversely affect our operations.
The provision of money transfer services is highly regulated, and the requirements vary from jurisdiction to jurisdiction. In the U.S., we are registered as a Money Services Business with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (“FinCEN”), and are also licensed to operate as a money transmitter in 48 U.S. states and the District of Columbia.
Outside the U.S., we provide services to our customers in a variety of ways. In several key jurisdictions, we have obtained licenses to operate as a money services business or payment institution, as applicable. In the United Kingdom, we have obtained a payment institution license from the Financial Conduct Authority. In Ireland, we have obtained a payment institution license from the Central Bank of Ireland, and such license is recognized across the European Economic Area. In Singapore, we are licensed by the Monetary Authority of Singapore as a major payment institution. In Canada, we are registered with the Financial Transactions and Reports Analysis Centre of Canada as a money services business. In Australia, we are registered as a remittance service provider. We plan to apply for money transmitter licenses or their equivalents in additional jurisdictions. Additionally, in several foreign jurisdictions, we work with disbursement partners to make funds available to recipients. These may be locally licensed businesses or regulated banks whom we believe to be compliant with local laws. If these disbursement partners fail to comply with local laws, we could be required to seek an alternate solution, which could impact our service and our business.
As a licensed money transmitter, we are subject to net worth requirements, bonding requirements, liquidity requirements, requirements for regulatory approval of controlling stockholders, restrictions on our investment of customer funds, reporting requirements, anti-money laundering compliance requirements, cybersecurity requirements, and monitoring, examination and oversight by state, federal, and international regulatory agencies. If our licenses are not renewed or we are denied licenses in additional states or jurisdictions where we choose to apply for a license, we could be forced to change our business practices or be required to bear substantial cost to comply with the requirements of the additional states or jurisdictions. Further, if we were found by these regulators to be in violation of any applicable banking or money services laws or regulations, we could be subject to fines, penalties, lawsuits, and enforcement actions; additional compliance requirements; increased regulatory scrutiny of our business; restriction of our operations; or damage to our reputation or brand. Regulatory requirements are constantly evolving, and we cannot predict whether we will be able to meet changes to existing regulations or the introduction of new regulations without such compliance harming our business, financial condition, and operating results.
Certain jurisdictions have enacted rules that require licensed money transmitters to establish and maintain transaction monitoring and filtering programs, and cybersecurity programs. Wherever we are subject to these rules, we are required to adopt additional business practices that could also require additional capital expenditures or impact our operating results. If federal, state, or international regulators were to take actions that interfered with our ability to transfer money reliably including if they attempted to seize transaction funds, to limit or prohibit us, our payment processors, or our disbursement partners from transferring money in certain countries, whether by imposing sanctions or otherwise such actions could harm our business. Regulators could also impose other regulatory orders, monetary penalties, or other sanctions on us. Any change to our business practices that makes our service less attractive to customers or prohibits use of our services by residents of a particular jurisdiction could decrease our transaction volume and harm our business.
We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our business and operating results may be materially and adversely affected. We also may not be able to sustain our growth rate in the future.
We have experienced rapid growth in recent periods in both our headcount and transaction volume, both of which place substantial demands on our management and operational resources. We will need to continue to improve our operational, financial, and management controls and our reporting systems and procedures to manage
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this growth. For example, our headcount grew from over 750 employees as of the beginning of 2019 to over 1,600 global employees as of June 30, 2021, and we expect our headcount to continue to grow. Additionally, we may not be able to hire new employees quickly enough to meet our needs or we may fail to effectively integrate, develop, and motivate our new employees. If we cannot efficiently and quickly hire and manage our growing number of employees, our employee morale, productivity, and retention could suffer, and our business and operating results could be materially and adversely affected.
Further, as we continue to grow, our business becomes increasingly complex and requires more resources. We have expended and anticipate continuing to expend significant capital expenditures and other resources on expanding our IT infrastructure, streamlining our business and management processes, and other operational areas. Continued growth could strain our existing resources and we could experience operating difficulties in managing our business across numerous jurisdictions. Failure to effectively scale could harm our future success, including our ability to retain and recruit personnel and to effectively focus on our growth strategy.
For example, our controls, policies and procedures, including with respect to accounting, risk management, data privacy, cybersecurity, client on-boarding, transaction monitoring and reliance on manual controls, among other compliance matters, remain under development and may not be consistently applied or fully effective to identify, monitor and manage all risks of our business as we continue to scale rapidly. If we do not inform, train and manage our employees properly, we may fail to comply with applicable laws and regulations, which could lead to adverse regulatory action. Moreover, the process by or speed with which our internal controls and procedures are implemented or adapted to changing regulatory or commercial requirements may be inadequate to ensure full and immediate compliance, leaving us vulnerable to inconsistencies and failures that may have a material adverse effect on our business, results of operations and financial condition. If our controls, policies and procedures are not fully effective or we are not successful in identifying and mitigating all risks to which we are or may be exposed, we may suffer uninsured liability, harm to our reputation or be subject to litigation or regulatory actions that could materially and adversely affect our business, financial condition and results of operations.
If we or our industry generally are unable to provide a high-quality and secure customer experience in the various locales in which we operate, our brand could suffer reputational damage and our business results could be harmed.
Our business is largely driven by and reliant on customer trust in our handling of money remittances. The pricing and reliability of our service, the security of personally identifiable and other sensitive information of our customers, and a responsive and effective customer support function are each critical elements for the maintenance of this trust. For example, any significant interruption in either our internal or our partners’ risk management, payment processing or disbursement systems could reduce customer confidence in our services. In addition, any breach, or reported breach, of information security policies or legal requirements that result in a compromise of customer data or causes customers to believe their data has been compromised could have a significant negative effect on our business. Legal claims and regulatory enforcement actions could also arise in response to these events, which would further exacerbate erosion of customer trust and potentially result in operating losses and liabilities. If we are unable to maintain affordable pricing, deliver services reliably and securely, or address customer support issues in an effective and timely manner, our reputation and our business and operating results could suffer material harm. In addition, any erosion in confidence in digital financial service providers as a means to transfer money generally could have a similar negative effect on us.
We transfer large sums of customer funds daily, and are subject to the risk of loss due to errors or fraudulent or illegitimate activities of customers or third parties, any of which could result in financial losses or damage to our reputation and trust in our brand, which would harm our business and financial results.
Our business is subject to the risk of financial losses as a result of operational errors, fraudulent activity, employee misconduct, or other similar actions or errors on our platform. We have been in the past, and will continue to be, subject to losses due to software errors in our platform, operational errors by our employees or third-party
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service providers. For example, incorrect input of payments into a third party processor’s systems has in the past affected the issuance rebates we received from our card services provider, which in turn negatively impacted revenue. In addition, we also are regularly targeted by parties who seek to commit acts of financial fraud, using a variety of techniques, including stolen bank accounts, compromised business email accounts, employee fraud, account takeover, false applications, and check fraud. We are also routinely targeted for illegitimate transactions such as money laundering. These risks are inherently greater for us because our corridors for remittances are generally from developed to developing economies, which have traditionally been highly targeted by bad actors perpetrating fraud or other unwanted activity. The methods used to perpetrate these illegal activities are continually evolving, and we expend considerable resources to monitor and prevent them. Our risk management efforts may not effectively prevent, and we may suffer losses from, these errors and activities and, in some cases, our usual risk allocation agreements and insurance coverages may not be sufficient to cover these losses. We have experienced transaction losses of $7.6 million, or 0.11%, $17.2 million, or 0.14%, and $15.5 million, or 0.17% of total send volume in connection with such errors, fraud, and misconduct in the years ended December 31, 2019 and December 31, 2020 and in the six month period ended June 30, 2021, respectively. We expect that losses of similar magnitude may occur again in the future. If any of these errors or illegitimate or fraudulent activities are significant, we may be subject to regulatory enforcement actions, suffer significant losses or reputational harm and our business, operating results, and financial condition could be adversely affected.
We have a history of operating losses and there is no assurance that our business will become profitable or that, if we achieve profitability, we will be able to sustain it.
We were incorporated in 2011 and we have experienced net losses since inception. We generated net losses of $51.4 million and $32.6 million for the fiscal years ended December 31, 2019 and December 31, 2020 and net losses of $21.1 million and $9.2 million for the six months ended June 30, 2020 and June 30, 2021. While we have experienced significant revenue increases in recent periods, we are not certain whether our customer base will continue to expand to the point where we may achieve profitability. If the assumptions we use to plan our business are incorrect or change, or if we are unable to maintain consistent revenue, it may be difficult to achieve and maintain profitability. Our revenue from any prior quarterly or annual periods should not be relied upon as an indication of our future revenue or revenue growth. We have historically spent, and intend to continue to spend, significant funds to further develop and secure our technology platform, develop new products and functionalities, invest in marketing programs to drive new customer acquisition, expand strategic partner integrations, and support international expansion into new payment corridors. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. We will also face increased compliance and security costs associated with growth, the expansion of our customer base and corridors, and being a public company. Our history of net losses has also caused us to at times draw on our revolving line of credit to satisfy our capital requirements and any inability to maintain or secure financing on satisfactory terms could materially and adversely impact our business. Our financial performance each quarter is also impacted by circumstances beyond our control, such as our ability to retain our customers, ability to efficiently attract new customers, corridor mix, revenue mix and seasonality. We may incur significant losses in the future for several reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may be adversely affected.
Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
Our revenue was $126.6 million and $257.0 million, and our send volume was $7.1 billion and $12.1 billion, for the fiscal years ended December 31, 2019 and 2020, respectively. Our revenue was $105.1 million and $202.1 million, and our send volume was $5.2 billion and $9.2 billion, for the six months ended June 30, 2020 and 2021, respectively. Although a large market share for remittance services remains untapped by us, we have recently
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experienced significant growth in our revenue and send volume. However, even if our revenue continues to increase, we expect that our growth rate will decline in the future as a result of a variety of factors, including the increasing scale of our business and the return to work as communities around the world recover from the COVID-19 pandemic. Overall growth of our revenue depends on a number of factors, including our ability to:
•maintain the rates at which customers transact on our platform;
•attract new customers;
•expand the functionality and scope of the products we offer on our platform;
•price our services competitively;
•maintain high quality, highly available products;
•maintain trust with our customers;
•maintain send volume;
•provide our customers with high-quality customer support that meets their needs;
•introduce our services in new payment corridors and markets, including maintaining existing and obtaining new money transmitter licenses;
•localize our services;
•successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform; and
•increase awareness of our brand and successfully compete with other companies.
We may not successfully accomplish any of these objectives, which makes it difficult for us to forecast our future operating results. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. Additionally if we fail to address the risks and difficulties that we face, including those associated with the factors listed above as well as those described elsewhere in this “Risk Factors” section, our growth rate will be adversely affected. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue or payment growth.
We expect our revenue mix to vary over time, which could affect our gross margin and results of operations.
We expect our revenue mix to vary over time, particularly if our recently introduced products grow to represent a larger portion of our revenue. Shifts in our business mix from quarter to quarter could produce substantial variation in revenue recognized. Further, our results of operations could be affected by changes in revenue mix and costs, together with numerous other factors, including, but not limited to, fluctuations in the demand for our services, the pricing of our services and our corridor mix. Any one of these factors or the cumulative effects of certain of these factors may result in significant fluctuations in our results of operations. This variability and unpredictability could result in our failure to meet internal expectations or those of securities analysts or investors for a particular period.
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Intellectual Property, Technology, Privacy and Security Risks
Cyberattacks or data security breaches could result in serious harm to our business, reputation and financial condition.
As our business continues to rapidly grow, so does the scope of risk associated with cyberattacks and data or other information security breaches. Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyber extortion, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology (“IT”) and infrastructure and those of third parties with whom we partner could compromise the confidentiality, availability, and integrity of the data in our systems. We have experienced from time to time, and may experience in the future, breaches of our systems due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities.
In particular, because we rely on third-party technology providers in our business, we rely on the cybersecurity practices and policies adopted by these third parties. Our ability to monitor our third-party technology providers’ cybersecurity practices is limited. Our disbursement partners and other third parties who have access to our data also may experience these types of events, and we experience additional exposure to these risks through these partners. If bad actors gain improper access to our systems or databases or those of our disbursement partners and other third parties who have access to our data, they may be able to steal, publish, delete, copy, unlawfully, or fraudulently use or modify data, including personal information. A security breach could result in monetary and other losses for us or our customers, identify theft for our customers, our inability to expand our business, additional scrutiny and restrictions and fines or penalties from regulatory or governmental authorities, loss of customers and customer confidence in our services, exposure to civil litigation, a breach of our contracts with lenders or other third parties, liquidity risks or a negative impact on our relationships with our financial services providers, including payment processors, disbursement partners, and other third parties, all which could harm our business, financial condition, and operating results. Also, our reputation could suffer irreparable harm, causing our current and prospective clients to decline to use our solutions in the future. Further, we could be forced to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs, investigating and remediating any information security vulnerabilities, complying with data breach notification obligations, and defending against and resolving legal and regulatory claims, all of which could divert resources and the attention of our management and key personnel away from our business operations and materially and adversely affect our business, financial condition, and operating results. While we maintain insurance policies, our coverage may be insufficient to compensate us for all losses caused by security breaches, and any such security breaches may result in increased costs for such insurance. We also cannot ensure that our existing cybersecurity insurance coverage will continue to be available on acceptable terms or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation and our business, financial condition, and operating results.
In addition, the trend towards working from home and using private residential networks to access the internet, which has arisen in response to the COVID-19 pandemic and other global economic and labor market conditions, may further exacerbate risks associated with cyberattacks and data security breaches, because we cannot guarantee these private work environments have the same robust security measures deployed in our physical offices.
For additional information, see the section titled “Risk Factors—Our business is subject to the risks of earthquakes, fires, floods, public health crises, pandemics, and other natural catastrophic events, and to interruption by man-made problems such as cyber-attacks, internal or third-party system failures, political unrest, market or currency disruptions, and terrorism, which could result in system and process failures and interruptions which could harm our business.”
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We are subject to privacy laws across multiple jurisdictions which are highly complex, overlapping and frequently changing and create compliance challenges that may expose us to substantial costs, liabilities or loss of customer trust. Our actual or perceived failure to comply with these laws could harm our business.
The legal and regulatory environment relating to “privacy and data protection laws” (as discussed in “Business—Regulatory Environment”) continues to develop and evolve in ways we cannot predict, including with respect to technologies such as cloud computing, AI, cryptocurrency, and blockchain technology. We have internal and publicly posted policies regarding our collection, processing, use, disclosure, and security of information. Although we endeavor to comply with our policies and documentation, we may at times fail to do so or be accused of having failed to do so. The publication of our privacy policy and other documentation that provide promises and assurances about data privacy and security can subject us to potential actions if they are found to be deceptive, unfair, or otherwise misrepresent our actual practices, which could materially and adversely affect our business, financial condition and results of operations. Any failure, or perceived failure, by us to comply with our privacy or cybersecurity policies as communicated to users or with privacy and data protection laws could result in proceedings or actions against us by data protection authorities, government entities, or others. Such proceedings or actions could subject us to significant fines, penalties, judgments, and negative publicity which may require us to change our business practices, increase the costs and complexity of compliance, and materially harm our business. In addition, compliance with inconsistent privacy and cybersecurity laws may restrict our ability to provide products and services to our customers. For additional discussion about the regulatory environment that we operate in, please see the section titled “Business—Regulatory Environment”.
Any security or privacy breach of our system could breach our agreements with significant partners that we use to deliver our services and expose us to significant loss.
Our agreements with third parties, including without limitation those with payment processors, credit card and debit card issuers and bank partners, include mutual contractual commitments on information security and data privacy compliance. If we experience an incident that creates a breach of such contractual commitments, we could be exposed to significant liability or cancellation of service under these agreements. The damages payable to the counterparty as well as the impact to our service could be substantial and create substantial costs and loss of business. For example, if we experience any information security or data privacy breach with respect to credit card or debit card information that we store, we could be liable to the issuing banks for their cost of issuing new cards and related expenses. In addition, a significant breach could result in our being prohibited from processing transactions for any of the relevant network organizations, such as Visa or MasterCard, which would harm our business.
Any significant interruption or failure of our system availability, including failure to successfully implement upgrades or new technologies to our mobile app or website, could adversely affect our business, financial, and operating results.
The efficient and uninterrupted operation of technologies that we use to deliver our services is important for the customer experience. This includes maintaining ready customer access and acceptable load times for our services at all times. Our systems and operations and those of third-party partners have experienced and may experience in the future interruptions or degradation of service availability due to a variety of events including distributed denial-of-service and other cyberattacks, insider threats, hardware and software defects or malfunctions, human error, earthquakes, hurricanes, floods, fires, and other natural disasters, public health crises (including pandemics), power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events. To the extent we cannot effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology platform to maintain sufficient system availability, new or existing customers may seek other services and may not return to our services as often in the future, or at all. If our service is unavailable when customers attempt to access it or it does not load as quickly as they expect, customers may lose trust in our service or determine that our services are unreliable or too slow to meet their needs.
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This would harm our ability to attract customers and could decrease the frequency with which they use our website and mobile solutions. As a result, our business, financial results and operating results may be harmed.
In addition, our platform is currently vulnerable to downtime should a major disaster or other event affect the west coast of the United States, where our cloud services provider is based, and our physical system architecture resides. While we have backups for these systems, our platform would be unavailable for some time were our normal systems to go down. Further, some of our systems are not fully redundant, and our disaster recovery program has not been fully tested and may not be sufficient for all eventualities.
Public scrutiny of internet privacy and security issues may result in increased regulation and different industry standards, which could deter or prevent us from providing our current services to our customers, thereby harming our business.
The regulatory framework for privacy and security issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, processing, use, storage, transmission, disclosure, and security of personal information by companies operating over the internet have recently come under increased public scrutiny. Due to the amount of personal information we process and handle as a part of our business, currently applicable laws and the implementation of new laws or amendments have a substantial impact on our operations both outside and in the United States, either directly as a data controller or indirectly through our partnerships and service providers. State, federal and foreign lawmakers and regulatory authorities have increased their attention on the collection and use of consumer data. In addition, many jurisdictions in which we operate have or are developing laws that protect the privacy and security of sensitive and personal information, including, but not limited to, the Gramm-Leach-Bliley Act (“GLBA”), the California Consumer Privacy Act of 2018 (“CCPA”), the California Privacy Rights Act of 2020 (“CPRA”), the United Kingdom’s Data Protection Act 2018 (the “Data Protection Act”), and the European General Data Protection Regulation (“GDPR”).
In addition, we rely on the standard contractual clauses (as promulgated and recently substantially revised by the European Commission) for intercompany data transfers from the European Union to the United States. As supervisory authorities continue to issue further guidance on personal data, we could suffer additional costs, complaints, or regulatory investigations or fines, and if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. For additional discussion about the cybersecurity and privacy regulatory environment that we operate in, see the section titled “Business—Privacy and Cybersecurity”.
The various privacy and cybersecurity laws and regulations with which we must comply are complex and evolving. Compliance with such laws and regulations require we expend significant resources, and we cannot guarantee that we will be able to successfully comply with all such privacy and cybersecurity laws and regulations, especially where they do or may in the future conflict with one another, nor can we predict the extent to which such new and evolving regulatory and legal requirements will impact our business strategies and the cost or availability of previously useful data, increase our potential liability, increase our compliance costs, require changes in business practices and policies, or otherwise adversely affect our business. Furthermore, any data breach or a failure by us to comply with the cybersecurity and privacy regulations and laws which we are subject to could result in penalties and fines, or in civil litigation against us, which could have a material adverse effect on our business, including on how we use personal data, on our financial condition, and our operating results.
We believe our policies and practices comply with applicable privacy guidelines and other applicable laws and regulations under which we are regulated. However, if our belief proves incorrect, if there are changes to the guidelines, laws, or regulations, or their interpretation, or if new regulations are enacted that are inconsistent with our current business practices, our business could be harmed. We may be required to change our business practices, services, or privacy policy, reconsider any plans to expand internationally, or obtain additional consents from our customers before collecting or using their information, among other changes. Changes like these could increase our
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operating costs and potentially make it more difficult for customers to use our services, resulting in less revenue or slower growth.
If we are unable to adequately protect or enforce our intellectual property rights, our business, prospects, financial condition, and operating results could be harmed.
The Remitly brand and the trademarks, service marks, trade names, copyrights, domain names, trade dress, patents and trade secrets, and other intellectual property and proprietary rights (collectively, “IP Rights”) that support that brand are important to our business. We rely on, and expect to continue to rely on, a combination of intellectual property laws, as well as confidentiality, invention assignment, and license agreements with our employees, contractors, consultants, and other third parties with whom we work, to establish and protect our brand, proprietary technology, and other IP Rights. However, effective protection of our IP Rights may not be available in every jurisdiction in which we offer our services and, where such laws are available, our efforts to protect such rights may not be sufficient or effective and such rights may be found invalid or unenforceable or narrowed in scope. If we are unable to prevent third parties from using or offering technologies or services that infringe on, misappropriate or otherwise violate our IP Rights, our business results could be adversely affected.
In addition, effective protection of our IP Rights is expensive to maintain. We have in the past and may in the future bring claims against third parties alleging infringement, misappropriation, or other violation of our IP Rights. Our efforts to enforce our IP Rights may be met with defenses, counterclaims, and countersuits attacking the ownership, scope, validity and enforceability of such rights. The outcome in any such lawsuits are unpredictable. Even if resolved in our favor, such lawsuits may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. Moreover, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing or any inability to enforce or otherwise defend our IP Rights could have a material adverse effect on our competitive position, business, financial condition, and results of operations.
For example, we have registered domain names for our website that we use in our business, such as www.remitly.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our services under a new domain name, which could diminish our brand or cause us to incur significant expenses to purchase rights to the domain name in question. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks.
We pursue registration of trademarks and service marks in the United States and in certain, but not all, current or potential jurisdictions outside of the United States, but doing so may not always be successful or cost-effective. We rely on common law (unregistered) trademark rights in certain jurisdictions where possible, but many countries do not recognize common law rights. Even if we apply to register our trademarks, our trademark applications may not be granted. Additionally, rights in common law trademarks are not always entitled to the same protections as registered trademarks, and are generally limited to the geographic region in which the trademark is used. We have relied on, and may in the future rely on, the well-known status of the REMITLY trademark in opposition or cancellation actions against potentially conflicting marks in jurisdictions where we do not own registrations, but we may be unable to protect our trademark and service mark rights, and third parties have in the past, and may again in the future, file or acquire trademarks and/or service marks that are similar to, infringe upon, dilute or diminish the value of our IP Rights. Opposition or cancellation proceedings may in the future be filed against our trademark and service mark applications and registrations, and our trademarks and service marks may not survive such proceedings. If third parties register or develop common law rights which adversely affect our brand or IP Rights and we are unable to successfully challenge such third-party rights, we may not be able to use our trademarks and service marks to further develop brand recognition.
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We also rely on our proprietary technology and trade secrets. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer, independently develop, or otherwise obtain and use them. The contractual provisions that we enter into with employees, consultants, disbursement partners, vendors, and customers may not prevent unauthorized use or disclosure of our proprietary technology or trade secrets and may not provide an adequate remedy in the event of such unauthorized use or disclosure. We also cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology or that our invention assignment agreements will be effective. Moreover, policing unauthorized use of our technologies, services, and intellectual property is difficult, expensive, and time consuming, particularly in international countries where the laws and enforcement of said laws may not effectively protect our IP Rights. In addition, we may be unable to determine the extent of any unauthorized use or infringement, misappropriation, or other violation of our services, technologies, or IP Rights. Any failure to adequately protect or enforce our IP Rights, or significant costs incurred in doing so, could materially harm our business, prospects, financial condition and operating results.
We also license certain third-party intellectual property that is important to our business, including technologies, data, content and software from third parties, and in the future we may license additional valuable third-party intellectual property or technology. If we fail to comply with any of the obligations under our license agreements, we may be required to pay damages and the licensor may have the right to terminate the license, which would cause us to lose valuable rights, and could prevent us from selling our services, or inhibit our ability to commercialize current or future services.
Assertions by third parties of infringement, misappropriation, or other violations by us of their intellectual property or other proprietary rights could result in significant costs and substantially harm our business and operating results.
Intellectual property disputes are common in the payments and digital financial services industries. We may become involved in lawsuits to protect or enforce our intellectual property rights, and we may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property. Some companies in the digital financial services industry, including some of our competitors, own large numbers of patents, copyrights, trademarks, and trade secrets, which they may use to assert claims against us. Third parties have asserted and may in the future assert claims of infringement, misappropriation, or other violations of intellectual property rights against us. As the number of services and competitors in our market increases and overlaps occur, claims of infringement, misappropriation, and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation, or other violation of intellectual property rights by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management. In addition, an adverse outcome of a dispute may require us to pay substantial damages; cease making, licensing, or using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to attempt to redesign our services or otherwise to develop non-infringing technology, which may not be successful; enter into potentially unfavorable royalty or license agreements to obtain the right to use necessary technologies or intellectual property rights; and indemnify our disbursement partners and other third parties. Royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. Any of these events could harm our business, financial condition, and operating results.
Our use of open source and third-party technology could impose limitations on our ability to offer our services to customers.
We use open source software in our services and expect to continue to use open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. Although we monitor our use of open source software to avoid subjecting our services to conditions we do not
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intend, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. Additionally, we could face claims from third parties seeking to enforce the terms of the applicable open source license. In such an event, we could be required to seek licenses from third parties to continue offering our services, to make our proprietary code generally available in source code form, to re-engineer our services, or to discontinue our services if re-engineering could not be accomplished on a timely basis, any of which could harm our business, financial condition, and operating results. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide our services. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could materially and adversely affect our business, financial condition and results of operations.
If we do not or cannot maintain the compatibility of our platform with the most popular mobile devices, desktop browsers, and tablet devices, our revenue and growth prospects may decline.
Our customers access our product offerings increasingly through mobile phones and also through the use of various other hardware devices and software programs. If any of the software providers change the features of their APIs, discontinue their support of such APIs, restrict our access to their APIs, or alter the terms governing their use in a manner that is adverse to our business, we will not be able to provide synchronization capabilities, which could significantly diminish the value of our platform and harm our business, operating results, and financial condition.
The functionality and popularity of our platform depends, in part, on our ability to integrate our platform with the offerings of our strategic partners. Critically, our financial institution strategic partners must be able to integrate our platform into their existing offerings. These strategic partners periodically update and change their systems, and although we have been able to adapt our platform to their evolving needs in the past, there can be no guarantee that we will be able to do so in the future. While we have multiple API integrations and partner redundancies built into our platform, if we are unable to adapt to the needs of our strategic partners’ platforms, our remittance transaction process may be interrupted or delayed, and our strategic partners may terminate their agreements with us, leading to a loss of access to large numbers of customers at the same time and consequent negative impact on our growth and customer retention.
We may not be able to enforce our intellectual property rights throughout the world.
We may be required to protect our proprietary technology in an increasing number of jurisdictions, a process that is expensive and may not be successful, or which we may not pursue in every location due to costs, complexities or other reasons. Filing, prosecuting, maintaining, defending, and enforcing intellectual property rights on our products, services, and technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. Competitors may use our technologies in jurisdictions where we have not obtained intellectual property rights to develop their own products and services and, further, may export otherwise infringing, misappropriating or violating products and services to territories where we have intellectual property protection but enforcement is not as strong as that in the U.S. These products and services may compete with our products and services, and our intellectual property rights may not be effective or sufficient to prevent them from competing.
In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as U.S. laws, and many companies have encountered significant challenges in establishing and enforcing their proprietary rights outside of the United States. These challenges can be caused by the absence or inconsistency of the application of rules and methods for the establishment and enforcement of intellectual property rights outside of the United States.
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In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of intellectual property protection. This could make it difficult for us to stop the infringement, misappropriation or other violation of our intellectual property rights. Accordingly, we may choose not to seek protection in certain countries, and we will not have the benefit of protection in such countries. Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by U.S. courts and foreign countries may affect our ability to obtain adequate protection for our products, services and other technologies and the enforcement of intellectual property rights. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, and results of operations.
Legal and Compliance Risks
Failure to comply with sanctions laws, anti-terrorist financing laws, anti-money laundering laws, and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.
We have implemented policies and procedures designed to allow us to comply with anti-money laundering laws and economic sanctions laws and prevent our platform from being used to facilitate business in countries or with persons or entities designated on lists promulgated by OFAC and equivalent international authorities. We may utilize the services of vendors, such as screening tools, in implementing such policies and procedures. In the event that we or any of our users engage in any conduct, intentionally or not, that facilitates money laundering, terrorist financing, or other illicit activity, or that violates anti-money laundering or sanctions laws, or otherwise constitutes activity that is prohibited by such laws, including through the fault of any vendor, we may be subject to fines, penalties, lawsuits, and enforcement actions; additional compliance requirements; increased regulatory scrutiny of our business; restriction of our operations; or damage to our reputation or brand.
Law enforcement and regulators continue to scrutinize compliance with these obligations, which may require us to further revise or expand our compliance program, including the procedures that we use to verify the identity of our customers or monitor our platform for potential illegal activity. In addition, any policies and procedures that we implement to comply with sanctions laws may not be effective, including in preventing customers from using our services with sanctioned persons or jurisdictions subject to comprehensive sanctions, including Cuba, North Korea, Syria, Iran, and the Crimea region of Ukraine. Given the technical limitations in developing controls to prevent, among other things, the ability of customers to publish on our platform false or deliberately misleading information or to develop sanctions-evasion methods, it is possible that we may inadvertently and without our knowledge provide services to individuals or entities that have been designated by OFAC or are located in a jurisdiction subject to comprehensive sanctions or an embargo by the United States, and such services may not be in compliance with the economic sanctions regulations administered by OFAC.
Consequences for failing to comply with applicable rules and regulations could include fines, criminal and civil lawsuits, forfeiture of significant assets, or other enforcement actions. We could also be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual breach of compliance by us, our customers, vendors, or our payment or disbursement partners with respect to applicable laws, rules, and regulations could have a significant impact on our reputation and could cause us to lose existing customers, prevent us from obtaining new customers, cause other payment or disbursement partners to terminate or not renew their agreements with us, require us to expend significant funds to remedy problems caused by violations and to avert further violations, adversely affect our relationship with our partner banks and other commercial counterparties and expose us to legal risk and potential liability, all of which may adversely affect our business, operating results, and financial condition and may cause the price of our common stock to decline.
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Use of our platform for illegal or fraudulent activities could harm our business, reputation, financial condition, and operating results.
Our platform is susceptible to illegal, improper or fraudulent uses, including money laundering, terrorist financing, sanctions evasion, bank fraud, payments involving child pornography or human trafficking, and the facilitation of other illegal, improper or fraudulent activity. The digital financial services industry is under increasing scrutiny from federal, state, and international regulators in connection with the potential for such illegal, improper or fraudulent activities. In addition, our remittance service facilitates payments to jurisdictions which may in some cases have higher levels of illegal, improper payments. For example, the United States to Colombia and United States to Nigeria payment corridors have historically been characterized by a high volume of fraudulent payments and are thus particularly high-risk. Our payment system has been utilized for illegal, improper and fraudulent uses in the past and we cannot guarantee that our policies, procedures and internal controls, or insurance, would adequately protect our business, maintain our continued ability to operate in the jurisdictions that we serve, or our reputation, especially if such illegal, improper or fraudulent activities were discovered to have taken place on our platform in the future. Our fraud loss expenses may increase if our fraud systems lose effectiveness or if new methods or schemes are developed to defraud us. Since the methods and schemes utilized by perpetrators of fraud are constantly evolving or, in some cases, not immediately detectable, we cannot assure you that our policies, procedures and controls for managing fraud will be effective over time or of our ability to update these measures to address emerging fraud risks. In addition, if illicit or fraudulent activity levels involving our services were to rise, it could lead to regulatory intervention and reputational and financial damage to us. This, in turn, could lead to government enforcement actions and investigations, a suspension or termination of our operating licenses, a reduction in the use and acceptance of our services, or an increase in our compliance costs, any of which may harm our business, financial condition, and operating results.
On the other hand, if the measures we have taken to detect illegal, improper or fraudulent activities are too restrictive and/or inadvertently prevent or delay proper transactions, this could result in suspension of legitimate customer activity on our payment system, deter new and existing customers or otherwise diminish our customer experience, any of which could harm our business.
Our platform is susceptible to fraud, and our business, reputation, financial condition and operating results could be harmed as a result.
We offer our customers the ability to fund transactions utilizing their credit card or debit card. We also offer alternative payment methods. Because these are card-not-present/online transactions, they involve a greater risk of fraud. We also release a small percentage of funded transactions for disbursement prior to our receiving funds from our customers, which exposes us to repayment risk in the event that these customers have insufficient funds in their bank account. Additionally, we carry chargeback liability for a large portion of disputed card payment transactions. If we are unable to effectively manage our payment and fraud risks, we may be placed on fraud monitoring programs put in place by various payment scheme networks, banking partners, and our business and financial results may be harmed.
Governments and regulators have been and will continue to be pressured to adopt greater protections for consumers which could require us to change our business model and harm our financial and operating results.
Globally, governmental agencies have been under increasing pressure to implement greater protections for consumers, which could result in enhanced requirements and obligations for services providers like us. The Consumer Financial Protection Bureau (“CFPB”) and similar regulatory agencies in other jurisdictions we serve have broad consumer protection mandates that could result in the promulgation and interpretation of rules and regulations that may affect our business. The CFPB’s Remittance Rule, for example, establishes threshold requirements for all money remittances involving U.S. participants, including, among other things, disclosure requirements regarding certain transaction details, receipts, refunds within statutory periods and error resolution. If
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we were found to be in violation of any of these regulations, our business or reputation could be harmed and we could face penalties and enforcement action by the CFPB.
In addition, the CFPB administers other regulations and may adopt new regulations governing consumer financial services, including regulations defining unfair, deceptive, or abusive acts or practices, and new model disclosures. The CFPB’s authority to change regulations adopted in the past by other regulators, or to rescind or alter past regulatory guidance, could increase our compliance costs and litigation exposure. These regulations, changes to these regulations, and other potential changes under CFPB regulations could harm our business, financial condition, and operating results and force us to change the way we operate our business. Finally, as a larger participant in the market for international money transfers, we are subject to the CFPB’s direct supervisory and examination authority. Any weaknesses in our compliance management system or Remittance Rule program may also subject us to penalties or enforcement action by the CFPB. If the CFPB or other similar regulatory bodies adopt, or customer advocacy groups are able to generate widespread support for, positions that are detrimental to our business, then our business, financial condition, and operating results could be harmed.
Our business is subject to a variety of U.S. and international laws and regulations, many of which are unsettled and still developing, and many of which may contradict one another due to conflicting regulatory goals. Failure to comply with these laws could subject us to regulatory action, claims or otherwise harm our business.
Our service is subject to a variety of laws and regulations worldwide, primarily from our key send jurisdictions in the United States, Canada, the EEA, the United Kingdom, Australia, and Singapore. We also work with disbursement partners in various receive jurisdictions, including Nigeria and India, whom we believe are complying with local laws and regulations. We rely on such disbursement partners to conduct our business and such disbursement partners could fail or be unable to satisfy their obligations to us. This could lead to our inability to access funds and/or credit losses for us and could adversely impact our ability to conduct our business.
From time to time, additional regulatory agencies may also attempt to assert jurisdiction over our international business activities. These laws are complex, extensive, and continuously evolving and developing, including laws regarding money laundering, terrorist financing, fraud, data use and retention, theft and misappropriation, cybersecurity, privacy, anti-spam, consumer disclosure and protection, advertising and marketing, payment processing, money transmission, financial services, currency controls, and escheatment. These requirements vary from jurisdiction to jurisdiction and are subject to continued interpretation by regulatory bodies, judicial branches, and enforcement agencies in each such jurisdiction. These changes can happen quickly and with little notice and, in addition, the scope and interpretation of these laws is often uncertain and may be conflicting. We or our disbursement partners are subject to reporting, recordkeeping, and anti-money laundering provisions of the laws of each of the jurisdictions in which we do business. In the United States, for example, the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (the “BSA”), and its implementing regulations, subjects our business to regulatory oversight by the Financial Crimes Enforcement Network and state regulators. We have implemented an anti-money laundering compliance program, including transaction monitoring procedures, to identify and address, among other things, use of our platform by prospective or existing customers that appears to constitute money laundering or other illegal activity. The BSA, among other laws and regulatory requirements, requires businesses such as ours to develop and implement a risk-based compliance program designed to prevent and identify money laundering schemes, report large cash transactions and suspicious activity, and maintain records, such as records about customers who use our services and other transaction records. Regulatory agencies continue to scrutinize compliance with these obligations, which may require us to revise or expand our compliance program, including the procedures we use to verify the identity of our customers or monitor international and domestic transactions. In addition, existing laws and regulatory requirements may change and become more stringent, such as requiring us to maintain records on a larger number of transactions or verify the identity of our customers in a prescriptive way, which could result in greater costs for compliance.
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Similarly, in the European Union, we operate through our Irish subsidiary, which is licensed under the EU Payment Services Directive (“PSD”) Under the PSD, as amended by a revised Payment Services Directive known as PSD2, and the 4th and 5th Anti-Money Laundering Directive in the EU, our EU operating company has increasingly become directly subject to reporting, recordkeeping, and anti-money laundering regulations, agent oversight and monitoring requirements, as well as broader supervision by EU member states. Additionally, the financial penalties associated with the failure to comply with anti-money laundering laws have increased in recent regulation, including the 4th Anti-Money Laundering Directive in the EU. Legislation that has been enacted or proposed in other jurisdictions could have similar effects. These laws and other similar legislation enacted or proposed in the United States and other countries have increased and will continue to increase our costs, and in the event that we or our agents are unable to comply, could harm our business, financial condition, results of operations, and cash flows.
We are also required to comply with all economic sanctions imposed by the United States, which are overseen by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), and by those imposed in the international jurisdictions in which we operate, including the European Union and the United Kingdom. Moreover, we are also subject to the Foreign Corrupt Practices Act, (“FCPA”) in the United States and similar laws in other countries that generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
Although we maintain policies and procedures that are designed to comply with these laws, any real or perceived failure to comply with them, and any future laws and regulations, could result in fines, sanctions, penalties, litigation, enforcement orders, loss of customer confidence, or other harmful consequences, or adversely affect our relationship with our customers, partner banks and other commercial counterparties, any of which could harm our business, financial condition, and operating results. In addition, governmental agencies both in the United States and worldwide may impose new or additional rules on money transfers affecting us, our agents, partner banks or commercial counterparties, including regulations that:
•prohibit, restrict, and/or impose taxes or fees on remittance transactions in, to, or from certain countries or with certain governments, individuals, and entities;
•impose additional customer identification and customer, agent, subagent due diligence, and vendor management requirements;
•impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring;
•limit the types of entities capable of providing remittance services, impose additional licensing or registration requirements on us, our agents, or their subagents, or impose additional requirements on us with regard to selection or oversight of our agents or their subagents;
•impose minimum capital or other financial requirements on us or our agents and their subagents;
•limit or restrict the revenue which may be generated from money transfers, including transaction fees and revenue derived from foreign exchange;
•require enhanced disclosures to our customers;
•require the principal amount of money originated in a country to be invested in that country or held in a trust until they are paid;
•limit the number or principal amount of remittances, which may be sent to or from a jurisdiction, whether by an individual, through one agent, or in aggregate;
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•impose more stringent information technology, cybersecurity, data, and operational security requirements on us or our agents and their subagents, including relating to data transfers and the use of cloud infrastructure;
•impose additional risk management and related governance and oversight requirements, including relating to the outsources of services to other group companies or to third parties; and
•prohibit or limit exclusive arrangements with our agents and subagents.
For example, the Central Bank of Nigeria recently imposed currency controls that limit repatriation of funds with immediate effect, which required money transmission businesses, including us, to make substantial adjustments to payments processes that serve Nigerian consumers. While we believe that we are compliant with our regulatory responsibilities, the legal, political, and business environments in these areas are routinely changing, and subsequent legislation, regulation, litigation, court rulings, or other events could expose us to increased liability, increased operating and compliance costs to implement new measures to reduce our exposure to this liability, and reputational damage. The risk of non-compliance is exacerbated when we introduce new products or services that subject us to new laws and regulations. In addition, as we expand and localize our international activities, we may become increasingly obligated to comply with the laws of the countries or markets in which we operate. In addition, because our services are accessible worldwide and we facilitate remittances to a growing number of countries, one or more jurisdictions may claim that we are required to comply with their laws. Local regulators may use their power to slow or halt payments to our customers in those jurisdictions. Such regulatory actions or the need to obtain licenses, certifications or other regulatory approvals could impose substantial costs and involve considerable delay in the provision or development of our services in a given market, or could require significant and costly operational changes or prevent us from providing any services in a given market. Additionally, external factors such as economic or political instability, or natural disasters may make money transfers to, from, within, or between particular countries difficult or impossible. These risks could negatively impact our ability to offer our services, to make payments to or receive payments from disbursement partners or to recoup funds that have been advanced to disbursement partners, and as a result could adversely affect our business, financial condition, results of operations, and cash flows. In addition, the general state of telecommunications and infrastructure in some developing countries, including countries where we have a large number of transactions, creates operational risks for us and our disbursement partners.
Governments may decide to impose restrictions or levy new taxes on money transfers or other digital financial services provided by us, which would harm our financial results and our business.
Our business could be harmed if a local, state, federal, or international government were to levy taxes on money transfers, as has been proposed in the past. Budget shortfalls in the United States and many jurisdictions could lead other states and jurisdictions to impose similar fees and taxes, as well as increase unclaimed property obligations. Such fees or taxes, and any related regulatory initiatives, may be implemented in a manner that conflicts with other laws to which we are bound or in a manner with which we are unable to comply, and noncompliance could harm our business. It is possible that governments of one or more countries may seek to censor content available on our website and mobile solutions or may even attempt to completely block access to our website or mobile solutions. Adverse legal or regulatory developments could harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be harmed and we may not be able to maintain or grow our revenue as anticipated.
We are subject to anti-corruption laws and regulations, and failure to comply with such laws could harm our business.
We are subject to the FCPA, the U.S. Travel Act, and the U.K. Bribery Act 2010, and may be subject to other anti-bribery laws in countries in which we conduct activities or have customers. We face significant risks if we cannot comply with the FCPA and other anti-corruption laws that prohibit companies and their agents and third-
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party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties, or private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. We have implemented an anti-corruption compliance policy, but we cannot ensure that all of our employees, customers, and agents, as well as those contractors to which we outsource certain of our business operations, will not take actions in violation of our policies or agreements and applicable law, for which we may be ultimately held responsible.
Any violation of the FCPA, other applicable anti-corruption laws, and other similar laws could result in investigations and actions by federal or state attorneys general or foreign regulators, loss of export privileges, severe criminal or civil fines and penalties or other sanctions, forfeiture of significant assets, whistleblower complaints, and adverse media coverage, which could have an adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
We are subject to regulations that limit the use of customer funds that we hold at any particular point in time and thus subject to additional regulatory requirements that could have a material adverse impact on our business, financial condition, operating results, and cash flows.
Our regulators expect us to possess sufficient financial soundness and strength to adequately support our business. Licensing requirements generally include minimum net worth requirements, provision of surety bonds, compliance with limitations on receivables from our affiliates or third parties and the maintenance of reserves in an amount equivalent to outstanding payment obligations, as defined by our various regulators. Also, our regulators specify the amount and composition of eligible assets that we or certain of our regulated subsidiaries must hold to satisfy outstanding settlement obligations. These regulators could further restrict the type of instruments that qualify as permissible investments or require our regulated subsidiaries to maintain higher levels of eligible assets. Any change or increase in these regulatory requirements could have a material adverse effect on our business, financial condition, and operating results.
Failure to comply with global and evolving marketing laws could subject us to claims or otherwise harm our business.
Our marketing practices rely upon a wide range of referral programs, exchange rate and fee-based promotions, e-mail and social media marketing and direct marketing practices, among other tactics. These marketing practices are subject to a variety of advertising and consumer protection laws and regulatory oversight both in the United States and in Canada, the EEA, the United Kingdom, Australia, Singapore and the other jurisdictions in which we do business. In the United States, some examples of applicable legislation includes the CAN-SPAM Act of 2003, the U.S. Federal Trade Commission guidelines with respect to misleading or deceptive advertising or marketing practices; the Telephone Consumer Protection Act of 1991 (the “TCPA”), state banking laws that prohibit non-banks, including licensed money transmitters, from holding themselves out as banks or providing banking services; and the California Consumer Privacy Act (the “CCPA”), and, the CPRA, which expands upon the CCPA.
These laws are continuously evolving and developing in light of technological change and regulatory objectives. These laws are overseen by regulators at the national and state level and, in some cases, carry private rights of action that may expose us to class-action and private litigation risk. We are, and, from time to time, we may become, subject to various legal proceedings and regulatory investigation matters and enforcement activities in connection with these laws and regulations. We intend to cooperate fully with such investigations. We are not presently a party to any legal or regulatory proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. We believe that our policies and practices comply with applicable marketing and consumer protection laws and regulations. However, if our belief proves incorrect, if there are changes to the guidelines, laws, regulations, or their interpretation, or if new regulations are enacted that are inconsistent with our current marketing
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practices or customer experience, our business could be harmed or our relationship with our partner banks and other commercial counterparties, could be adversely affected.
Use of social media, endorsers, emails, and text messages may adversely impact our reputation or subject us to fines or other penalties.
We use social media, emails, and text messages as part of our approach to marketing. As social media rules and policies, and laws and regulations rapidly evolve to govern the use of these channels, the failure by us, our employees or third parties acting at our direction to abide by applicable rules, policies, laws, and regulations in the use of these channels could adversely affect our reputation or subject us to fines, contractual damages, or other penalties. In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement, misappropriation, or other violation of intellectual property and other proprietary rights, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, customers, or others. Any such inappropriate use of social media, emails, and text messages could also cause reputational damage.
Our customers may engage with us online through our social media platforms, including Facebook, Instagram, and Twitter, by providing feedback and public commentary about all aspects of our business. Information concerning us, whether accurate or not, may be posted on social media platforms at any time and may have a disproportionately adverse impact on our brand, reputation, or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our business, operating results, financial condition, and prospects.
If our disbursement partners fail to comply with applicable laws, it could harm our business.
Our services are regulated by state, federal, and international governments. Many of our disbursement partners are banks and are heavily regulated by their home jurisdictions. Our non-bank disbursement partners are also subject to various regulations, including money transfer regulations. We require regulatory compliance as a condition to our continued relationship with our partners, perform due diligence on them, and monitor them periodically with the goal of meeting regulatory expectations. However, there are limits to the extent to which we can monitor their regulatory compliance. Any determination that our disbursement partners or the sub-disbursement partners of our aggregator disbursement partners have violated laws and regulations could damage our reputation and customer trust in our brand and services, and may ultimately lead to regulatory action against us by our regulators. It is possible that in some cases we could be liable for the failure of our disbursement partners to comply with laws or regulations or to operate with sufficient oversight over their disbursement networks, which also could harm our business, financial condition, and operating results.
In addition, foreign exchange rates could become regulated or foreign exchange purchases could become taxed by the governments in countries in which we do business, and such governments could implement new laws or regulations that affect our right to set foreign exchange spreads. Such regulations could harm our business.
From time to time, we may be subject to legal proceedings, disciplinary actions, regulatory disputes, and governmental investigations that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
From time to time, we may be subject to claims, lawsuits (including class actions), government investigations, disciplinary actions, administrative proceedings, arbitrations, and other proceedings involving competition and antitrust, intellectual property, privacy, cybersecurity, consumer protection, regulatory compliance, securities, tax, labor and employment, commercial disputes, money transmission, and other matters that could adversely affect our business operations and financial condition. The outcome of any legal or administrative proceeding, regardless of its merits, is inherently uncertain. Regardless of the merits, pending or future legal or administrative proceedings could result in a diversion of management’s attention and resources and reputational harm, and we may be required to incur significant expenses defending against these claims or pursuing claims against third parties to protect our
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rights. If we do not prevail in litigation, we could incur substantial liabilities. We may also determine in certain instances that a settlement may be a more cost-effective and efficient resolution for a dispute.
Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, administrative and regulatory proceedings, the amount of our estimates could be wrong as determining reserves for pending legal administrative, and regulatory proceedings is a complex, fact-intensive process that is subject to judgment calls. The results of legal, administrative, and regulatory proceedings cannot be predicted with certainty and determining reserves for pending litigation and other legal, administrative, and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business. Any adverse determination related to legal, administrative, or regulatory proceedings or a settlement agreement could require us to change our technology or our business practices in costly ways, prevent us from offering certain products or services, require us to pay monetary damages, fines, or penalties, or require us to enter into royalty or licensing arrangements, and could adversely affect our operating results and cash flows, harm our reputation, or otherwise negatively impact our business.
Any future litigation against us could be costly and time-consuming to defend.
In addition to intellectual property litigation, we have in the past and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or claims for reimbursement following theft or misappropriation of customer data. Litigation might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, overall financial condition, and operating results. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance, which could reduce the trading price of our common stock.
Operational Risks
We are exposed to the risk of loss or insolvency if our disbursement partners fail to disburse funds according to our instructions or were to become insolvent unexpectedly or funds are disbursed before customer funds are guaranteed to be sufficient .
We are exposed to the risk of loss in the event our disbursement partners fail to disburse funds to recipients according to our instructions. Such reasons could include mistakes by our disbursement partners in processing payment instructions or failing to correctly classify and process error categories, or negligence, insolvency, or fraud by our disbursement partners. One or more of our disbursement partners could elect to temporarily withhold money from customers, which would cause delays in any transfers reaching their ultimate destination. Were such delays to occur, this would cause a loss of trust in the ability of our service to meet the timeline that we set for ourselves and provide our customers. Were customers to lose trust in our ability to deliver our services in a timely and professional manner, our business and financial results could be harmed. We are also subject to risk of loss if funds are disbursed before customer funds are guaranteed to be sufficient, which could also harm our business and financial results.
If there is any material change of service terms or loss of coverage in our payment processors and disbursement network, our business could be harmed.
Our third-party payment processors and disbursement partners are critical components of our business. We partner with payment processors in our send jurisdictions to provide clearing, processing, and settlement functions for the funding of all of our transactions. We also partner with disbursement partners in our receiving jurisdictions to
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disburse funds to recipients via cash pick-up or delivery, bank deposit, or mobile wallet. For payments processing, the terms of service are governed under applicable payment network rules that are determined by the processor and generally are not subject to negotiation. We may be forced to cease doing business with a payment processor if its rules and certification requirements governing electronic funds transfers change or are reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit card and debit card payments from customers or facilitate other types of online payments, and our business and operating results would be harmed.
In addition, if we are unable to renew existing agreements or sign new payment processing and disbursement partners under terms consistent with, or better than, those currently in place, our growth, revenue, and overall business may be harmed. Our payment processors and disbursement partners could choose to terminate or not renew their agreements with us. Payment processors and disbursement partners could reduce the services provided, cease to do business with us, or cease doing business altogether. If these events occur and we are unable to secure alternative providers willing to provide services on more preferable terms, this could lead to our inability to clear our payment instruments or move funds on a global and timely basis as required to settle our obligations. This would negatively impact our revenue as well as our reputation and brand.
If our disbursement partners do not provide a positive recipient experience, our business would be harmed.
We partner with our disbursement partners to disburse funds to our customers’ recipients. If the experience delivered by our disbursement partners to a recipient is deemed unsatisfactory for any reason, including because our disbursement partners are not properly trained to disburse money or deliver poor customer service, if wait times at our disbursement partners’ pick up locations are too long, or if cash pick-up locations are not located in convenient and safe locations and open for business at convenient times, customers may choose to not use our services in the future and our business would be harmed. If the experience delivered by our disbursement partners to a recipient is deemed unsatisfactory for any reason, customers may choose to not use our services in the future and our business would be harmed.
Increases in various types of fees, such as interchange fees, payment scheme fees and disbursement fees, could increase our costs, affect our profitability, cause us to lose customers, or otherwise limit our operations.
Our payment processors and disbursement partners charge us fees, which may increase from time to time. Payment processors may pass through payment scheme mandated costs, such as interchange fees, and changes to these payment scheme fees, or decreases in negotiated rebates could increase our costs. Banks currently determine the fees charged for bank-originated transactions and may increase the fees with little prior notice. Our card processors have in the past and may in the future increase the fees charged for each transaction using credit cards and debit cards, which may be passed on to us. Our disbursement partners charge us disbursement fees, which they have in the past and may in the future increase. U.S. federal, state, or international governments could also mandate a payment processing or remittance tax, require additional taxes or fees to be imposed upon our customers, or otherwise impact the manner in which we provide our services. If our transaction processing fees increase, it may require us to change our disbursement options, modify payment methods or take other measures that would impact our costs and profitability or cause us to lose customers or otherwise limit our operations.
The loss of one or more key members of our management team, or our failure to attract, integrate, and retain other highly qualified personnel in the future, could harm our business.
We believe our success has depended, and continues to depend, on the efforts and talents of our employees and senior management team, including our co-founders Matthew Oppenheimer and Joshua Hug. Our future success depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees who mirror the diversity and spread of our customers. Qualified individuals are in high demand, and we may be unable to find the number of technically talented employees we need to continue our growth, or we may incur significant costs to attract and keep such employees. In addition, any future loss of any of our senior management,
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key employees, or key technical personnel could harm our ability to execute our business plan, and we may not be able to find adequate replacements. All of our officers and other U.S. employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. We cannot ensure that we will be able to retain the services of any of our senior management or other senior employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business could be harmed.
Interruptions or delays in the services provided by critical data centers or internet service providers could impair the delivery of our platform and our business could suffer.
We host our platform using third-party cloud infrastructure services, including two facilities located on the west coast of the United States. All of our services utilize resources operated by us through third-party providers including Amazon Web Services (“AWS”), a provider of cloud infrastructure services. We do not have control over the operations of the facilities of AWS and other third-party providers that we use. We therefore depend on our third-party cloud providers’ ability to protect their data centers against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, and similar events. Our operations depend on protecting the cloud infrastructure hosted by such providers by maintaining their respective configuration, architecture, and interconnection specifications, as well as the information stored in these virtual data centers and which third-party internet service providers transmit. We have from time-to-time in the past experienced service disruptions, and we cannot assure you that we will not experience interruptions or delays in our service in the future. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the data storage services we use. Although we have disaster recovery plans that utilize multiple data storage locations, any incident affecting their infrastructure that may be caused by fire, flood, severe storm, earthquake, hurricane, cybersecurity attacks, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters, military actions, terrorist attacks, and other similar events beyond our control could negatively affect our platform, including any disruptions in light of increased usage during the COVID-19 pandemic. In the event that AWS’ or any other third-party provider’s systems or service abilities are hindered by any of the events discussed above, our ability to operate our platform may be impaired and data may be compromised. All of the aforementioned risks may be augmented if our or our partners’ business continuity and disaster recovery plans prove to be inadequate. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct, all of which could lead to data theft or misappropriation. Any prolonged service disruption affecting our platform for any of the foregoing reasons could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Our platform is accessed by many customers, often at the same time. As we continue to expand the number of our customers and products available to our customers, there may be interruptions or delays in service. In addition, the failure of data centers, third-party internet service providers, or other third-party service providers to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to grow our business and scale our operations. If our third-party infrastructure service agreements are terminated, or there is a lapse of service, or there is interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as delays and additional expense in arranging new facilities and services
Moreover, we are heavily reliant on the cloud services provided by AWS. AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. We may not be able to easily switch our AWS operations to another cloud or other data center provider if there are disruptions or interference with our use of or relationship with AWS, and, even if we do switch our operations, other cloud and data center providers are subject to the same risks. If AWS unexpectedly terminates our cloud services agreement, we would be forced to incur additional expenses to locate an alternative provider and may experience outages or
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disruptions to our service. Any service disruption affecting our platform during such migration or while operating on the AWS cloud infrastructure could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business.
Sustained financial market illiquidity, or illiquidity at our partner financial institutions, could harm our business, financial condition, and operating results.
We face risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity or failure of financial institutions where we deposit money, including financial institutions that hold prefunding accounts for our disbursement partners. In particular:
•We may be unable to access funds in our investment portfolio, deposit accounts, and clearing accounts on a timely basis to pay transactions and receive settlement funds. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to pay transactions could harm our business, financial condition, and operating results;
•Our funds are held by us and our disbursement partners, which includes banks, non-bank financial institutions, and aggregators, both in the United States and abroad. During high volume sending periods, a significant portion of our available cash may be held in an account or accounts outside of the United States. Our payment processors, the commercial banks that hold our funds, our disbursement partners, and the financial institutions that hold prefunding accounts for our disbursement partners or our disbursement collateral could fail or experience sustained deterioration in liquidity. This could lead to our inability to move funds on a global and timely basis as required to pay transactions and receive settlement funds; loss of prefunded balances; or a breach in our regulatory capital requirements if we are unable to recover our funds; and
•We maintain cash at commercial banks in the United States in amounts in excess of the Federal Deposit Insurance Corporation limit of $250,000. In the event of a failure at a commercial bank where we maintain our deposits, we may incur a loss to the extent such loss exceeds the insurance limitation.
If financial liquidity deteriorates, our ability to access capital may be harmed and we could become insolvent.
Future acquisitions, strategic investments, partnerships, collaborations, or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.
We have in the past, and we may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not such acquisitions are completed. In addition, we have limited experience in acquiring other businesses, and we may not successfully identify desirable acquisition targets, or if we acquire additional businesses, we may not be able to integrate them effectively following the acquisition. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, as well as unfavorable accounting treatment and exposure to claims and disputes by third parties, including intellectual property claims. We also may not generate sufficient financial returns to offset the costs and expenses related to any acquisitions. In addition, if an acquired business fails to meet our expectations, our business, operating results, and financial condition may suffer.
We may also make significant investments in new products, marketing campaigns, technologies, or services developed solely by us or in conjunction with strategic partners we identify. For example, in February 2020 we launched Passbook in partnership with Sunrise, an app-based banking service developed by us and designed to partner with other financial institutions for money management specifically for multinational customers. We invested significant time and resources in the project. It is possible that our strategic investments may not become
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profitable and fail to return our initial investment, and this may have a harmful effect on our business and financial results.
Remitly Global is a holding company with no operations of its own and manages a network of local subsidiaries, each of which is subject to different local regulations. In the future, we may depend on our subsidiaries to fund our operations and expenses.
We are a holding company with subsidiaries in the United States, Canada, the United Kingdom, Ireland, Poland, Australia, Nicaragua and Singapore, all of which are directly or indirectly wholly owned. Managing the regulatory compliance activities for each of these many subsidiaries is a complicated task, and we expend significant resources in doing so. However, we cannot guarantee that we will be able to keep abreast of the changing legal and regulatory landscapes for each of the jurisdictions in which our subsidiaries exist. If any of the regulatory environments applicable to our subsidiaries change materially, and we fail to adapt to such change, our business and financial results may be harmed.
Additionally, as a holding company, we may rely on our operating subsidiaries for distributions or payments for cash flow. Therefore, our ability to fund and conduct our business, service our debt, and pay dividends, if any, in the future may depend on the ability of our subsidiaries and intermediate holding companies to make upstream cash distributions or payments to us, which may be impacted, for example, by their ability to generate sufficient cash flow or limitations on the ability to repatriate funds, whether as a result of currency liquidity restrictions, monetary or exchange controls, regulatory restrictions, or otherwise. For example, certain of our subsidiaries are subject to minimum capital and liquidity requirements as U.S.-regulated entities and/or the jurisdictions where they do business. Such requirements may limit the ability of these regulated subsidiaries to dividend or distribute funds to Remitly Global. Our operating subsidiaries and intermediate holding companies are separate legal entities, and although they are directly or indirectly wholly owned and controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends, or otherwise. To the extent the ability of any of our subsidiaries to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt, and pay dividends, if any, could be harmed.
Expansion into new international markets and payment corridors will expose us to risks associated with handling of additional currencies and compliance with local regulations and law.
As our international operations increase, or more of our expenses are denominated in currencies other than the U.S. dollar, our operating results may be more greatly affected by fluctuations in local markets or the exchange rates of the currencies in which we do business.
There are significant costs and risks inherent in conducting business in international markets, including:
•establishing and maintaining effective controls at international locations and the associated costs;
•increased competition from local providers;
•compliance with international laws and regulations, including data privacy frameworks similar to the GDPR;
•adapting to doing business in other languages or cultures;
•compliance with local tax regimes, including potential double taxation of our international earnings, and potentially adverse tax consequences due to U.S. and international tax laws as they relate to our international operations;
•compliance with anti-bribery laws, such as the FCPA and the U.K. Bribery Act;
•currency exchange rate fluctuations and related effects on our operating results;
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•economic and political instability in some countries;
•the uncertainty of protection for intellectual property and other proprietary rights in some countries and practical difficulties of obtaining, maintaining, protecting, and enforcing rights abroad; and
•other costs of doing business internationally.
As we expand into more international markets, we are faced with greater complexities around having to comply with various sets of local regulations, policies and laws, which could change in ways that are adverse to our business. In particular, central banks or other regulatory agencies or institutions in the countries we operate could enact policies that may negatively affect our business, and we may incur increased costs and resources to deal with such unfavorable laws and policies.
These factors and other factors could harm our international operations and, consequently, materially impact our business, operating results, and financial condition.
Further, we may incur significant operating expenses as a result of our international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We also have more limited brand recognition in certain parts of the world, leading to delayed acceptance of our platform by international customers. If we cannot continue to expand internationally and manage the complexity of our global operations successfully, our financial condition and operating results could be adversely affected.
A substantial amount of our revenue is derived from remittances to India, the Philippines and Mexico and our business could be significantly affected by any adverse changes in these regions.
Historically, our revenue has been substantially derived from remittances to India, the Philippines and Mexico. Remittances sent to these three countries represented approximately 75% of our revenue and send volume in the year ended December 31, 2020 and approximately 70% of our revenue and send volume in the six months ended June 30, 2021. Because these countries account for a substantial portion of our revenue and send volume, our business is exposed to adverse regulatory and competitive changes, economic conditions and changes in political conditions in each of these countries. Moreover, due to the concentration of our revenue in these geographies, our business is less diversified and, accordingly, is subject to greater regional risks than some of our competitors.
Financial Risks
We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements. If we fail to remediate any material weaknesses or otherwise fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2020, two material weaknesses in our internal control over financial reporting were identified. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weaknesses are as follows:
•We did not design and maintain effective controls over certain IT, general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain:(1) program change management controls for certain financial systems to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; and (2) user access controls to ensure appropriate segregation of
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duties and that adequately restrict user and privileged access to certain financial systems, programs, and data to appropriate Company personnel.
This material weakness contributed to the following material weakness:
•We did not design and maintain effective controls over segregation of duties of journal entries. More specifically, certain personnel had the ability to prepare and post journal entries without an independent review performed by someone without this ability.
These material weaknesses did not result in a misstatement to our annual consolidated financial statements as of and for the year ended December 31, 2020. However, each of the material weaknesses described above, individually and aggregated could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
As of the date of this prospectus, these remain material weaknesses and we are in the process of remediating these material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions: (1) developing enhanced risk assessment procedures and monitoring controls related to changes in financial systems; (2) implementing comprehensive access control protocols to implement restrictions on user and privileged access to the affected applications; (3) implementing controls to review and monitor user access; and (4) establishing additional controls over the preparation and review of journal entries. While we are undertaking efforts to remediate these material weaknesses, the material weaknesses will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded through testing, that the newly implemented and enhanced controls are designed and operating effectively. We are working to remediate the material weaknesses as efficiently and effectively as possible but expect that full remediation could potentially go beyond December 31, 2021. At this time, we cannot provide an estimate of costs expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, incur significant costs, and place significant demands on our financial and operational resources.
We cannot assure you that the measures that we have taken, and that will be taken, to remediate these material weaknesses will, in fact, remedy the material weaknesses or will be sufficient to prevent future material weaknesses from occurring. We also cannot assure you that we have identified all of our existing material weaknesses. If we fail to remediate any material weaknesses or otherwise fail to establish and maintain effective internal controls, our ability to accurately and timely report our financial results could be adversely affected and may result in a restatement of our annual or interim financial statements.
We have built proprietary financial systems as part of our technology platform. Such systems could become unstable as we grow, bugs could be introduced, and nonperformance, system interruptions and undetected errors could adversely affect our business and financial results.
Our proprietary financial systems are an integral part of our technology platform, which is a complex system composed of many interoperating components and which incorporates other third-party software that is highly complex. Our business is dependent upon our ability to prevent system interruption on our proprietary financial systems. Our software may now, or in the future, contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. Bugs in our software, misconfigurations of our systems, and unintended interactions between systems could result in our failure to comply with certain domestic and international regulatory financial reporting obligations, or could cause downtime that would impact the timeliness of meeting these regulatory reporting requirements. We have from time to time found defects or errors in our system and may discover additional defects in the future that could result in financial information unavailability
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or system disruption. In addition, we have experienced outages on our proprietary financial systems due to circumstances within our control, such as outages due to software limitations. If sustained or repeated, any of these outages could impact the accuracy and completeness of our financial information over several reporting periods. In addition, our release of new software may in the future cause interruptions in the availability of our financial information. Any errors, bugs, or vulnerabilities discovered in our code or systems after release could result in an interruption in the availability of our financial information, and could result in inaccurate and incomplete financial information which could adversely affect our business and financial results.
If one or more of our counterparties, including financial institutions, aggregators, and local cash pick-up institutions where we have cash on deposit, or our lenders and potential hedging counterparties default on their financial or performance obligations to us or fail, we may incur significant losses.
We have significant amounts of cash, cash equivalents and receivables outstanding on deposit or in accounts with banks or other counterparties in the United States and international jurisdictions. While we do not currently enter into derivative financial instrument transactions as part of currency hedging activities, we may in the future enter into such transactions with various financial institutions. Certain banks and financial institutions are also lenders under our credit facilities. We may be exposed to the risk of default by, or deteriorating operating results or financial condition or failure of, these counterparties. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to access or recover our assets that are deposited, held in accounts with, or otherwise due from, such counterparty may be limited by the counterparty’s liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties we could incur significant losses, which could negatively impact our operating results and financial condition.
Fluctuations in currency exchange rates could harm our operating results and financial condition.
Our revenue is derived primarily by the transference of currency between countries for our customer base and is thus reliant on the exchange rates of various currencies relative to one another, including the U.S. dollar. We have seen increased money transfer volume if the U.S. dollar strengthens against certain currencies, especially the Indian rupee, the Philippine peso or the Mexican peso. Conversely, we have seen decreased money transfer volume if the U.S. dollar weakens against those currencies. We are also exposed to risks relating to fluctuations in currency exchange rates between the date on which a customer initiates a cross-border remittance payment and the date that the remittance recipient receive the funds through our disbursement partners because the foreign exchange rate quoted to the customer is not adjusted for changes between the initiation date and the settlement date. Additionally, with respect to our revenue which is denominated in currencies other than the U.S. dollar, we may be adversely affected if such currencies weakened against the U.S. dollar because it would result in lower levels of reported revenue on our U.S. dollar denominated financial statements.
Macroeconomics factors, including inflation, that weaken the U.S. dollar could harm our operating results and financial condition. Additionally, while the majority of our revenue and expenses are denominated in the U.S. dollar, certain of our international operations are conducted in foreign currencies, a significant portion of which occur in the currencies of Canada, the United Kingdom, Australia and the Philippines. Changes in the relative value of the U.S. dollar to other currencies may negatively affect revenue and other operating results as expressed in U.S. dollars. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions in non-local currencies. As a result, it could be more difficult to detect underlying trends in our business and operating results. To the extent that fluctuations in currency exchange rates cause our operating results to differ from expectations of investors, the market price of our common stock could be adversely impacted. To date, we have not engaged in currency hedging activities to limit the risk of exchange fluctuations; however, to limit our risk exposure associated with exchange rate fluctuations we may choose to engage in currency hedging activities in the future. Even if we use derivative instruments to hedge exposure to fluctuations in foreign currency exchange rates, the use of such hedging activities may not offset the adverse financial effects of unfavorable movements in foreign exchange rates over the
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limited time the hedges are in place, and may introduce additional risks if we are unable to structure effective hedges with such instruments.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our operating results, our stock price and the value of your investment could decline.
Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our operating results include the following:
•fluctuations in demand for our services or pricing of our fees associated with our services;
•our ability to attract new customers;
•our ability to retain and grow engagement with our existing customers;
•our ability to expand our relationships with our marketing, payment processing, disbursement, and banking partners, or identify and attract new strategic partners;
•customer growth rates and the revenue derived from and quantity of existing customers retained;
•changes in customer preference for mobile-first services as a result of security breaches in the industry or privacy concerns, or other security or reliability concerns regarding our services;
•changes in customers’ budgets and in the timing of their budget cycles and money transfer decisions;
•potential and existing strategic partners choosing our competitors’ products or developing their own solutions in-house;
•the development or introduction of new platforms or services by our competitors that are easier to use or more advanced than our current suite of services, especially in respect of the application of AI-based services;
•our failure to adapt to new forms of payment that become widely accepted, including cryptocurrency;
•security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform which may result in data theft and/or misappropriation;
•the adoption or retention of more entrenched or rival services in the international markets where we compete;
•our ability to control costs, including our operating expenses;
•the amount and timing of payment for operating expenses, particularly technology and development and sales and marketing expenses;
•the amount and timing of non-cash expenses, including stock-based compensation, depreciation and amortization, and other non-cash charges;
•the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining and motivating existing employees;
•fluctuation in market interest rates, which impacts interest earned on funds held for customers;
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•fluctuation in currency exchange rates;
•the effects of acquisitions and their integration;
•general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;
•the impact of new accounting pronouncements;
•changes in the competitive dynamics of our market; and
•awareness of our brand and our reputation in our target markets.
Any of these and other factors, or the cumulative effect of some of these factors, may cause our operating results to vary significantly. In addition, we expect to incur significant additional expenses due to the increased costs of operating as a public company. If our quarterly operating results fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
Our cash flows may be significantly affected by the day of the week on which a quarter ends. As a result, you should not rely on quarter-to-quarter comparisons of our cash flows.
Our cash flows may be affected by the day of the week on which each quarter ends which may affect our quarterly operating results. There can be a delay between when we release funds for disbursement and when we receive customer funds from our payment processors. For example, if a quarter closes on a Saturday, our cash flow statements will show a decreased cash balance because we will have wired out funds on Friday which will be available for disbursement on Saturday, Sunday and Monday but we may not receive customer funds from our payment processors until Monday. In addition, due to time zone differences, an additional day’s worth of funding is required for disbursements to certain markets. As a result, period-to-period comparisons of our statements of cash flows may not be meaningful, and you should not rely on them as an indication of our liquidity or capital resources.
Inaccurate forecasts of our customer growth and retention could result in higher operating expenses relative to actual revenue and ultimately harm our business.
Our customer growth forecast is a key driver in our business plan which affects our ability to accurately forecast revenue and expenses. In addition, we plan our operating expenses, including our marketing expenses and headcount needs, in part on our forecasts of customer growth, retention, and future revenue. Seasonality and foreign exchange rate movements create volatility to these assessments which may adversely impact their accuracy. We also analyze revenue contributions from customer cohorts acquired during a particular year ended December 31 and revenue associated with those cohorts for each year thereafter. While we believe these cohorts are fair representations of our overall customer base, there is no assurance that they will be representative of any future group of customers or periods. Revenue for a particular customer cohort may fluctuate from one period to another depending on, among other factors, our ability to retain and increase revenue from our customers within a given cohort and changes to the products and services we offer to our customers. If we overestimate customer growth or retention and customer spend rates, our revenue will not grow as we forecast, our operating expenses may be too high relative to actual revenue levels our business, financial condition and operating results may be harmed.
If the revenue generated by new customers differs significantly from our expectations, or if our CAC or costs associated with servicing our customers increase, we may not be able to recover our CAC or generate profits from this investment.
We invest significant resources in marketing with the aim to acquire new customers and expect to continue to spend significant amounts to acquire additional customers, primarily through online advertising, marketing promotions, and television advertising. When making decisions regarding investments in customer acquisition, we
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analyze the transactional profit we have historically generated per customer over the expected lifetime value of the customer. Our analysis of the transactional profit that we expect a new customer to generate over his or her lifetime depends upon several estimates and assumptions, including whether a customer will send a second transaction, whether a customer will send multiple transactions in a month, the amount of money that a customer sends in a transaction and the predictability of a customer’s sending pattern. The accuracy of our predictions with respect to transactional profits may be subject to greater variance in corridors in which we presently have low penetration rates than in our more established corridors.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations which could harm our operating and financial results.
Our net operating losses (“NOLs”) could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. or international tax law. NOLs generated in taxable years beginning before January 1, 2018 are permitted to be carried forward for only 20 taxable years under applicable U.S. federal income tax law. Under the 2017 Tax Cuts and Jobs Act (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), NOLs arising in taxable years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five taxable years preceding the taxable year of such loss, and NOLs arising in taxable years beginning after December 31, 2020 may not be carried back. Moreover, under the Tax Act as modified by the CARES Act, NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOLs generally will be limited in taxable years beginning after December 31, 2020 to 80% of current year taxable income. The extent to which state income tax law will conform to the Tax Act and CARES Act is uncertain. For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheets, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating and financial results.
Changes and evolving requirements in tax laws or their interpretation, including as applied to us and our customers, could adversely affect our business.
As a multinational organization, operating in multiple jurisdictions we may be subject to increasingly complex tax laws and taxation in several jurisdictions, the application of which can be uncertain. The amount of taxes we are required to pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws, or revised interpretations of existing tax laws, potential disputes around transfer prices implemented and precedents, which could have a material adverse effect on our business. Such material adverse effect may include the value of any tax loss carryforwards, tax credits recorded on our balance sheet, the amount of our cash flow, our liquidity, financial condition and results of operations.
Many of the jurisdictions in which we conduct business have detailed transfer pricing rules or may comply with the Organization for Economic Cooperation and Development (the “OECD”) guidelines, which require contemporaneous documentation establishing that all transactions with non-resident related parties be priced using arm’s length pricing principles. Tax authorities in these jurisdictions could challenge our related party transfer pricing policies and, consequently, the tax treatment of corresponding expenses and income. If any tax authority were to be successful in challenging our transfer pricing policies, we may be liable for additional corporate income tax, withholding tax, indirect tax and penalties and interest related thereto, which may have a significant impact on our results of operations and financial condition.
We are subject to regular review and audit by the relevant tax authorities in the jurisdictions we operate and as a result, the authorities in these jurisdictions could review our tax returns and impose additional significant taxes, interest and penalties, challenge the transfer pricing policies adopted by us, claim that our operation constitutes a taxable presence in different jurisdiction and/or that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could materially affect our income tax provision, net income, or cash flows in the period or periods for which such determination is made.
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In addition, tax benefits we currently receive in certain jurisdictions require us to meet several conditions and may be challenged or terminated or reduced in the future, which would increase our taxes, possibly with a retroactive effect.
In addition, the failure by our customers to comply with reporting obligations in connection with transactions on our platform could result in regulatory inquiry, reputational damage and potential enforcement actions and additional reporting and withholding requirements.
We may not be able to secure additional financing in a timely manner, on satisfactory terms, or at all, to meet our future capital needs, which could impair our ability to execute on our business plan.
We believe that our existing cash, cash equivalents, short-term investments, expected available borrowing under our New Revolving Credit Facility, and expected cash flow from operations will be sufficient to meet our operating and capital requirements for at least the next 12 months. However, we may require additional capital to respond to business opportunities (including increasing the number of customers acquired or acquisitions), capital needed during high volume sending periods, new capital requirements introduced or required by our regulators and payment processors, challenges, or unforeseen circumstances and may determine to engage in equity or debt financings for other reasons.
We have a $150.0 million revolving credit facility with a syndicated group of lenders, including Silicon Valley Bank, and $16.8 million outstanding under standby letters of credit as of June 30, 2021 (the “Revolving Credit Facility”). We may enter into the New Revolving Credit Facility as described in “Prospectus Summary—Recent Developments—New Revolving Credit Facility” and may incur additional indebtedness in the future. We have relied on this Revolving Credit Facility and expect to rely on the New Revolving Credit Facility to finance a substantial portion of the capital requirements and obligations we are subject to in connection with our remittance business. If we were unable to refinance our Revolving Credit Facility or New Revolving Credit Facility or enter into an alternative facility on similar terms, we may be unable to meet regulatory compliance requirements with respect to maintaining sufficient capital. Additionally, if the interest rate on our line of credit or any alternative financing were to increase, our operating results could be harmed, particularly because we rely on drawings under our line of credit to satisfy regulatory compliance requirements with respect to maintaining sufficient capital. The credit agreement governing our Revolving Credit Facility contains, and the credit agreement governing our New Revolving Credit Facility is expected to contain, conditions to borrowing and covenants; any failure to satisfy these conditions to borrowing or covenants could result in us being unable to borrow additional amounts under the Revolving Credit Facility or the New Revolving Credit Facility or having to repay outstanding amounts. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to secure additional debt or equity financing in a timely manner, or at all, which could require us to scale back our business plans and operations.
Failure to maintain sufficient capital could harm our business, financial condition, and operating results.
We have significant working capital requirements driven by:
•the delay between when we release funds for disbursement and when we receive customer funds from our payment processors, which can be exacerbated by time zone differences, bank holidays, national or governmental holidays, and weekends;
•regulatory capital requirements pertaining to net worth;
•regulatory requirements pertaining to permissible investments and safeguarding of customer funds;
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•requirements contained in the credit agreement governing our Revolving Credit Facility and expected to be contained in our New Revolving Credit Facility;
•collateral requirements imposed on us by our payment processors; and
•collateral requirements imposed on us by our disbursement partners.
This requires us to have access to significant amounts of capital, particularly at high volume sending times, which we may not be able to forecast accurately. Our need to access capital will increase as our number of customers, transactions processed, and total sending volume increases.
Increases in our send volume processed, even if short-term in nature, can cause increases in our capital requirements. Our ability to meet our capital requirements could be affected by various factors, including any inability to collect funds from customers, inability to maintain fraud losses at acceptable rates, or incurring unanticipated losses. If we do not have sufficient capital and are unable to access or raise additional capital, we may not be able to pursue our growth strategy, fund key strategic initiatives, such as geographic expansion or product development efforts, or continue to transfer money to recipients before funds are actually received from our customers.
In addition, we may not be able to meet new capital requirements introduced or required by our regulators and payment processors. We currently have a Revolving Credit Facility and may enter into the New Revolving Credit Facility to mitigate capital fluctuations, but there can be no assurance that the New Revolving Credit Facility will be sufficient or renewed at favorable rates or that we will have access to additional capital as needed, or at all.
New tax treatment of companies engaged in online money transfer may harm the commercial use of our services and our financial results.
Due to the global nature of the internet, it is possible that various states or foreign countries might attempt to regulate our transactions or levy sales, income, or other taxes relating to our activities. Tax authorities at the international, federal, state, and local levels are currently reviewing the appropriate treatment of companies engaged in internet commerce in general and remittances in particular. New or revised international, federal, state, or local tax regulations may subject us or our customers to additional sales, income, and other taxes. We cannot predict the effect of current attempts to impose sales, income, or other taxes on commerce over the internet. New or revised taxes would likely increase the cost of doing business online and decrease the attractiveness of using our mobile services. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could harm our business and operating results.
Our reported financial results may be materially and adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States (“GAAP”), are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Operating Results—Critical Accounting Policies and Estimates.” The results of these estimates form the basis
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for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve the identification of performance obligations in revenue recognition, the valuation of the stock-based awards, including the determination of fair value of our common stock, among others. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
We track certain business metrics with internal tools and do not independently verify such metrics. Certain of our business metrics may not accurately reflect certain details of our business, are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We track certain business metrics, including active customers, send volume and Adjusted EBITDA, which are not independently verified by any third party and are not measured according to GAAP. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we report. If the internal tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report may not be accurate. In addition, limitations or errors with respect to how we measure data (or the data that we measure) may affect our understanding of certain details of our business, which could affect our longer-term strategies. If our business metrics are not accurate representations of our business, customer base, or traffic levels; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, we may be subject to legal or regulatory actions, and our operating and financial results could be adversely affected. In addition, from time to time we may change the business metrics that we track, including metrics that we report, and any new business metrics will also be subject to the foregoing limitations and risks.
General Risks
Our customers and business operations are exposed to macroeconomic conditions and geopolitical forces in developing regions and regions that account for a significant amount of our send volume, which exposes us to risk of loss.
The majority of our total revenue is currently derived from remittances being sent from the United States, Canada, the EEA, the United Kingdom, Australia and Singapore to India, the Philippines, and Mexico and other locations in Latin America, Africa and Asia. In particular, a substantial portion of our send volume is derived from remittances being sent to India, the Philippines and Mexico. As a result, any macroeconomic or geopolitical trends that disrupt these regions or alter their immigration patterns, economic conditions or cultural norms could have an impact on the demand for our services or our ability to provide such services. Any economic or political instability, civil unrest, natural disasters, public health crises, or other similar circumstances affecting these regions could have a disproportionately harmful impact on our business, financial position, and operating results.
Global trade policy or international relations between larger developed countries could also impact the market for our services or our ability to serve those markets effectively. For example, Chinese technologies are critical components of many of our disbursement partners, payment processors, and overall distribution network. If there were a disruption of trade relations between the United States and China, we, and our disbursements partners that rely on these technologies could lose access to these critical Chinese technologies, which would disrupt our business and could have a material adverse effect on our operations. In addition, the Chinese government could take action that would create significant competitive advantage to Chinese companies and create obstacles for us.
Changes in U.S. immigration laws or changes in the emigration laws of other jurisdictions that discourage international migration, and political or other events, such as war, terrorism, or public health crises, that make it
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more difficult for individuals to immigrate to, or work in, the United States or other countries, could adversely affect our gross send volume or growth rate. Sustained weakness in the United States or global economic conditions could reduce economic opportunities for immigrant workers and result in reduced or disrupted international migration patterns. Reduced or disrupted international migration patterns are likely to reduce money transfer volumes and harm our operating results.
Our business is subject to the risks of earthquakes, fires, floods, public health crises, pandemics, and other natural catastrophic events, and to interruption by man-made problems such as cyber-attacks, internal or third-party system failures, political unrest, market or currency disruptions, and terrorism, which could result in system and process failures and interruptions which could harm our business.
Our corporate headquarters is located in Seattle, Washington and our cloud services providers and data centers are also largely located in the western United States. The west coast of the United States contains active earthquake zones. Although our systems have been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences, they remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, public health crises, cyber-attacks, computer viruses, computer denial-of-service attacks, human error, hardware or software defects or malfunctions (including defects or malfunctions of components of our systems that are supplied by third-party service providers), and similar events or disruptions. As we rely heavily on our servers, computer and communications systems, and the internet to conduct our business and provide high-quality customer service, disruptions in these systems could harm our ability to operate our business, impede our employees’ ability to conduct business activities whether at our facilities or from a remote location, and cause lengthy delays, which could harm our business, financial condition, and operating results. An outage at any one facility could result in our system being unavailable for a significant period of time. We have disaster recovery programs in place, but these may also fail, prolonging the period of time during which our system and products may not be available.
Additionally, some of the countries to which our disbursement partners deliver the funds we transfer regularly experience serious political unrest or upheaval. Such political unrest may lead to temporary or long-term disruptions to our disbursement network in the affected countries. If such disruption were ongoing, our customers may look to other methods of transferring funds, or we may be unable to resume our services in such countries, and our business and financial results may be harmed.
Cybersecurity attacks continue to increase, evolve in nature, and become more sophisticated, and providers of digital products and services have been and are expected to continue to be targeted. As computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, ransomware, and other data security incidents have become more commonplace, we face increased risk from these activities to maintain the performance, reliability, security, and availability of our solutions and related services and technical infrastructure to the satisfaction of our customers. Threats to our computer systems and those of our third-party technology providers or clients may result from human error, fraud, or malice on the part of employees or third parties, including state-sponsored organizations with significant financial and technological resources, or from accidental technological failure. Any such computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, ransomware, or other data security breaches to our network infrastructure or IT systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing customers and attract new customers. The insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks, or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance.
For additional information regarding risks associated with cyber-attacks, see the section titled “Risk Factors—Cyberattacks or data security breaches could result in serious harm to our business, reputation and financial condition.”
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While the digital financial services industry and our business has seen accelerated growth as a result of the COVID-19 pandemic, it has also adversely affected some aspects of our business and could have an adverse effect on our business in the future.
As a result of the COVID-19 pandemic, our business, and the digital financial services industry in general, has seen accelerated growth, but we have also experienced disruptions, such as the impact on the ability of our customer support and operations teams, both internal and third-party, to service customer needs quickly due to longer wait times and the impact on our ability to hire personnel quickly, that could severely impact our business, our services, global currency exchange rates, local and global labor markets, and the global economy.
The COVID-19 pandemic has created and is likely to continue to create significant uncertainty in global financial markets. To date, with travel restrictions and shelter-in-place policies, the demand for digital remittances has increased, and this has driven a significant acceleration in our new customer growth. As the pandemic continues, we may experience volatility in customer demand and delayed customer money transfer decisions, which could materially harm our business, operating results, and overall financial performance.
While we have experienced accelerated growth partially driven by the COVID-19 pandemic, the long-term impact of a volatile or worsening COVID-19 pandemic is impossible to predict and may adversely impact the purchasing and money transfer habits of our customers and the operations of our business partners in the future, and may adversely impact our operating results as a result. Cross-border and domestic commerce may be adversely impacted by measures taken by government authorities and businesses globally to contain and limit the pandemic, including travel restrictions, border closures, quarantines, shelter in place and lockdown orders, mask and social distancing requirements, and business limitations and shutdowns. In addition, while we have rapidly expanded our business and improved our operating results during the COVID-19 pandemic, many of our customers, who are primarily immigrants, have also suffered negative financial consequences, including wage and job loss, and have thus had less need for our services. There is no guarantee that those customers who have had less need of our service during the COVID-19 pandemic will return to our platform in the future. To the extent that mitigation measures remain in place or are reinstated for significant periods of time, they may adversely affect our business, financial condition, and operating results. In addition, actions that we have taken or may take in the future intended to assist customers impacted by the COVID-19 pandemic may negatively impact our operating results. In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to:
•Increased cybersecurity and payment fraud risk related to the COVID-19 pandemic, as cybercriminals attempt to profit from stolen or misappropriated data and the disruption in light of increased online banking, e-commerce, and other online activity;
•Challenges to the availability and reliability of our services resulting from changes to our normal operations, including due to one or more clusters of COVID-19 cases occurring at our (or our service providers’) sites or mandatory local lock-down requirements, which have impacted, and may continue to impact our employees, our level of customer service, and/or the systems or employees of our customers and business partners; and
•Increased volume of customer requests for support and regulatory requests for information and support or additional regulatory requirements, which could require additional resources and costs to address.
These and other factors arising from the COVID-19 pandemic could worsen in countries that have been or are in the future afflicted with COVID-19, each of which could further adversely impact the use of our services by our customers, the ability of our employees to perform work, and our business generally, and could have a material adverse impact on our operating and financial results.
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The significant increase in the number of our employees who are working remotely as a result of the pandemic could introduce operational risk, increase cybersecurity risk, strain our business continuity plans, negatively impact productivity, give rise to claims by employees, or otherwise adversely affect our business. Additionally, we may require new or modified processes, procedures, and controls to respond to changes in our business environment. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.
The COVID-19 pandemic continues to rapidly evolve. The extent to which the pandemic continues to affect our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence. Such developments include the ultimate geographic spread of COVID-19, the distribution and long-term efficacy of vaccines, the effects of more contagious and virulent variants of COVID-19, the duration of the pandemic, travel restrictions and actions taken to contain the pandemic or treat its impact, such as social distancing and quarantines or lock-downs, business closures or business disruptions, and the effectiveness of actions taken to contain and treat the disease. To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it is likely to also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Anti-takeover provisions in our charter documents and under Delaware or other state law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and affect the market price of our common stock.
Provisions in our amended and restated certificate of incorporation and restated bylaws, as they will be in effect upon the completion of this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and restated bylaws will include provisions that:
•authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;
•require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent;
•specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our Chief Executive Officer;
•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
•establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
•prohibit cumulative voting in the election of directors;
•provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock;
•provide that vacancies on our board of directors may be filled only by a majority vote of directors then in office, even though less than a quorum; and
•require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.
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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibit a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Furthermore, while state statutes governing our money transmitter licenses vary, most require investors to receive the approval of, or provide notice to, the relevant licensing authority before exceeding a certain ownership threshold (as low as 10%), including indirect ownership, in a licensed money transmitter. Accordingly, current or prospective investors seeking to acquire 10% or greater ownership of us in the aggregate would need to first obtain such regulatory approvals and provide such notices to the relevant regulators. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.
We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of this offering, (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more, (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities, or (4) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of June 30th, our second fiscal quarter, of such fiscal year.
We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future operating results may not be as comparable to the operating results of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market, and other applicable securities rules and regulations
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impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.
Our management team has limited experience managing a public company.
Our management team has limited experience managing a publicly traded company, interacting with public company investors and securities analysts, and complying with the increasingly complex laws pertaining to public companies. These new obligations and constituents require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could harm our business, operating results, and financial condition.
We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We do not intend to pay any cash dividends in the foreseeable future. In addition, our Revolving Credit Facility contains, and our New Revolving Credit Facility is expected to contain, restrictions on our ability to pay cash dividends on our capital stock. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline.
Our stock price and trading volume following the completion of this offering will be heavily influenced by the way analysts and investors interpret our financial information and other disclosures. Securities and industry analysts do not currently, and may never, publish research on our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.
Our amended and restated certificate of incorporation will contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation, to the fullest extent permitted by law, will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our amended and restated certificate of incorporation will provide that the U.S. federal district courts will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (a “Federal Forum Provision”). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or
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liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and the Federal Forum Provision will apply, to the fullest extent permitted by law, to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, to the fullest extent permitted by law. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities will be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum they find favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.
Risks Related to Ownership of Our Common Stock
This initial public offering will be the first time our common stock has been available on a public market, and the stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
There has been no public market for our common stock prior to this offering. The initial public offering price for our common stock will be determined through negotiations between us, the selling stockholders and the underwriters and may vary from the market price of our common stock following this offering. An active trading market for our common stock may not develop or, if developed, any market may not be sustained. The market prices of the securities of newly public companies such as ours have historically been highly volatile. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
•overall performance of the equity markets;
•actual or anticipated fluctuations in our revenue and other operating results;
•changes in the financial projections we may provide to the public or our failure to meet these projections;
•failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
•recruitment or departure of key personnel;
•the economy as a whole and market conditions in our industry;
•negative publicity related to the real or perceived quality of our platform, as well as the failure to timely launch new products and services that gain market acceptance;
•rumors and market speculation involving us or other companies in our industry;
•announcement by us or our competitors of new products or services, commercial relationships, or significant technical innovations;
•acquisitions, strategic partnerships, joint ventures, or capital commitments;
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•new laws or regulations or new interpretations of existing laws or regulations applicable or our business;
•lawsuits threatened or filed against us, litigation involving our industry, or both;
•developments or disputes concerning our or other parties’ products, services, or intellectual property and other proprietary rights;
•changes in accounting standards, policies, guidelines, interpretations, or principles;
•interpretations of any of the above or other factors by trading algorithms, including those that employ natural language processing and related methods to evaluate our public disclosures;
•other events or factors, including those resulting from war, incidents of terrorism, natural disasters, pandemics, or responses to those events;
•the expiration of contractual lock-up or market stand-off agreements; and
•sales of shares of our common stock by us or our stockholders.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, and technology companies in particular, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.
Based upon shares outstanding as of June 30, 2021, upon the completion of this offering, our executive officers, directors, and current beneficial owners of 5% or more of our common stock will, in the aggregate, beneficially own approximately % of our outstanding common stock. These persons, acting together, will be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.
Future sales of our common stock in the public market could cause the market price of our common stock to decline.
Sales of a substantial number of shares of our common stock in the public market following the completion of this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.
All of our directors and officers and the holders of substantially all of our capital stock and securities convertible into our capital stock are subject to lock-up agreements that restrict their ability to transfer shares of our capital stock for 180 days from the date of this prospectus, subject to earlier termination if such date would occur during a blackout period under our insider trading policy as described under the section titled “Underwriting”, provided that:
•The First Release: on the first trading day on which our common stock is traded on Nasdaq, up to 15% of the shares of our common stock (including shares issuable upon exercise of options and shares of common stock that are subject to vesting conditions due to the early exercise of options that, in each case, will vest on or prior to September 30, 2021) held by current or former employees, consultants and advisors
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(excluding our current executive officers and directors) on the date of the initial preliminary prospectus filed in connection with this offering may be sold; and
•The Second Release: if the conditions to the Second Release described under the section titled “Underwriting” are satisfied, then beginning on November 24, 2021:
◦current or former employees, consultants and advisors (excluding our current executive officers and directors) may sell up to 15% of the shares of common stock held as of November 19, 2021 (including shares issuable upon exercise of options, shares of common stock that are subject to vesting conditions due to the early exercise of options and RSUs that, in each case, will vest on or prior to December 15, 2021) (the “Second Release Eligible Securities”); and
◦all other stockholders may sell up to the greater of (x) the number of shares of common stock that would result in receipt of net proceeds to the holder in an amount equal to the exercise and tax costs incurred by such holder with respect to options exercised in the 18 months preceding this offering and (y) 15% of the Second Release Eligible Securities.
We currently expect that the number of shares eligible to be sold in the First Release would equal approximately shares, including approximately shares issuable upon exercise of vested options. We currently expect that the number of shares eligible to be sold in the Second Release would equal approximately shares, including approximately shares issuable upon exercise of vested options and settlement of RSUs and assuming all shares that were eligible to be sold on the First Release were sold during such period.
If not earlier released, all of our shares of common stock, other than those sold in this offering which are freely tradable, will become eligible for sale upon expiration of the lock-up period, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.
In addition, there were 25,973,602 shares of common stock issuable upon the exercise of options or the settlement of RSUs outstanding as of June 30, 2021. We intend to register all of the shares of common stock issuable upon exercise of outstanding options, RSUs, or other equity incentives we may grant in the future, for public resale under the Securities Act. The shares of common stock will become eligible for sale in the public market to the extent such options are exercised or such RSUs are settled, subject to the lock-up agreements described above and compliance with applicable securities laws.
Based on shares outstanding as of , upon completion of this offering, holders of up to approximately shares, or %, of our common stock will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
We may issue our shares of common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.
We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.
We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, operating results, and prospects could be harmed, and the market price
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of our common stock could decline. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government that may not generate a high yield for our stockholders.
You will experience immediate and substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering.
The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our common stock immediately after this offering. If you purchase shares of our common stock in this offering, you will suffer immediate dilution of $ per share, or $ per share if the underwriters exercise their over-allotment option in full, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to the sale of common stock in this offering and the assumed public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus. For more information, see the section titled “Dilution.” If outstanding options or warrants to purchase our common stock are exercised in the future, you will experience additional dilution.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, including changes in technology and development, sales and marketing, and general and administrative expenses (including any components of the foregoing) and our ability to achieve, and maintain, future profitability;
•our business plan and our ability to effectively manage our growth;
•our market opportunity, including our total addressable market;
•our ability to grow and retain our customer base and share in existing corridors;
•our ability to expand into new corridors;
•anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
•our ability to expand into broader financial services;
•beliefs and objectives for future operations;
•our ability to develop new products and services and bring them to market in a timely manner;
•the effects of seasonal trends on our results of operations;
•our expectations concerning relationships with third parties, including strategic, banking and disbursement partners;
•our ability to obtain, maintain, protect, and enhance our intellectual property and other proprietary rights;
•our ability to keep data and our infrastructure secure;
•the effects of increased competition in our markets and our ability to compete effectively;
•future acquisitions or investments in complementary companies, products, services, or technologies;
•our expectations regarding anticipated technology needs and developments and our ability to address those needs and developments with our solutions;
•our ability to stay in compliance with laws, policies and regulations that currently apply or become applicable to our business, including consumer protection laws and trade policies, as well as our ability to attract new customers under such compliance;
•our ability to buy foreign currency at generally advantageous rates;
•the effects of changes to immigration laws, macroeconomic conditions and geopolitical forces on our customers and business operations;
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•our ability to develop and protect our brand;
•the effects of the ongoing COVID-19 pandemic in the countries in which we operate;
•economic and industry trends, projected growth, or trend analysis;
•our ability to attract and retain qualified employees;
•the estimates and methodologies used in preparing our consolidated financial statements and determining stock option exercise prices;
•the increased expenses associated with being a public company; and
•the future market prices of our common stock.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this prospectus or to conform these statements to actual results or to changes in our expectations, except as required by law.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
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MARKET AND INDUSTRY DATA
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity, and market size, is based on information from various sources, as well as assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our services. This information involves important assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity, and market size information included in this prospectus is generally reliable, information of this sort is inherently imprecise. In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. The information contained on, or that can be accessed through, any website listed below is not a part of this prospectus.
This prospectus contains statistical data, estimates, and forecasts that are based on industry publications or reports generated by third parties or other publicly available information, as well as other information based on our internal sources.
Certain monetary amounts, percentages, and other figures included elsewhere in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
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USE OF PROCEEDS
We estimate that the net proceeds from our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses, will be approximately $ million. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds from this offering by approximately $ million, assuming the number of shares of our common stock offered by us remains the same and after deducting the estimated underwriting discount. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of our common stock offered would increase (decrease) the net proceeds from this offering by approximately $ million, assuming that the assumed initial public offering price of $ remains the same, and after deducting the estimated underwriting discounts and commissions.
The principal purposes of this offering are to create a public market for our common stock, increase our visibility in the marketplace, obtain additional capital, and increase our capitalization and financial flexibility. We currently intend to use the net proceeds we receive from this offering for working capital and other general corporate purposes, which may include marketing, technology and product development, geographic or product expansions, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions, or businesses that complement our business. However, we do not have agreements or commitments for any acquisitions or investments outside the ordinary course of business at this time. At this time, we have not specifically identified a material single use for which we intend to use the net proceeds, and, accordingly, we are not able to allocate the net proceeds among any of these potential uses in light of the variety of factors that will impact how such net proceeds are ultimately utilized by us.
We will have broad discretion over the uses of the net proceeds of this offering. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.
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DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant. In addition, our Revolving Credit Facility contains, and our New Revolving Credit Facility is expected to contain, restrictions on our ability to pay cash dividends on our capital stock. Further, several of our operating subsidiaries are subject to financial services regulations and their ability to pay dividends and distribute cash may be restricted. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for more information.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents, as well as our capitalization, as of June 30, 2021, on:
•an actual basis;
•a pro forma basis, which reflects (1) the automatic conversion of all outstanding shares of our convertible preferred stock as of June 30, 2021 into 127,410,631 shares of our common stock, (2) stock-based compensation expense associated with restricted stock units subject to service-based and performance-based vesting conditions, which we will recognize upon the completion of this offering, and (3) the filing and effectiveness of our amended and restated certificate of incorporation; and
•a pro forma as adjusted basis, which reflects (1) all adjustments included in the pro forma column and (2) the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the front cover of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses.
The pro forma as adjusted information presented is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.
| As of June 30, 2021 | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| (in thousands) | Actual | Pro Forma | Pro Forma As Adjusted(1) | ||||||||||||||
| Cash and cash equivalents | $ | 173,363 | $ | 173,363 | |||||||||||||
Revolving credit facility(2) | — | — | |||||||||||||||
| Redeemable convertible preferred stock, $0.0001 par value per share; 132,674,735 shares authorized; 127,410,631 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted | 390,687 | — | |||||||||||||||
| Stockholders' deficit | |||||||||||||||||
| Preferred stock; $0.0001 par value per share; no shares authorized, issued, and outstanding, actual; shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted | — | — | |||||||||||||||
| Common stock, $0.0001 par value per share; 190,000,000 shares authorized; 26,385,643 shares issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted | 3 | 16 | |||||||||||||||
| Additional paid-in capital | 17,193 | 408,602 | |||||||||||||||
| Accumulated other comprehensive income | 575 | 575 | |||||||||||||||
| Accumulated deficit | (229,906) | (230,641) | |||||||||||||||
| Total stockholders’ deficit | (212,135) | 178,552 | |||||||||||||||
| Total capitalization | $ | 178,552 | $ | 178,552 | |||||||||||||
______________
(1)Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization by approximately $ million, assuming that the number of shares
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offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of our common stock offered would increase (decrease) the amount of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization by approximately $ million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discount. If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization would increase by approximately $ million, after deducting the estimated underwriting discount, and we would have shares of our common stock issued and outstanding, pro forma as adjusted.
(2)Prior to the completion of this offering, we may enter into the New Revolving Credit Facility arranged by certain syndicate lenders and terminate our Revolving Credit Facility. Proceeds are expected to be available to us for general corporate purposes, including funding working capital. See “Prospectus Summary—Recent Developments—New Revolving Credit Facility.”
The number of shares of our common stock to be outstanding after this offering is based on 153,796,274 shares of our common stock outstanding as of June 30, 2021 and excludes:
•25,355,906 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2021, with a weighted-average exercise price of $3.13 per share under our 2011 Plan;
•231,500 shares of our common stock issuable upon the exercise of stock options granted between June 30, 2021 and July 31, 2021 under our 2011 Plan, with a weighted average exercise price of $9.65 per share;
•617,696 shares of our common stock issuable upon the settlement of RSUs, outstanding as of June 30, 2021 under our 2011 Plan;
•no shares of our common stock issuable upon the settlement of RSUs granted between June 30, 2021 and July 31, 2021 under our 2011 Plan;
•256,250 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock outstanding as of June 30, 2021, with a weighted-average exercise price of $0.42 per share;
• shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,934,742 shares of our common stock reserved for future issuance under our 2011 Plan, as of June 30, 2021 (which number of shares does not include the stock options to purchase shares of our common stock granted after June 30, 2021), (2) shares of our common stock reserved for future issuance under our 2021 Plan, which will become effective on the date immediately prior to the date of this prospectus, and (3) shares of our common stock reserved for issuance under our ESPP, which will become effective on the date of this prospectus; and
•1,819,609 shares of our common stock reserved to be issued pursuant to the Pledge 1% campaign, of which we expect to issue approximately 181,961 shares of our common stock at or around the completion of this offering pursuant to the Pledge 1% campaign. For more information, see the section titled “Business—Corporate Philanthropy” for more information.
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DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the amount per share paid by purchasers of shares of common stock in this initial public offering and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.
As of June 30, 2021, our pro forma net tangible book value was approximately $ million, or $ per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of June 30, 2021, after giving effect to (1) the automatic conversion of all outstanding shares of our convertible preferred stock into 127,410,631 shares of our common stock and (2) the filing and effectiveness of our amended and restated certificate of incorporation.
After giving effect to the pro forma adjustments set forth above and our sale in this offering of shares of our common stock, at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses, our pro forma as adjusted net tangible book value as of June 30, 2021 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to investors purchasing common stock in this offering at the assumed initial public offering price.
The following table illustrates this dilution on a per share basis to new investors:
| Assumed initial public offering price per share | $ | ||||||||||
| Pro forma net tangible book value per share as of June 30, 2021, before giving effect to this offering | $ | ||||||||||
| Increase in pro forma net tangible book value per share attributable to new investors in this offering | |||||||||||
| Pro forma as adjusted net tangible book value per share | |||||||||||
| Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering | $ | ||||||||||
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range reflected on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $ per share and would increase (decrease) the dilution per share to new investors in this offering by $ per share, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $ per share and would increase (decrease) the dilution to new investors by $ per share, assuming the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount.
Sales of shares of common stock by the selling stockholders in our initial public offering will reduce the number of shares of common stock held by existing stockholders to , or approximately % of the total shares of common stock outstanding after our initial public offering, and will increase the number of shares held by new investors to , or approximately % of the total shares of common stock outstanding after our initial public offering.
The following table summarizes, on a pro forma as adjusted basis as of June 30, 2021, after giving effect to the pro forma adjustments described above, the difference between existing stockholders and new investors purchasing shares of common stock in this offering with respect to the number of shares purchased from us, the total
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consideration paid to us, and the average price per share paid by our existing stockholders or to be paid by investors purchasing shares in this offering at an assumed offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discount and estimated offering expenses:
| Shares Purchased | Total Consideration | ||||||||||||||||||||||||||||
| Number | Percent | Amount | Percent | Average Price Per Share | |||||||||||||||||||||||||
| Existing stockholders | % | $ | % | $ | |||||||||||||||||||||||||
| New public investors | |||||||||||||||||||||||||||||
| Total | 100 | % | $ | 100 | % | ||||||||||||||||||||||||
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus remains the same and after deducting the estimated underwriting discount.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares of common stock from the selling shareholders. If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding after this offering.
The number of shares of our common stock to be outstanding after this offering is based on 153,796,274 shares of our common stock outstanding as of June 30, 2021 and excludes:
•25,355,906 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2021, with a weighted-average exercise price of $3.13 per share under our 2011 Plan;
•231,500 shares of our common stock issuable upon the exercise of stock options granted between June 30, 2021 and July 31, 2021 under our 2011 Plan, with a weighted average exercise price of $9.65 per share;
•617,696 shares of our common stock issuable upon the settlement of RSUs, outstanding as of June 30, 2021 under our 2011 Plan;
•no shares of our common stock issuable upon the settlement of RSUs granted between June 30, 2021 and July 31, 2021 under our 2011 Plan;
•256,250 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock outstanding as of June 30, 2021, with a weighted-average exercise price of $0.42 per share;
• shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,934,742 shares of our common stock reserved for future issuance under our 2011 Plan, as of June 30, 2021 (which number of shares does not include the stock options to purchase shares of our common stock granted after June 30, 2021), (2) shares of our common stock reserved for future issuance under our 2021 Plan, which will become effective on the date immediately prior to the date of this prospectus, and (3) shares of our common stock reserved for issuance under our ESPP, which will become effective on the date of this prospectus; and
•1,819,609 shares of our common stock reserved to be issued pursuant to the Pledge 1% campaign, of which we expect to issue approximately 181,961 shares of our common stock at or around the completion of this offering to the Pledge 1% campaign. For more information, see the section titled “Business—Corporate Philanthropy”.
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To the extent that any outstanding options described above are exercised, new options or RSUs are issued under our stock-based compensation plans, or we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering. If all of the outstanding options described above had been exercised as of June 30, 2021, the as adjusted net tangible book value per share after this offering would be $ , and dilution in net tangible book value per share to new investors would be $ .
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Remitly is a leading digital financial services provider for immigrants and their families in over 135 countries around the world.
Our differentiated approach to addressing the complexity of cross-border remittances and financial services is comprised of four core elements:
•Providing a simple and reliable way of sending money with our mobile-centric suite of products. On June 30, 2021, over 85% of our customers engaged with Remitly on their mobile phones, shifting what traditionally required waiting in line to speak with an agent to the palm of their hands. Also as of June 30, 2021, our mobile app had a 4.9 iOS App Store rating with more than 450,000 reviewers and a 4.8 Android Google Play rating with more than 170,000 reviewers. We have achieved this level of engagement and these high ratings by designing mobile-centric products that make the customer experience simple and convenient and give our customers complete peace of mind.
•Conveniently putting money safely in the hands of our customers’ families, wherever they are, by relying on our global network. Our global network of funding and disbursement partnerships enables us to complete money transfers in over 1,700 corridors without the need to deploy local operations in each country. We have partner relationships with top tier banks and leading global payment providers to give our customers an array of payment (or pay-in) options, including with a bank account, credit card or debit card, and alternative payment methods. Our disbursement network provides our customers with a choice of delivery and enables us to send (or pay-out) funds within minutes, to more than 3.5 billion bank accounts, over 630 million mobile wallets, and over 355,000 cash pickup locations (including retail outlets and banks). These partner relationships help drive a better customer experience, including faster transfers, higher acceptance rates, and enhanced reliability.
•Creating trusted and personalized experiences with our localization expertise at scale. We believe our expertise in localizing our marketing, products and customer support at scale is a key differentiator. For example, we tailor our customer experience with over 14 native languages and we drive peace of mind with our global customer support team. Additionally, for disbursement of funds, we partner with local brands that are among the most trusted and recognized by our customers, their families, and their other recipients.
•Using our data-driven approach to better serve our customers and provide more value. We have a data-driven approach to how we grow our business, prioritize our investments, and manage our operations. Because our customers initiate transfers digitally, we capture and leverage a body of transaction-related data that provides insight into customer behavior and customer experience. This data and the analytics we perform inform our marketing investments and product development prioritization. In addition, we leverage our data platform and proprietary models to manage pricing, treasury, risk, and customer support.
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The combination of our differentiated approach and our relentless focus on meeting the financial services needs of our immigrant communities has resulted in significant customer growth, high customer engagement, rapid send volume and transaction growth, and attractive customer economics built on top of an expansive global network.
•Significant customer growth. As of June 30, 2021, more than 5 million customers have completed at least one transaction with Remitly. The number of our active customers grew approximately 57% for the three month period ended June 30, 2021 compared to the three month period ended June 30, 2020, while the number of transactions per active customers has increased each year for the past five years.
•High customer engagement. The majority of our active customers send money for non-discretionary needs multiple times per month, providing strong customer engagement and a reoccurring revenue stream with high visibility and predictability.
•Rapid send volume growth. Driven by our customer growth and high repeat transactions, our send volume increased 78% to $9.2 billion for the six months ended June 30, 2021, compared to $5.2 billion for the six months ended June 30, 2020. Looking at a longer period of time, our send volume increased at a compounded annual growth rate of 92% between 2015 and 2020. In addition, in 2020 we completed over 30.6 million transactions, representing total send volume of $12.1 billion.
•Attractive customer economics. As our customers continue to transact with us, we realize significant customer lifetime value and gain richer data sets, enabling us to enhance our services and extend our
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offering with other financial services. The combination of our low acquisition costs, overall payback period of approximately 10 months, and high repeat transactions leads to attractive customer economics and an average five-year LTV/CAC ratio of over 6x.
•Expanded global network. Each year we have expanded our global network by adding new funding and disbursement partners around the world. Within the last five years, we extended our global reach to over 135 countries and over 75 supported currencies. We continued to diversify our remittance business; the revenue from customers in the United States declined from 83% of revenue in 2019 to 77% of revenue in 2020, while revenue from customers in Canada increased from 10% to 12% and revenue from customers in other countries increased from 7% to 11%.
Our success in growing our customer base and usage of our services has allowed us to achieve meaningful scale to date. We generated $257.0 million in revenue for 2020, compared to $126.6 million for 2019, 103% year-over-year growth. We generated $202.1 million in revenue for the six months ended June 30, 2021, compared to $105.1 million for the six months ended June 30, 2020, 92% year-over-year growth. We incurred a net loss of $32.6 million for 2020, compared to a net loss of $51.4 million for 2019. We incurred a net loss of $21.1 million for the six months ended June 30, 2020, compared to a net loss of $9.2 million for the six months ended June 30, 2021.
Our Revenue Model
For our remittance business, which represents the vast majority of our revenue today, we generate revenue from transaction fees charged to customers and foreign exchange spreads applied to the customer’s principal.
Transaction fees vary based on the corridor, the currency in which funds are delivered to the recipient, the funding method a customer chooses (e.g., ACH, credit card, debit card, etc.), and the amount of the customer’s principal.
Foreign exchange spreads represent the difference between the foreign exchange rate offered to customers and the foreign exchange rate on the Company's currency purchases. They are an output of proprietary and dynamic models that are designed to provide fair and competitive rates to our customers, while generating a spread for the Company based on our ability to buy foreign currency at generally advantageous rates.
Revenue from transaction fees and foreign exchange spreads is reduced by customer promotions. For example, we may, from time to time, waive transaction fees for first-time customers, or provide customers with better foreign exchange rates on their first transaction. These incentives are accounted for as reductions to revenue, up to the point where net historical cumulative revenue, at the customer level, is reduced to zero. Any incentives above this amount are recorded as marketing expense. We consider these incentives as an investment in our long-term relationship with customers.
The trusted relationships we foster with our customers and the repeat nature of their sending behavior has resulted in strong revenue retention rates. This provides a reoccurring revenue stream with high visibility and predictability.
Key Business Metrics and Non-GAAP Financial Measure
We regularly review the following key business metrics and a non-GAAP financial measure to evaluate our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We believe that these key business metrics and the non-GAAP financial measure provide meaningful supplemental information for management and investors in assessing our historical and future operating performance. The calculation of these key business metrics and the non-GAAP financial measure discussed below may differ from other similarly titled metrics used by other companies, analysts, or investors.
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Active Customers
| Three Months Ended December 31, | Three Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Active customers | 948 | 1,891 | 1,525 | 2,397 | |||||||||||||||||||
We believe that the number of our active customers is an important indicator of customer engagement and the overall growth of our business.
Active customers increased to 1,891,000 for the three months ended December 31, 2020, or 100% growth, compared to the three months ended December 31, 2019. This increase was primarily due to an increase in new customers driven by investments in marketing spend, our seamless user experience, network expansion, and new corridor rollouts, as well as the accelerated digital adoption of remittances as a result of the COVID-19 pandemic.
Active customers increased to 2,397,000, or 57% growth, for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. This increase was primarily due to an increase in new customers driven by investments in marketing spend, our seamless user experience, and network expansion. In addition, we continue to see the benefit of increased adoption of digital remittances as a result of the COVID-19 pandemic which began in April 2020.
Send Volume
| Year Ended December 31, | Six Months Ended June 30 | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Send volume | $ | 7,087 | $ | 12,055 | $ | 5,185 | $ | 9,249 | |||||||||||||||
We measure send volume to assess the scale of remittances sent using our platform. Our customers mostly send from the United States, Canada, United Kingdom, other countries in Europe, and Australia. The recipients are located in over 115 countries across the globe; the largest receive countries include India, the Philippines, and Mexico.
Send volume increased to $12.1 billion for 2020, compared to $7.1 billion for 2019, largely due to higher transaction volumes from new and existing customers, partially offset by lower average send amount per active customers as a result of increasing geographic diversification, and in particular a mix shift toward corridors with lower average send amounts.
Send volume increased $4.1 billion, or 78%, to $9.2 billion for the six months ended June 30, 2021, compared to $5.2 billion for the six months ended June 30, 2020, largely due to higher transaction volumes from new and existing customers, partially offset by lower average send amount per active customers as a result of increasing geographic diversification, and a mix shift toward corridors with lower average send amounts.
Non-GAAP Financial Measure
We use a non-GAAP financial measure to supplement Net loss. This non-GAAP financial measure is Adjusted EBITDA which we calculate as Net loss adjusted by i) interest expense, net; ii) provision for income taxes; iii) non-cash charge of depreciation and amortization; iv) other expense (income), net, including gains and losses from the remeasurement of foreign currency assets and liabilities into their functional currency and v) non-cash stock-based compensation expense.
Our goal is not to maximize Adjusted EBITDA in any given quarter, but to drive revenue growth with investments that generate long-term value. Adjusted EBITDA is a key output measure used by our management to
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evaluate our operating performance, inform future operating plans, and make strategic long term decisions, including those relating to operating expenses and the allocation of internal resources.
Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not reflect the effect of income taxes that may represent a reduction in cash available to us;
•Adjusted EBITDA does not reflect the effect of gains and losses from the remeasurement of foreign currency assets and liabilities into their functional currency;
•Adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; and
•other companies, including companies in our industry, may calculate Adjusted EBITDA differently from how we calculate this measure or not at all, which reduces its usefulness as a comparative measure.
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Add: | |||||||||||||||||||||||
| Interest expense, net | 497 | 916 | 606 | 526 | |||||||||||||||||||
| Provision for income taxes | 259 | 1,163 | 440 | 824 | |||||||||||||||||||
| Depreciation and amortization | 2,658 | 4,060 | 1,857 | 2,571 | |||||||||||||||||||
| Other expense (income), net | 34 | 1,302 | 1,496 | (2,648) | |||||||||||||||||||
| Stock-based compensation expense | 3,648 | 5,264 | 2,523 | 4,225 | |||||||||||||||||||
| Adjusted EBITDA | $ | (44,296) | $ | (19,859) | $ | (14,208) | $ | (3,720) | |||||||||||||||
Adjusted EBITDA improved to $(19.9) million for 2020 compared to $(44.3) million for 2019. This improvement was largely due to higher revenue driven by an acceleration in new customer acquisition partially offset by higher transaction and customer support costs, investments in new customer acquisition and our technology platform, other general and administrative expenses, and an increase in expenses that are adjusted from net loss.
Adjusted EBITDA improved to $(3.7) million for the six months ended June 30, 2021, compared to $(14.2) million for the six months ended June 30, 2020, driven by continued acceleration in revenue and new customer acquisition partially offset by higher processing and customer support costs, investments in customer acquisition and our technology platform, and other general and administrative expenses.
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Key Factors Affecting Our Performance
Ability to Retain Our Customers and Maintain High Customer Engagement
Our send volume is primarily driven by existing customers who regularly use our remittance product to send money home. We believe our mobile-first products and superior customer experience encourage high retention and repeat usage, which are important drivers of our performance.
We measure active customers to monitor the growth and performance of our customer base. During the second quarter of 2021, 2.4 million customers used Remitly to send money abroad, up 57% from the second quarter of 2020. The majority of our active customers send money for recurring, non-discretionary needs multiple times per month, providing a reoccurring revenue stream with high visibility and predictability.
Ability to Attract New Customers
Our long-term growth will depend, in part, on our continued ability to attract new customers to our platform. We intend to expand our customer base by launching new send and receive corridors, by continuing to innovate, and by providing the most trusted financial services for immigrants. We will continue to acquire our customers through digital marketing channels and word-of-mouth referrals from existing customers, and we expect our marketing expenses to increase in the coming years as a result. We will also explore new customer acquisition channels. Given the nature of our revenue, our investment in marketing in a given period may not impact results until subsequent periods.
Ability to Maintain Efficient Customer Acquisition
Our ability to efficiently acquire customers is critical to our growth and attractive customer economics. Online marketing competition, our ability to effectively target the right demographic, and competitor pricing may impact our customer acquisition strategy.
We have a history of successfully monitoring CAC and will continue to be strategic and disciplined toward customer acquisition. For example, for performance marketing, we set rigorous customer acquisition targets that we continuously monitor to ensure a high return on investment over the long term, and we can increase or decrease this investment as desired.
Corridor Mix
Our business is global and certain attributes of our business vary by corridor such as send amount, customer funding sources, and transaction frequency. For example, a period of high growth in receive corridors with large average send amounts, such as India, could disproportionately impact send volume while impacting active customers to a lesser extent. While shifts in our corridor mix could impact the trends in our global business, including send volume and customer economics, our strategy is to manage and optimize each of these corridors over the long term based on their specific dynamics.
Seasonality
Our operating results and metrics are subject to seasonality, which may result in fluctuations in our quarterly revenues and operating results. For example, active customers and send volume generally peak as customers send gifts for regional and global holidays including, most notably, in the fourth quarter around the Christmas holiday. This seasonality typically drives higher fourth quarter customer acquisition, which generally results in higher fourth quarter marketing costs and transaction loss expenses. It also results in higher transactions and transaction expenses, along with higher working capital needs. Other periods of seasonality include Ramadan/Eid, Lunar New Year/Tết and Mother's Day, although the impact is generally lower than in the fourth quarter. The number of business days in a quarter and the day of week that the last day of the quarter falls on may also introduce variability in our results, balance sheet, or cash flows.
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Ability to Invest in Our Technology Platform and Introduce New Products
We will continue to invest significant resources in our technology platform. These investments will allow us continue to iterate, adapt, and add features to our current products, improve the customer and recipient experience, grow our payment and disbursement network, enhance our risk and security infrastructure, and continue to secure data in accordance with changing best practices and legal requirements, as well as to introduce new and innovate products. We expect our expenses related to technology and development to increase, which may impact short-term profitability, but we believe these investments will ultimately contribute to our long term growth.
Ability to Manage Risk and Fraud
We manage fraud (e.g., through identity theft) and other illegitimate activity (e.g., money laundering) by utilizing our proprietary risk models built on machine learning processes, early warning systems, bespoke rules, and manual investigation processes. Our models and processes enable us to identify and address complex and evolving risks in these unwanted activities, while maintaining a differentiated customer experience. In addition, we integrate historical fraud loss data and other transaction data into our risk models which helps us identify emerging patterns and quantify fraud and regulatory and compliance risks across all aspects of our customer interactions. This allows us to achieve and maintain fraud loss rates within desired guardrails.
Macroeconomic and Geopolitical Changes
Global macroeconomic and geopolitical factors, including immigration, trade and regulatory policies, unemployment, foreign currency fluctuations, and the rate of digital remittance adoption impact demand for our services and the options that we can offer. These factors evolve over time and periods of significant currency appreciation or depreciation, whether in send or receive currencies, changes to global migration patterns, and changes to digital adoption trends may shift the timing and volume of transactions using our service.
Impact of COVID-19
The COVID-19 pandemic has caused significant disruption worldwide and many of our customers and employees have been impacted. With travel restrictions and shelter-in-place policies, the demand for digital remittances has increased, and this has driven a significant acceleration in our new customer growth.
We have also experienced, and may continue to experience, a modest adverse impact on our business practices, including as a result of transitioning part of our workforce to work from home and establishing strict health and safety protocols for our offices. Our customer support and operations teams, both internal and third-party, have been impacted, which has affected our ability to service customer needs due to longer wait times and our ability to hire personnel quickly.
Certain operating expenses have grown more slowly due to reduced business travel and the virtualization or cancellation of events. While a reduction in some operating expenses may have an immediate positive impact on our operating results, we do not yet have visibility into the full impact this will have on our business longer term. As COVID-19 vaccination rates increase and people begin to return to offices and other workplaces and travel more, the positive impacts of the COVID-19 pandemic on our business may slow or decline.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. We do not yet know the full extent of potential impacts on our business or operations.
We will continue to actively monitor the situation and may take further actions that may alter our business practices as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, or business partners.
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Components of Results of Operations
Revenue
Our revenue is generated on transaction fees charged to customers and foreign exchange spreads between the foreign exchange rate offered to customers and the foreign exchange rate on our currency purchases. Revenue is recognized when the funds have been delivered to the intended recipient in an amount that reflects the consideration we expect to be entitled to in exchange for services provided. Revenue is derived from each transaction and varies based on the size of the transaction, the funding method used, the currency to be ultimately disbursed, the rate at which the currency was purchased, and the countries to which the funds are transferred. We recognize transaction revenue on a gross basis as we are the principal for fulfilling payment transactions.
Costs and Expenses
Transaction Expenses. Transaction expenses include fees paid to disbursement partners for paying funds to the recipient, provisions for transaction losses, fees paid to payment processors for funding transactions, bad debt expense, fraud prevention costs and costs for compliance tools.
Customer Support and Operations. Customer support and operations expenses consist primarily of personnel-related expenses associated with our customer support and operations organization, including salaries, benefits, and stock-based compensation, as well as third-party costs for customer support services and travel and related office expenses. This includes our customer service teams which directly support our customers, consisting of online support and call centers, and other costs incurred to support our customers, including related telephony costs to support these teams, and investments in tools to effectively service our customers, as well as increased customer self-service capabilities. Customer support and operations expenses also include corporate communication costs and professional services fees.
Marketing. Marketing expenses consist primarily of advertising costs used to attract new customers. Marketing expenses also include personnel-related expenses associated with our marketing organization, including salaries, benefits, and stock-based compensation, promotions, costs for software subscription services dedicated for use by our marketing organization, and outside services contracted for marketing purposes.
Technology and Development. Technology and development expenses consist primarily of personnel-related expenses for employees involved in the research, design, development and maintenance of both new and existing products and services, including salaries, benefits and stock-based compensation. Technology and development expenses also include professional services fees and costs for software subscription services dedicated for use by our technology and development teams.
We believe delivering new functionality is critical to attract new customers and expand our relationship with existing customers. We expect to continue to make investments to expand our solutions in order to enhance our customers’ experience and satisfaction, and to attract new customers. We expect our technology and development expenses to increase in absolute dollars, but they may fluctuate as a percentage of total revenue from period to period as we expand our technology and development team to develop new solutions and enhancements to existing solutions.
General and Administrative. General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities, and administrative personnel, including salaries, benefits, and stock-based compensation. General and administrative expenses also include professional services fees, costs for software subscriptions, facilities costs, and other corporate expenses.
Depreciation and Amortization. Depreciation and amortization expense includes depreciation on property and equipment and leasehold improvements, as well as the amortization of internal-use software costs and amortization of intangible assets.
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Interest Income
Interest income consists primarily of interest income earned on our cash and cash equivalents.
Interest Expense
Interest expense consists primarily of the interest expense on our borrowings under our Credit Agreement.
Other Income (Expense), Net
Other income (expense), net primarily consists of gains and losses from the remeasurement of foreign currency assets and liabilities into their functional currency.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain international and state jurisdictions in which we conduct business. We have established a full valuation allowance against our U.S. net deferred tax assets.
Results of Operations
The following table sets forth our consolidated statements of operations for the periods presented:
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | $ | 126,567 | $ | 256,956 | $ | 105,149 | $ | 202,106 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
Transaction Expenses(1) | 55,858 | 110,414 | 46,210 | 87,615 | |||||||||||||||||||
Customer Support and Operations(1) (2) | 17,445 | 25,428 | 10,163 | 20,430 | |||||||||||||||||||
Marketing (1) (2) | 43,542 | 73,804 | 32,107 | 52,274 | |||||||||||||||||||
Technology and Development (1) (2) | 32,008 | 40,777 | 19,059 | 26,842 | |||||||||||||||||||
General and Administrative(1) (2) | 25,658 | 31,656 | 14,341 | 22,890 | |||||||||||||||||||
| Depreciation and Amortization | 2,658 | 4,060 | 1,857 | 2,571 | |||||||||||||||||||
| Total costs and expenses | 177,169 | 286,139 | 123,737 | 212,622 | |||||||||||||||||||
| Loss from operations | (50,602) | (29,183) | (18,588) | (10,516) | |||||||||||||||||||
| Interest income | 1,111 | 273 | 174 | 10 | |||||||||||||||||||
| Interest expense | (1,608) | (1,189) | (780) | (536) | |||||||||||||||||||
| Other (expense) income, net | (34) | (1,302) | (1,496) | 2,648 | |||||||||||||||||||
| Loss before provision for income taxes | (51,133) | (31,401) | (20,690) | (8,394) | |||||||||||||||||||
| Provision for income taxes | 259 | 1,163 | 440 | 824 | |||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
_______________
(1) Exclusive of depreciation and amortization, shown separately, above
(2) Includes stock-based compensation expense as follows:
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Customer support and operations | $ | 25 | $ | 22 | $ | 9 | $ | 37 | |||||||||||||||
| Marketing | 541 | 869 | 411 | 721 | |||||||||||||||||||
| Technology and development | 1,486 | 2,130 | 1,015 | 1,824 | |||||||||||||||||||
| General and administrative | 1,596 | 2,243 | 1,088 | 1,643 | |||||||||||||||||||
| Total | $ | 3,648 | $ | 5,264 | $ | 2,523 | $ | 4,225 | |||||||||||||||
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Comparison of the Years Ended December 31, 2019 and 2020
Revenue
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 126,567 | $ | 256,956 | $ | 130,389 | 103 | % | |||||||||||||||
Revenue increased $130.4 million, or 103%, from 2019 to 2020. This increase was primarily driven by growth in active customers, which doubled compared to 2019.
Transaction Expenses
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Transaction expenses | $ | 55,858 | $ | 110,414 | $ | 54,556 | 98 | % | |||||||||||||||
| Percentage of revenue | 44 | % | 43 | % | |||||||||||||||||||
Transaction expenses increased $54.6 million, or 98%, for 2020, compared to 2019. The increase was driven by a $37.3 million increase in direct costs associated with processing a higher volume of our customers’ remittance transactions and the disbursement of our customers’ funds to their recipients, a $12.0 million increase in fraud and other losses largely driven by growth in new customers and send volume, and a $5.3 million increase in software and tools that support our compliance and risk operations.
As a percentage of revenue, transaction expenses decreased to 43% for 2020, from 44% for 2019, which was driven primarily by scale benefits as we grew send volume.
Customer Support and Operations
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Customer support and operations | $ | 17,445 | $ | 25,428 | $ | 7,983 | 46 | % | |||||||||||||||
| Percentage of revenue | 14 | % | 10 | % | |||||||||||||||||||
Customer support and operations expenses increased $8.0 million, or 46%, for 2020, compared to 2019. This increase was primarily driven by a $5.5 million increase in third-party customer support costs, a $1.7 million increase in internal personnel costs at our sites in the Philippines and Nicaragua that support customer operations, and a $1.1 million increase in software and telephony costs, partially offset by $0.2 million lower travel and office expenses. Although customer support and operations expense growth is typically tied to new customer and active customers growth, these costs grew slower than active customers for 2020, as we experienced absenteeism and delays in hiring due to the COVID-19 pandemic. We also invested in tools to increase customer self-service capabilities, which helped to reduce customer contact rates and drove operational efficiencies.
As a percentage of revenue, customer support and operations expenses decreased to 10% for 2020, from 14% for 2019, which was driven primarily by operational efficiencies coupled with the impact of the COVID-19 pandemic on our ability to service customer demand. We expect that these costs will increase as a percentage of revenue in 2021, as we increase staffing to support higher demand.
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Marketing
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Marketing | $ | 43,542 | $ | 73,804 | $ | 30,262 | 70 | % | |||||||||||||||
| Percentage of revenue | 34 | % | 29 | % | |||||||||||||||||||
Marketing expenses increased $30.3 million, or 70%, for 2020, compared to 2019, due primarily to an increase of $28.1 million in direct marketing expenses, including online and offline marketing spend and promotion costs to acquire new customers. Personnel-related costs, including stock-based compensation expense, increased by $2.1 million, driven by a 41% year-over-year increase in marketing headcount, partially offset by a $0.2 million decrease in compensation expense recorded for a tender offer that occurred in 2019. The remaining increase was driven by a $0.3 million increase in other marketing operating expense, primarily indirect marketing.
As a percentage of revenue, marketing expenses decreased to 29% for 2020, from 34% for 2019, as our existing customer base became a larger portion of revenue while our marketing spend was mostly dedicated to acquiring new customers.
Technology and Development
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Technology and development | $ | 32,008 | $ | 40,777 | $ | 8,769 | 27 | % | |||||||||||||||
| Percentage of revenue | 25 | % | 16 | % | |||||||||||||||||||
Technology and development expenses increased $8.8 million, or 27%, for 2020, compared to 2019. This increase was driven by a $7.3 million increase in personnel-related expenses, including stock-based compensation expense, resulting from a 27% year-over-year increase in technology and development headcount, partially offset by a $2.0 million decrease in compensation expense related to a tender offer that occurred in 2019. The increase in technology and development expenses was also driven by $3.5 million in software costs for employee tools and cloud services due to growth in both headcount and the volume of transactions.
As a percentage of revenue, technology and development expenses decreased to 16% for 2020, from 25% for 2019, as we leveraged our technology platform and infrastructure over a larger revenue and customer base.
General and Administrative
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| General and administrative | $ | 25,658 | $ | 31,656 | $ | 5,998 | 23 | % | |||||||||||||||
| Percentage of revenue | 20 | % | 12 | % | |||||||||||||||||||
General and administrative expenses increased $6.0 million, or 23%, for 2020, compared to 2019. This increase was primarily driven by a $6.2 million increase in personnel-related expenses, including stock-based compensation expense, driven by a 52% increase in general and administrative headcount. This increase was partially offset by a $1.8 million decrease in compensation expense related to a tender offer that occurred in 2019. The growth in general and administrative expenses was also due to an increase of $1.1 million in facilities costs as we expanded our office space in the United Kingdom and Nicaragua, and an increase of $0.5 million in other general and administrative expenses, primarily professional fees and bank fees.
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As a percentage of revenue, general and administrative expenses decreased to 12% for 2020, from 20% for 2019, due to economies of scale as our revenue grew faster than our general and administrative expenses.
Depreciation and Amortization
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Depreciation and Amortization | $ | 2,658 | $ | 4,060 | $ | 1,402 | 53 | % | |||||||||||||||
| Percentage of revenue | 2 | % | 2 | % | |||||||||||||||||||
Depreciation and amortization increased $1.4 million, or 53%, for 2020, compared to 2019. This increase was primarily driven by an increase in depreciation for internally developed software.
Interest Income
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 1,111 | $ | 273 | $ | (838) | (75) | % | |||||||||||||||
Interest income decreased $0.8 million, for 2020, compared to 2019, primarily due to a lower interest rate earned on interest-bearing accounts.
Interest Expense
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest expense | $ | (1,608) | $ | (1,189) | $ | 419 | (26) | % | |||||||||||||||
Interest expense decreased $0.4 million, for 2020, compared to 2019, primarily due to lower interest expense on our Revolving Credit Facility as a result of lower outstanding borrowings, given the close of our Series F redeemable convertible preferred stock financing in 2020.
Other Expense, net
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Other expense, net | $ | (34) | $ | (1,302) | $ | (1,268) | nm* | ||||||||||||||||
| * not meaningful | |||||||||||||||||||||||
Other expense, net, increased $1.3 million for 2020, compared to 2019, primarily due to foreign exchange remeasurements on transactions associated with high volume balance sheet balances and volatility in related currencies, including the Indian rupee and Mexican peso.
Provision for Income Taxes
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2019 | 2020 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Provision for income taxes | $ | 259 | $ | 1,163 | $ | 904 | 349 | % | |||||||||||||||
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The provision for income taxes increased $0.9 million, for 2020, compared to 2019, primarily due to an increase in foreign taxable income in line with business growth in these jurisdictions and changes in U.S. state income tax laws.
Comparison of the Six Months Ended June 30, 2020 and 2021
Revenue
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 105,149 | $ | 202,106 | $ | 96,957 | 92 | % | |||||||||||||||
Revenue increased $97.0 million, or 92%, to $202.1 million for the six months ended June 30, 2021, compared to $105.1 million for the six months ended June 30, 2020. This increase was driven primarily by the growth in active customers, which increased 57% for the three months ended June 30, 2021 as compared to the same period in 2020, as well as an increase in revenue as a percentage of send volume, which is impacted by the mix of corridors and the average remittance size in those corridors.
Transaction Expenses
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Transaction expenses | $ | 46,210 | $ | 87,615 | $ | 41,405 | 90% | ||||||||||||||||
| Percentage of total revenue | 44 | % | 43 | % | |||||||||||||||||||
Transaction expenses increased $41.4 million, or 90%, to $87.6 million, for the six months ended June 30, 2021, compared to $46.2 million, for the six months ended June 30, 2020. The increase was primarily due to a $33.5 million increase in direct costs associated with processing a higher volume of our customers’ remittance transactions and the disbursement of our customers’ funds to their recipients, a $6.1 million increase in fraud and other losses largely driven by growth in new customers and send volume, and a $1.8 million increase in other transaction expenses, primarily software and tools that support our compliance and risk operations.
As a percentage of revenue, transaction expenses declined slightly to 43% for the six months ended June 30, 2021 as compared to 44% for the six months ended June 30, 2020.
Customer Support and Operations
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Customer support and operations | $ | 10,163 | $ | 20,430 | $ | 10,267 | 101% | ||||||||||||||||
| Percentage of total revenue | 10 | % | 10 | % | |||||||||||||||||||
Customer support and operations expenses increased $10.3 million, or 101%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The increase was primarily driven by a $4.7 million increase in third-party customer support costs, a $3.4 million increase in internal personnel costs at our sites in the Philippines and Nicaragua that support customer operations, a $1.5 million increase in software and telephony costs as we supported more active customers, and a $0.6 million increase in other operating expenses including customer set up fees and $0.1 million in other costs.
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As a percentage of revenue, customer support and operations expenses remained flat at 10% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. We expect that these costs will continue to increase as a percentage of revenue for the remainder of 2021, as we increase staffing to support higher demand.
Marketing
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Marketing | $ | 32,107 | $ | 52,274 | $ | 20,167 | 63% | ||||||||||||||||
| Percentage of total revenue | 31 | % | 26 | % | |||||||||||||||||||
Marketing expenses increased $20.2 million, or 63%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, due primarily to an increase of $17.7 million in direct marketing expense, including online and offline marketing spend and promotion costs to acquire new customers. Personnel-related costs increased by $1.6 million driven by a 32% increase in marketing headcount compared to the same period in 2020 and a $0.3 million increase in stock-based compensation. The increase in marketing expenses was also driven by a $0.6 million increase in software costs and other indirect marketing costs.
As a percent of revenue, marketing expenses decreased to 26% for the six months ended June 30, 2021, from 31% for the six months ended June 30, 2020, as our existing customer base became a larger portion of revenue while our marketing spend was mostly dedicated to acquiring new customers.
Technology and Development
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Technology and development | $ | 19,059 | $ | 26,842 | $ | 7,783 | 41% | ||||||||||||||||
| Percentage of total revenue | 18 | % | 13 | % | |||||||||||||||||||
Technology and development expenses increased $7.8 million, or 41% for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The increase was driven by a $4.6 million increase in personnel related expenses resulting from a 19% increase in headcount compared to the same period in 2020 and a $0.8 million increase in stock-based compensation. The increase in technology and development expense was also driven by $1.7 million in software costs for employee tools and cloud services as well as $0.5 million higher professional fees due to growth in headcount and volume of transactions and a $0.2 million increase in other costs.
As a percentage of revenue, technology and development expenses decreased to 13% for the six months ended June 30, 2021, from 18% for the six months ended June 30, 2020, as we leveraged our technology platform and infrastructure over a larger revenue and customer base.
General and Administrative
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| General and administrative | $ | 14,341 | $ | 22,890 | $ | 8,549 | 60% | ||||||||||||||||
| Percentage of total revenue | 14 | % | 11 | % | |||||||||||||||||||
General and administrative expenses increased $8.6 million, or 60%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The increase was primarily driven by a $3.7 million increase in personnel-related expenses resulting from a 43% increase in general and administrative headcount compared to the
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same period in 2020 and a $0.6 million increase in stock-based compensation. The increase in general and administrative expense was also due to an increase of $2.4 million in professional fees mostly related to public company readiness, a $0.8 million increase to other taxes, a $0.8 million increase to other general and administrative operating expenses reflecting primarily employee related and bank changes, and a $0.3 million increase to software.
As a percentage of revenue, general and administrative expenses decreased to 11% for the six months ended June 30, 2021, from 14% for the six months ended June 30, 2020, as we leveraged our infrastructure over a larger revenue and customer base.
Depreciation and Amortization
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Depreciation and Amortization | $ | 1,857 | $ | 2,571 | $ | 714 | 38 | % | |||||||||||||||
| Percentage of revenue | 2 | % | 1 | % | |||||||||||||||||||
Depreciation and amortization increased $0.7 million, or 38%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. This increase is mostly due to an increase in depreciation for internally developed software, computers and other assets.
Interest Income
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 174 | $ | 10 | $ | (164) | (94) | % | |||||||||||||||
Interest income decreased $0.2 million for the six month period ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to a lower interest rate on interest-bearing accounts.
Interest Expense
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest expense | $ | (780) | $ | (536) | $ | 244 | (31) | % | |||||||||||||||
Interest expense decreased $0.2 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily due to lower interest expense on our Revolving Credit Facility as a result of lower outstanding borrowings, given the close of our Series F redeemable convertible preferred stock financings in 2020 and 2021.
Other (Expense) Income, net
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Other (expense) income, net | $ | (1,496) | $ | 2,648 | $ | 4,144 | (277) | % | |||||||||||||||
Other (expense) income, net, increased $4.1 million from other (expense), net to other income, net, for the six month period ended June 30, 2021, compared to the six month period ended June 30, 2020, primarily due to foreign
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exchange remeasurements on transactions associated with high-volume balance sheet balances, and volatility in related currencies including the Colombian peso, Philippine peso, and Indian rupee.
Provision for Income Taxes
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2020 | 2021 | Amount | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Provision for income taxes | $ | 440 | $ | 824 | $ | 384 | 87 | % | |||||||||||||||
The provision for income taxes increased $0.4 million, or 87%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to an increase in taxable income for our international entities.
Quarterly Results of Operations
The following tables summarize our selected unaudited quarterly consolidated statements of operations data, the percentage of revenues that each line item represents, and the key business metrics for each of the six quarters through the period ended June 30, 2021. The information for each of these quarters has been prepared on the same basis as our audited annual consolidated financial statements and reflects, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.
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Consolidated Statements of Operations Data
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Revenue | $ | 45,740 | $ | 59,409 | $ | 71,790 | $ | 80,017 | $ | 91,056 | $ | 111,050 | |||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
Transaction Expenses(1) | 21,194 | 25,016 | 28,046 | 36,158 | 41,110 | 46,505 | |||||||||||||||||||||||||||||
Customer Support and Operations(1) (2) | 4,936 | 5,227 | 7,632 | 7,633 | 8,631 | 11,799 | |||||||||||||||||||||||||||||
Marketing (1) (2) | 13,606 | 18,501 | 18,816 | 22,881 | 26,116 | 26,158 | |||||||||||||||||||||||||||||
Technology and Development (1) (2) | 9,129 | 9,930 | 10,380 | 11,338 | 11,644 | 15,198 | |||||||||||||||||||||||||||||
General and Administrative(1) (2) | 6,997 | 7,344 | 7,667 | 9,648 | 10,882 | 12,008 | |||||||||||||||||||||||||||||
| Depreciation and Amortization | 866 | 991 | 1,002 | 1,201 | 1,245 | 1,326 | |||||||||||||||||||||||||||||
| Total costs and expenses | 56,728 | 67,009 | 73,543 | 88,859 | 99,628 | 112,994 | |||||||||||||||||||||||||||||
| Loss from operations | (10,988) | (7,600) | (1,753) | (8,842) | (8,572) | (1,944) | |||||||||||||||||||||||||||||
| Interest income | 165 | 9 | 7 | 92 | 5 | 5 | |||||||||||||||||||||||||||||
| Interest expense | (327) | (453) | (247) | (162) | (259) | (277) | |||||||||||||||||||||||||||||
| Other (expense) income, net | (1,727) | 231 | (241) | 435 | 1,426 | 1,222 | |||||||||||||||||||||||||||||
| Loss before provision for income taxes | (12,877) | (7,813) | (2,234) | (8,477) | (7,400) | (994) | |||||||||||||||||||||||||||||
| Provision for income taxes | 219 | 221 | 195 | 528 | 370 | 454 | |||||||||||||||||||||||||||||
| Net loss | $ | (13,096) | $ | (8,034) | $ | (2,429) | $ | (9,005) | $ | (7,770) | $ | (1,448) | |||||||||||||||||||||||
______________
(1)Exclusive of depreciation and amortization, shown separately, above
(2)Includes stock-based compensation expense as follows:
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | |||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Customer support and operations | $ | 2 | $ | 7 | $ | 5 | $ | 8 | $ | 8 | $ | 29 | ||||||||||||||||||||||||||
| Marketing | 194 | 217 | 216 | 242 | 285 | 436 | ||||||||||||||||||||||||||||||||
| Technology and development | 510 | 505 | 533 | 582 | 590 | 1,234 | ||||||||||||||||||||||||||||||||
| General and administrative | 529 | 559 | 575 | 580 | 639 | 1,004 | ||||||||||||||||||||||||||||||||
| Total | $ | 1,235 | $ | 1,288 | $ | 1,329 | $ | 1,412 | $ | 1,522 | $ | 2,703 | ||||||||||||||||||||||||||
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Percentage of Revenue Data
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
Transaction Expenses(1) | 46 | 42 | 39 | 45 | 45 | 42 | |||||||||||||||||||||||||||||
Customer Support and Operations(1) | 11 | 9 | 11 | 10 | 9 | 11 | |||||||||||||||||||||||||||||
Marketing (1) | 30 | 31 | 26 | 29 | 29 | 23 | |||||||||||||||||||||||||||||
Technology and Development (1) | 20 | 17 | 14 | 14 | 13 | 14 | |||||||||||||||||||||||||||||
General and Administrative(1) | 15 | 12 | 11 | 12 | 12 | 11 | |||||||||||||||||||||||||||||
| Depreciation and Amortization | 2 | 2 | 1 | 2 | 1 | 1 | |||||||||||||||||||||||||||||
| Total costs and expenses | 124 | 113 | 102 | 112 | 109 | 102 | |||||||||||||||||||||||||||||
| Loss from operations | (24) | (13) | (2) | (12) | (9) | (2) | |||||||||||||||||||||||||||||
| Interest income | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Interest expense | (1) | (1) | — | — | — | — | |||||||||||||||||||||||||||||
| Other (expense) income, net | (4) | — | — | 1 | 2 | 1 | |||||||||||||||||||||||||||||
| Loss before provision for income taxes | (28) | (13) | (3) | 1 | (8) | (1) | |||||||||||||||||||||||||||||
| Provision for income taxes | — | — | — | 1 | — | — | |||||||||||||||||||||||||||||
| Net loss | (29) | % | (14) | % | (3) | % | (11) | % | (9) | % | (1) | % | |||||||||||||||||||||||
________________
(1) Exclusive of depreciation and amortization, shown separately, above
Quarterly Changes in Revenue
Revenue increased sequentially in each of the quarters presented primarily due to an increase in active customers. For the three months ended June 30, 2020, the COVID-19 pandemic drove increased demand for digital remittances. As a result, we observed an acceleration in new customer growth and increased engagement with our existing customer base, resulting in continued revenue growth for each of the subsequent quarters in 2020 and 2021. In addition, our revenue is subject to seasonality, most notably in the fourth quarter around the Christmas holiday.
Quarterly Changes in Costs and Expenses
Transaction expenses increased sequentially in each of the quarters presented primarily due to an increase in costs associated with processing our customers’ remittance transactions, the disbursement of our customers funds to their recipients, and an increase in fraud and other losses largely driven by growth in new customers and send volume. For the three months ended June 30, 2020, the three months ended September 30, 2020, and the three
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months ended June 30, 2021, transaction expenses as percentage of revenue decreased primarily due to lower-than-average fraud rates and other losses. For each three month period ended December 31, 2020 and March 31, 2021, transaction expense as a percentage of revenue increased due to higher fraud and other losses.
Customer support and operations expenses increased sequentially in each of the quarters presented. This increase was driven by the cost of third-party customer support, internal personnel and software and telephony costs to support the increase in active customers.
Marketing expenses increased sequentially in each of the quarters presented primarily due to an increase in online and offline marketing and promotion costs to acquire new customers. Starting in the second quarter of 2020, online marketing became less competitive due to COVID-19, allowing us to rapidly acquire new customers. We realized a benefit of this reduction in market competition in the three months ended September 30, 2020, where marketing expenses decreased to 26% of revenue. In the fourth quarter of 2020, online marketing competition started to return to pre-COVID-19 levels. For the three months ended June 30, 2021, marketing expenses as a percentage of revenue decreased compared to the three months ended March 31, 2021 as revenue growth accelerated faster than marketing spend. We expect online and offline marketing and promotion costs will continue to increase.
Technology and development expenses increased sequentially in each of the quarters presented due to increased personnel-related and software costs. As a percentage of revenue, these costs grew slower as we leveraged our technology platform and infrastructure over a larger revenue and customer base.
General and administrative expenses increased sequentially in each of the quarters presented mostly due to an increase in personnel-related costs, professional services costs and facilities costs. These costs grew slower than revenue due to economies of scale.
Depreciation and amortization expenses increased sequentially in each of the quarters presented mostly due to an increase in depreciation for internally developed software.
Quarterly Changes in Key Business Metrics and Non-GAAP Measures
Active customers
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||
| Active customers (in thousands) | 1,140 | 1,525 | 1,692 | 1,891 | 2,136 | 2,397 | |||||||||||||||||||||||||||||
Active customers increased sequentially in each of the quarters presented primarily due to an increase in new customers driven by investments in marketing spend, our seamless user experience, network expansion, and the accelerated growth in the adoption of digital remittances as a result of the COVID-19 pandemic, especially during the three months ended June 30, 2020.
Send volume
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||
| Send volume (in millions) | $ | 2,448 | $ | 2,736 | $ | 3,245 | $ | 3,626 | $ | 4,273 | $ | 4,976 | |||||||||||||||||||||||
Send volume increased sequentially in each of the quarters presented primarily due to an increase in active customers, reflecting both strong new customer growth and continued engagement with our existing customer base.
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Adjusted EBITDA
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Net loss | $ | (13,096) | $ | (8,034) | $ | (2,429) | $ | (9,005) | $ | (7,770) | $ | (1,448) | |||||||||||||||||||||||
| Add: | |||||||||||||||||||||||||||||||||||
| Interest expense, net | 162 | 444 | 240 | 70 | 254 | 272 | |||||||||||||||||||||||||||||
| Provision for income taxes | 219 | 221 | 195 | 528 | 370 | 454 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 866 | 991 | 1,002 | 1,201 | 1,245 | 1,326 | |||||||||||||||||||||||||||||
| Other expense (income), net | 1,727 | (231) | 241 | (435) | (1,426) | (1,222) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | 1,235 | 1,288 | 1,329 | 1,412 | 1,522 | 2,703 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (8,887) | $ | (5,321) | $ | 578 | $ | (6,229) | $ | (5,805) | $ | 2,085 | |||||||||||||||||||||||
During the three months ended September 30, 2020 and June 30, 2021, we experienced a significant increase in our Adjusted EBITDA primarily driven by higher revenue due to an increase in active users as well as lower marketing expenses as a percentage of revenue.
Liquidity and Capital Resources
We have financed our operations and capital expenditures primarily through cash generated from operations including transaction fees and foreign exchange spreads, sales of our redeemable convertible preferred stock, and our $150.0 million Revolving Credit Facility, of which we had unused borrowing capacity of $70.0 million and $150.0 million as of December 31, 2020 and June 30, 2021, respectively. As of December 31, 2020 and June 30, 2021, our principal sources of liquidity were cash and cash equivalents of $186.7 million and $173.4 million, respectively, and funds available under the Revolving Credit Facility.
We believe that our cash, cash equivalents, and funds available under the Revolving Credit Facility will be sufficient to meet our working capital requirements for at least the next twelve months. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked securities, and the ownership of our existing stockholders would be diluted. If we raise additional financing by incurring additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that are unfavorable to equity investors. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Revolving Credit Facility
In June 2019, we entered into a Senior Secured Credit Facilities Agreement that provided access to $85.0 million in revolving borrowing that we use primarily to pre-fund transactions. In November 2020, we amended the Senior Secured Credit Facilities Agreement to increase the amount available for revolving borrowing pursuant to the
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credit agreement to $150.0 million (as amended, the “Revolving Credit Facility”). The Revolving Credit Facility will mature in November 2023.
Borrowings under the Revolving Credit Facility accrue interest at a floating rate per annum equal to (1) ABR defined in the Revolving Credit Facility as the rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) 3.25% and (c) the Federal Funds Effective Rate in effect for such day plus 0.50% plus (2) 1.0%. In addition, there is an unused revolving line facility fee, which accrues at a floating rate equal to 0.40% of the unused portion of the line, and is payable monthly. As of December 31, 2020 and June 30, 2021, the interest rate of the borrowings under the Revolving Credit Facility was 4.25%.
Borrowings are subject to mandatory repayment within 20 business days in an amount necessary to reduce the borrowings, in the aggregate, to an amount less than our customer funds account maintained with the lender. The Revolving Credit Facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness, pay dividends, incur encumbrances, make distributions to holders of its capital stock, make investments or engage in transactions with affiliates. Financial covenants include an adjusted quick ratio requirement that is measured on a monthly basis as well as trailing twelve month Consolidated Adjusted EBITDA, as defined in the Revolving Credit Facility, measured on a quarterly basis. We were in compliance with all financial covenants as of December 31, 2020 and June 30, 2021.
Our obligations under the Revolving Credit Facility are secured by substantially all of our and our subsidiaries’ assets, other than intellectual property. Amounts of borrowings under the Revolving Credit Facility may fluctuate depending upon transaction volumes and seasonality. As of December 31, 2020 and June 30, 2021, we had $80.0 million and zero borrowings outstanding under the Revolving Credit Facility, respectively.
Prior to the completion of this offering, we may enter into the New Revolving Credit Facility arranged by certain syndicate lenders and terminate the Revolving Credit Facility. See “Prospectus Summary—Recent Developments—Revolving Credit Facility” for additional information.
Cash Flows
The following table shows a summary of our cash flows for the periods presented:
| Year Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||||||||
| Operating activities | $ | 8,435 | $ | (114,209) | $ | (47,586) | $ | 60,276 | |||||||||||||||
| Investing activities | (7,209) | (4,370) | (2,372) | (2,252) | |||||||||||||||||||
| Financing activities | 117,017 | 122,216 | (25,981) | (72,646) | |||||||||||||||||||
Operating Activities
Our main sources of operating cash are transaction fees charged to customers and foreign exchange spreads on transactions. Our primary uses of cash from operating activities have been for advertising expenses used to attract new customers, transaction expenses that include fees paid to payment processors and disbursement partners, personnel-related expenses, technology and analytics, and other general corporate expenditures.
Net cash used in operating activities mainly consists of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization, amortization of operating lease right-of-use assets, and changes in operating assets and liabilities during each period.
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For 2019, net cash provided by operating activities was $8.4 million, which primarily consisted of net loss of $51.4 million adjusted for non-cash charges of $6.3 million and net cash inflows of $53.5 million due to changes in our operating assets and liabilities. The main drivers for the change in operating assets and liabilities were a decrease in disbursement prefunding of $17.1 million and an increase in customer liabilities of $54.2 million related to transactions processed from customers but not yet disbursed to recipients, offset by an increase in customer funds receivable of $17.4 million. The changes in these operating assets and liabilities are inline with the growth of the business and were impacted by timing and volume of funding needs and disbursements at the end of 2019.
For 2020, net cash used in operating activities was $114.2 million, which primarily consisted of our net loss of $32.6 million adjusted for non-cash charges of $9.3 million and net cash outflows of $91.0 million, due to changes in our operating assets and liabilities. The main drivers for the change in operating assets and liabilities were an increase in disbursement prefunding of $69.7 million related to funding disbursement partners for expected send volume over a long holiday weekend, an increase in customer funds receivable of $20.0 million due to an increase in volume and growth in our business and decrease of customer liabilities of $29.1 million due to timing of disbursements offset by an increase in accrued expenses and other current liabilities of $25.9 million due to timing of settlement of trade liabilities as well as increase in operating expense accruals in line with the growth of the business.
For the six months ended June 30, 2020, net cash used by operating activities was $47.6 million, which primarily consisted of changes in our operating assets and liabilities of $30.9 million, as well as a net loss of $21.1 million. The main drivers for the change in operating assets and liabilities were a decrease in customer liabilities of $27.7 million, as well as an increase in customer funds receivable of $8.3 million, both due to growth in our business and timing of cash settlements and disbursements, respectively, partially offset by an $8.2 million increase in the balance of accrued expenses and other liabilities due to the timing of the settlement of expenses in the ordinary course of business.
For the six months ended June 30, 2021, net cash provided by operating activities was $60.3 million, which primarily consisted of changes in our operating assets and liabilities of $62.7 million offset by net loss of $9.2 million. The main drivers for the change in operating assets and liabilities were a decrease in disbursement prefunding of $50.3 million due to seasonality of the business, an increase in customer liabilities of $17.4 million due to growth in our business and timing of disbursements, offset by an increase in customer receivables of $8.9 million in line with the growth in our business, and timing of cash settlement.
Investing Activities
Cash used in investing activities consists of purchases of property and equipment and capitalization of internal-use software.
Net cash used in investing activities for 2019 was $7.2 million, which was primarily related to purchases of property and equipment to support the increase in headcount, expansion and improvement of our facilities, and capitalized internal use software costs.
Net cash used in investing activities for 2020 was $4.4 million, which was primarily related to purchases of property and equipment to support the increase in headcount, expansion and improvement of our facilities, and capitalized internal use software costs.
Net cash used in investing activities was $2.3 million for the six months ended June 30, 2021 and 2020, primarily related to purchases of property and equipment to support the increase in headcount, and capitalization of internal use software costs.
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Financing Activities
Cash provided by our financing activities consists primarily of proceeds from the issuance of our redeemable convertible preferred stock, proceeds from our Revolving Credit Facility borrowings, and proceeds from the exercise of stock options. Cash used in financing activities consists primarily of repayments of our Revolving Credit Facility borrowings, along with repurchases and retirement of common stock and redeemable convertible preferred stock in connection with a tender offer.
Net cash provided by financing activities for 2019 of $117.0 million was primarily driven by $129.8 million from the issuance of Series E redeemable convertible preferred stock, net of issuance costs and $9.0 million of net proceeds from our Revolving Credit Facility borrowings to meet our working capital requirements, offset by $2.8 million of cash used to repay our term loan, and further offset by $20.0 million cash used for the repurchase and retirement of common and redeemable convertible preferred stock in connection with a tender offer.
Net cash provided by financing activities for 2020 of $122.2 million was primarily driven by $84.8 million from the issuance of Series F redeemable convertible preferred stock, net of issuance costs and $35.0 million of proceeds from our Revolving Credit Facility borrowings to meet our working capital needs.
Net cash used in financing activities for the six months ended June 30, 2020 of $26.0 million was primarily driven by repayments of our Revolving Credit Facility borrowings of $27.0 million, partially offset by proceeds from exercise of stock option of $1.0 million.
Net cash used in financing activities for the six months ended June 30, 2021 of $72.6 million was primarily driven by repayments of our Revolving Credit Facility borrowings of $80.0 million, partially offset by proceeds from exercise of stock options of $4.4 million along with issuance of Series F redeemable convertible preferred stock, net of issuance costs, of $3.0 million.
Contractual Obligations and Commitments
Our principal commitments consist of operating lease commitments, purchase commitments and standby letters of credit. The following table summarizes our contractual obligations as of December 31, 2020 (in thousands):
| Payments Due By | |||||||||||||||||||||||||||||
| Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||||||||||||
| Operating lease commitments | $ | 7,331 | $ | 3,278 | $ | 3,585 | $ | 468 | $ | — | |||||||||||||||||||
| Purchase commitments | 546 | 546 | — | — | — | ||||||||||||||||||||||||
| Standby letters of credit | 14,103 | 5,209 | 8,894 | — | — | ||||||||||||||||||||||||
| Total | $ | 21,980 | $ | 9,033 | $ | 12,479 | $ | 468 | $ | — | |||||||||||||||||||
There have been no material changes to our contractual obligations through June 30, 2021.
Off-Balance Sheet Arrangements
As of December 31, 2020 and June 30, 2021, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as foreign currency exchange rates and credit risk. Management establishes and oversees the implementation of policies governing our investing, funding, and foreign currency activities in order to mitigate market risks. We monitor risk exposures on an ongoing basis.
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Credit Risk
We are exposed to credit risk relating to our pay-in payment providers if in the course of a transaction, we were to disburse funds to the recipient but the pay-in payment provider does not deliver our customer’s funds to us (for example, due to their illiquidity). We mitigate this credit risk by engaging with reputable pay-in payment providers and entering into written agreements with pay-in providers allowing for legal recourse. We are also exposed to credit risk relating to many of our disbursement partners when we pre-fund or remit funds in advance of having confirmed funds collected from our customers, if our disbursement partners fail to disburse funds according to our instructions (for example, due to their insufficient capital). We mitigate these credit exposures by engaging with reputable disbursement partners and performing a credit review before onboarding each disbursement partner. We also periodically review credit ratings or, if unavailable, other financial documentation, of both our pay-in payment providers and disbursement partners. We have not experienced significant losses during the periods presented.
Foreign Currency Exchange Rate Risk
Given the nature of our business, we are exposed to foreign exchange rate risk in a number of ways. Our principal exposure to foreign exchange rate risk includes:
•Exposure to foreign currency exchange risk on our cross-border payments if exchange rates fluctuate between initiation of the transaction and transaction disbursement to the recipient. We disburse transactions in multiple foreign currencies, including most notably the Indian rupee, the Mexican peso, and the Philippine peso. In the vast majority of cases, the recipient disbursement occurs within a day of sending, which mitigates foreign currency exchange risk. To enable disbursement in the receive currency, we prefund many disbursement partners one to two business days in advance based on expected send volume. Foreign exchange rate risk due to differences between the timing of transaction initiation and payment varies based on the day of the week and the bank holiday schedule; for example, disbursement prefunding is typically largest before long weekends.
•While the majority of our revenue and expenses are denominated in the U.S. dollar, certain of our international operations are conducted in foreign currencies, a significant portion of which occur in Canada, the United Kingdom, Australia and the Philippines. Changes in the relative value of the U.S. dollar to other currencies may affect revenue and other operating results as expressed in U.S. dollars.
As of December 31, 2019 and December 31, 2020, a hypothetical uniform 10% strengthening or weakening in the value of the U.S. dollar relative to all other currencies in which our net loss is generated, would have resulted in a decrease or increase to the fair value of our assets and liabilities denominated in currencies other than the subsidiaries’ functional currencies of approximately $1.9 million and $9.7 million, respectively, based on our unhedged exposure to foreign currency at that date. There are inherent limitations in this sensitivity analysis, primarily due to the following assumptions: (1) foreign exchange rate movements are linear and instantaneous, (2) exposure is static, and (3) customer transaction behavior due to currency rate changes is static. As a result, the analysis is unable to reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect our results from operations. For example, the impact on December 31, 2020 as shown in this sensitivity analysis is higher than normal, as the disbursement prefunding balance on December 31, 2020 was $102.0 million due to the need to fund transactions to be paid out over the upcoming long holiday weekend. Both the disbursement prefunding balance and the customer funds liability balance (and resulting net impact to our net currency position) may be highly variable day to day. In addition, changes in foreign exchange rates may impact customer behavior by altering the timing or volume of transactions sent through our platform. For example, an increase in the value of a send currency against a receive currency may accelerate the timing or amount of remittances.
To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges between our current assets and current liabilities in similarly denominated foreign currencies. At this time, we do not enter
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into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. We may do so in the future, but it is difficult to predict the impact hedging activities would have on our operating results.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this prospectus, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.
Revenue Recognition
Our revenue is generated on transaction fees charged to customers and foreign exchange spreads between the foreign exchange rate offered to customers and the foreign exchange rate on the Company's currency purchases. Revenue is recognized when control of these services is transferred to our customers, which is the time the funds have been delivered to the intended recipient in an amount that reflects the consideration we expect to be entitled to in exchange for services provided. We account for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, which includes the following steps:
(i)identification of the contract with a customer;
(ii)identification of the performance obligations in the contract;
(iii)determination of the transaction price;
(iv)allocation of the transaction price to the performance obligations in the contract; and
(v)recognition of revenue when, or as, we satisfy a performance obligation.
Revenue is derived from each transaction and varies based on the funding method chosen by the customer, the size of the transaction, the currency to be ultimately disbursed, the rate at which the currency was purchased, and the countries to which the funds are transferred. Our contract with customers can be terminated by the customer without a termination penalty up until the time the funds have been delivered to the intended recipient. Therefore, our contracts are defined at the transaction level and do not extend beyond the service already provided.
Our service comprises a single performance obligation to complete transactions for our customers. Using compliance and risk assessment tools, we perform a transaction risk assessment on individual transactions to determine whether a transaction should be accepted. When we accept a transaction and process the designated payment method of the customer, we become obligated to our customer to complete the payment transaction.
We recognize transaction revenue on a gross basis as we are the principal for fulfilling payment transactions. As the principal to the transaction, we control the service of completing payments on our payment platform. We bear primary responsibility for the fulfillment of the payment service, are the merchant of record, contract directly with our customers, control the product specifications, and define the value proposition of our services. We are also responsible for providing customer support. Further, we have full discretion over determining the fee charged to our customers, which is independent of the cost we incur in instances where we may utilize payment processors or other
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financial institutions to perform services on our behalf. These fees paid to payment processors and other financial institutions are recognized as transaction expenses in the consolidated statements of operations. We do not have any deferred contract acquisition costs.
Stock-Based Compensation
We account for stock-based compensation expense by calculating the estimated fair value of each employee and nonemployee award at the grant date or modification date by applying the Black-Scholes option pricing model or the model. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are recognized in the period in which they occur.
The model utilizes the estimated value of our underlying common stock at the measurement date based on the following assumptions:
Expected term. We calculate the expected term based on the average period the options are expected to remain outstanding using the simplified method, generally calculated as the midpoint of the requisite service period and the contractual term of the award.
Expected volatility. We base our estimate of expected volatility on the historical volatility of comparable companies from a representative peer group selected based on industry, financial, and market capitalization data.
Risk-free interest rate. The risk-free interest rate used in the model is based on the implied yield currently available for the U.S. Treasury securities at maturity with an equivalent term.
Expected dividend yield. Our expected dividend yield is zero as we have never declared nor paid any dividends and do not currently expect to do so in the future.
Common Stock Valuation
The fair values of the shares of common stock underlying our stock-based awards were determined by our board of directors. The values of stock-based awards granted were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
The assumptions we used in the valuation model are based on future expectations combined with management judgment. In the absence of a public trading market for our common stock, our board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock for financial reporting purposes as of the grant date of each stock option award, including the following factors:
•contemporaneous valuations of our common stock performed by unrelated third-party specialists;
•secondary sales;
•the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock;
•the lack of marketability of our common stock;
•our actual operating results and financial performance;
•current business projections;
•hiring of key personnel and the experience of management;
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•our history and the introduction of new services;
•our stage of development;
•the likelihood and potential timing of achieving a liquidity event, such as an initial public offering or a merger or acquisition, given prevailing market conditions;
•liquidity of stock-based awards involving securities in a private company;
•the market performance of comparable publicly traded companies; and
•United States and global capital market conditions.
In valuing our common stock, the fair value of our business was determined using the market approach with input from management. The market approach estimates value based on a comparison of us to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to our financial forecasts to estimate the value of the subject company.
In December 2020, we started using a hybrid method utilizing a combination of the option pricing method or OPM and the probability-weighted expected return method or PWERM, to estimate the value of our common stock. Under the PWERM, the value of a company’s particular equity class is estimated based upon an analysis of future values for the entire enterprise assuming various future outcomes. Share value is based upon the probability-weighted present value of these expected outcomes, as well as the rights of each class of preferred and common stock. We also applied a discount for lack of marketability to account for a lack of access to an active public market.
In addition, we considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange and assigned the transactions an appropriate weighting in the valuation of our common stock. Factors considered include the number of different buyers and sellers, transaction volume, frequency, and timing relative to the valuation date.
In some cases, we considered the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation determined pursuant to one of the methods described above or a straight-line interpolation between the two valuation dates. This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.
Application of these approaches and methodologies involves the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable public companies, and the probability of and timing associated with possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.
For valuations after the closing of this offering, our board of directors will determine the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the date of grant. Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions.
Recently Issued Accounting Pronouncements
See Note 2 of the notes to our consolidated financial statements included elsewhere in this prospectus for information on recently issued accounting pronouncements.
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Internal Control Over Financial Reporting
In the course of preparing the financial statements that are included in this prospectus, our management has determined that we have material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
The material weaknesses are as follows: we did not design and maintain effective controls over certain IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (1) program change management controls for certain financial systems to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; and (2) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to certain financial systems, programs, and data to appropriate Company personnel.
This material weakness contributed to the following material weakness: we did not design and maintain effective controls over segregation of duties of journal entries. More specifically, certain personnel had the ability to prepare and post journal entries without an independent review performed by someone without this ability.
These material weaknesses did not result in a misstatement to our annual consolidated financial statements as of and for the year ended December 31, 2020. However, each of the material weaknesses described above, individually and aggregated, could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
As of the date of this prospectus, these remain material weaknesses and we are in the process of remediating these material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions: (1) developing enhanced risk assessment procedures and monitoring controls related to changes in financial systems; (2) implementing comprehensive access control protocols to implement restrictions on user and privileged access to the affected applications; (3) implementing controls to review and monitor user access; and (4) establishing additional controls over the preparation and review of journal entries.
We have concluded that these material weaknesses in our internal control over financial reporting occurred because, prior to this offering, we were a private company and did not have the necessary business processes, and related internal controls necessary to satisfy the accounting and financial reporting requirements of a public company.
In accordance with the provisions of the JOBS Act, we and our independent registered public accounting firm were not required to, and did not, perform an evaluation of our internal control over financial reporting as of December 31, 2020 nor any period subsequent in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act after the completion of this offering.
JOBS Act
We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private
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companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We expect to use the extended transition period for any new or revised accounting standards during the period in which we remain an emerging growth company.
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BUSINESS
Our Vision
Transform the lives of immigrants and their families by providing the most trusted financial services on the planet.
Our Beginning
The inspiration behind Remitly came when Matt, our co-founder and Chief Executive Officer, was working in Kenya. There, Matt realized how reliant some families were on the money sent from their loved ones working abroad. He also saw how difficult it was to send and receive money overseas – the process was painful, opaque, and expensive. This first-hand look at cross-border remittances was an eye-opener, and Matt became convinced there was a better way.
In 2011, Josh and Shivaas, our two other co-founders, joined Matt to start Remitly and began working on the problem immediately. Their goal was to make a difference for immigrant communities by using technology to initially disrupt traditional cross-border remittances.
Ten Years Later
Today, Remitly is a leading digital financial services provider for immigrants and their families in over 135 countries around the world. Looking back over the last ten years, we have remained committed to our initial goal: to help millions of immigrants send money home in a safe, reliable, and transparent manner. The long-term, trusted relationships we foster with our customers have enabled us to expand our core cross-border remittance product to over 1,700 corridors worldwide and extend our offering to a broader suite of financial services.
Our customers are at the heart of everything we do. They are primarily immigrants from developing countries who have moved away from their families to seek new opportunities and build a better life for themselves and their loved ones. While our customers may be physically distant, they remain closely connected with and deeply committed to their family and friends back home – often sending money home multiple times per month. Through their individual experiences, they help us define how we design and build best-in-class services. Our relentless focus on our customers underpins our commitment to do everything in our power to ensure their hard-earned money reaches their families back home.
Our Opportunity
Cross-border remittance and banking are two of the largest financial services markets in the world. The cross-border remittance market alone is estimated to be approximately $1.5 trillion in total migrant remittance inflow volume in 2020 (including both formal and informal person-to-person channels) and generates approximately $40 billion in transaction fees globally. The scale of this industry is an indicator of the essential role remittance plays in our economy and society.
However, the traditional approach has been challenged by both the lack of innovation and financial inclusivity. Dominated by banks, operators of brick-and-mortar locations, and informal channels, the players in these markets typically rely on disparate legacy systems and processes. This results in a poor customer experience and additional operating costs that are passed down to the customer. When technology is used, these players typically utilize solutions that may not be scalable, integrated, or built to address cultural and local market requirements of the diverse immigrant communities that they serve.
Today, there are over 280 million immigrants world-wide who may be excluded from fair access to everyday financial services used to build wealth and financial security. For them, sending money internationally is often unreliable, inconvenient, and expensive. The experience can also be daunting – they risk having their identity stolen, losing their money or having no way to ask a service question at a moment in need. Additional financial services,
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even when available to them, such as savings, credit, investments, and insurance products, often come with high fees, and can be deceptive.
What Sets Us Apart
Our core proposition is to bring trust, reliability, and a fair and transparent price to cross-border remittances and broader financial services.
To deliver our proposition, we have a differentiated approach that aligns with the specific needs and interests of our customers and solves the problems immigrant communities often face in making remittances. There are four core elements to our differentiated approach:
•Providing a Simple and Reliable Way of Sending Money with Our Mobile-Centric Suite of Products. On June 30, 2021, over 85% of our customers engaged with Remitly on their mobile phones, shifting what traditionally required waiting in line to speak with an agent to the palm of their hands. Also as of June 30, 2021, our mobile app had a 4.9 iOS App Store rating with more than 450,000 reviewers and a 4.8 Android Google Play rating with more than 170,000 reviewers. We have achieved this level of engagement and these high ratings by designing mobile-centric products that make the customer experience simple and convenient and give our customers complete peace of mind.
Our mobile app for cross-border remittances provides an easy-to-use, end-to-end process. From the moment a customer connects their banking information to our app, they can send money home in minutes with just five taps for repeat transactions. Our customers and their families can also track the status of their transactions in real time. This mobile-centric experience enables us to engage beyond the initial transaction, generating strong repeat usage and high customer loyalty. In 2020, we extended our offering with the addition of Passbook, our app-based banking service developed in partnership with Sunrise.
•Conveniently Putting Money Safely in the Hands of Our Customers’ Families, Wherever They Are, by Relying on Our Global Network. Our global network of funding and disbursement partnerships enables us to complete money transfers in over 1,700 corridors without the need to deploy local operations in each country. We are able to do this while complying with global and local licensing and regulatory requirements.
We have partner relationships with global banks and leading payment providers to give our customers an array of payment (or pay-in) options, including with a bank account, card-based payments and alternative payment methods. Our disbursement network provides our customers with various digital and traditional delivery methods and enables us to send (or pay-out) funds within minutes to more than 3.5 billion bank accounts, over 630 million mobile wallets, and over 355,000 cash pickup locations. These partner relationships help drive a better customer experience, including faster transfers, higher acceptance rates, and enhanced reliability.
In 2020, we began serving business customers with the launch of Remitly For Developers, our remittance-as-a-service offering that strategically leverages our custom-built global network and compliance and regulatory infrastructure.
•Creating Trusted and Personalized Experiences with Our Localization Expertise at Scale. We believe our expertise in localizing our marketing, products, and customer support at scale is a key differentiator. For example, we tailor our customer experience with 14 native languages, and we provide peace of mind with our global customer support team. Additionally, for disbursement of funds, we partner with local brands that are among the most trusted and recognized by our customers and their families.
•Using Our Data-Driven Approach to Better Serve Our Customers and Provide More Value. We have a data-driven approach to how we grow our business, prioritize our investments, and manage our operations. Because our customers initiate transfers digitally, we capture and leverage a body of
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transaction-related data that provides insight into customer behavior and customer experience. This data and the analytics we perform inform our marketing investments and product development prioritization. In addition, we leverage our data platform and proprietary models to manage pricing, treasury, risk, and customer support.
Our Technology Platform is at the Core of Everything We Do
Our technology platform was purpose-built to power our mobile-centric suite of products, connect our global network, localize our marketing, products and experiences, and drive our data-driven approach.
Given the scale of our business and complexity of digital cross-border payments, our technology platform has broad and complex capabilities and, together with our data, gives us a unique advantage in understanding our customers. Our technology platform is comprised of the following:
•Marketing technology stack that enables our marketing team to efficiently operate and improve the quality of our customer experiences by supporting our localization strategies and efficiently capturing and analyzing data to ensure maximum long-term return on our marketing investments;
•Core transaction engine that underpins the entire transaction lifecycle from pricing and FX, to funding, processing, and, ultimately, to disbursement;
•Customer experience engine with corridor-specific user journeys and multilingual self-service or real-time support;
•Disbursement system for partner integrations that support a diverse set of delivery methods in over 115 countries; and
•Multi-layered machine learning and data-driven fraud and risk management capabilities (KYC, anti-money laundering, etc.), in compliance with highly complex and continuously evolving global and local regulations.
We Benefit from a Powerful Flywheel
As we grow our customer base and complete more transactions, we collect more data. This data enables us to refine our marketing strategy, improve the customer experience, and accelerate our pace of innovation including introducing new services to our customers, or the recipient. Having a broader suite of services attracts more customers and enhances the experience, which could drive more transactions to Remitly and fuel further compounding organic growth.
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We are in the early stages of capturing our addressable market opportunity. Our send volume of approximately $16.1 billion for the twelve months ended June 30, 2021 represented approximately 1% of the $1.5 trillion in estimated total migrant remittance inflow volume in 2020 (including both formal and informal person-to-person channels) and approximately 3% of our $540 billion core serviceable available market of formal remittance flows to low- and middle-income countries. We see a significant opportunity to grow our customer base, expand into new corridors, and continue extending our product offering into broader financial services. We believe the first player to reach significant scale with a trusted, mobile-first approach will have a profound brand, data, product, and cost advantage to take disproportionate market share.
While we are just getting started, we are proud of the scale we have achieved to date. In 2020 our customers completed approximately 31 million remittance transactions using Remitly. A majority of our active customers send money for non-discretionary needs multiple times per month, providing strong customer engagement and a reoccurring revenue stream with high visibility and predictability. We believe our customers consistently return to Remitly and use our services given our relentless focus on fostering trusted relationships from day one. The combination of our low acquisition costs, overall payback period of approximately 10 months, and high repeat transactions leads to attractive customer economics. For the customers acquired during the year ended December 31, 2019, the five-year LTV/CAC ratio was greater than 6.0x.
The chart below shows annual revenue contributions from customer cohorts acquired during a particular year ended December 31, and includes the revenue associated with those cohorts for each year thereafter. A customer is included in a particular cohort based on the year in which that customer first completes a transaction with us. The first year of each annual cohort is the smallest bar shown, as we add new customers throughout the year. As a result, revenue in the first full calendar year for an annual cohort on average grows more than 160% compared to the acquisition year. In subsequent years, cohorts typically retain over 90% of the revenue generated in the preceding year. We believe that this analysis supports our strategy of making the initial investments in order to build long-
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term, trusted customer relationships, illustrates that our products and services continue to provide value to our customers on an ongoing basis, and demonstrates our ability to grow our business over time.
For the fiscal years ended December 31, 2019 and 2020, we generated revenue of $126.6 million and $257.0 million, respectively, representing year-over-year growth of approximately 103%. We incurred net losses of $51.4 million and $32.6 million, respectively, for those same years. For the six months ended June 30, 2020 and 2021, we generated revenue of $105.1 million and $202.1 million, respectively, representing year-over-year growth of approximately 92%. We incurred net losses of $21.1 million and $9.2 million, respectively, for those same periods.
Our Industry and Key Secular Trends In Our Favor
The personal financial services industry is one of the oldest, largest, and most critical markets in the world, touching everyone across the globe, and providing a means for buying, selling, saving, investing, and more. Until recently, the industry had experienced little innovation, and it continues to suffer from significant gaps in inclusion, leaving potentially millions of immigrants on the outside of the full protections and advantages of the formal financial system. Now with the rise of modern mobile technologies and the digitization of consumer products, we believe a fundamental shift is underway in how financial services are built for, available to, and accessed by consumers. Crucially, these services are able to offer inclusion to immigrants and others that previously were not welcomed by the formal financial system.
There are a number of important secular megatrends and market dynamics that are supporting our growth:
•The global immigrant community is large, growing and critically important. Currently, there are more than 280 million immigrants around the world, which has grown dramatically since 2000 when there were less than 180 million. One of the primary reasons people choose to emigrate is to pursue economic opportunities that will improve the lives and financial well-being of themselves and their families. This movement of people to higher income countries is fundamental to global economic development. For immigrants working and living abroad, remittances can be a critical lifeline for and a bridge to their families.
•Global money movement is complex. The cross-border remittance market is highly complex with a fragmented ecosystem of providers and disparate technologies, leading to significant inefficiency. In each jurisdiction, there are unique risk, compliance, and regulatory requirements to navigate and comply with. Global remittance networks are additionally required to operate at hyper-local levels on both the sender and recipient sides, with consumers demanding an array of pay-in and pay-out alternatives in both physical and
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digital formats. Disbursements and last mile delivery of funds require vast, sophisticated networks of tightly-integrated local partnerships.
•Legacy solutions are inadequate, inefficient, and inconvenient. Today the majority of cross-border money transfers are serviced by traditional offline channels, including banks and informal person-to-person transfer services. The large industry players primarily service senders who fund with cash, which requires an extensive network of brick-and-mortar locations and originating agents, and similarly vast infrastructure in receiving locations. This antiquated model has been plagued by the following problems:
◦Inconvenient offline experience, including limited store hours, long wait times, manual forms and sometimes unsafe locations, on both the send and receive sides;
◦Lack of transparency in transaction fees and exchange rates;
◦High transaction fees, which directly impact how much of the sent remittance is received;
◦Slow and delayed processes, especially for offline transactions in which the sender has to message the recipient with all of the details necessary for receiving the funds;
◦Poor customer service;
◦Lack of reliability, visibility and control; and
◦Fraud, data theft, and immigration enforcement targeting.
Traditional players have been slow to adapt to rapid technological shifts and changing consumer preferences for digital solutions and increased disbursement options, in part because they are saddled with fixed infrastructures that give them economic incentive not to adapt, creating an opportunity for new, disruptive market entrants.
•Digital offerings proliferate, resulting in better customer propositions. Digitization of financial products is increasing rapidly. The proliferation of smartphones globally provides financial service companies with a new point of connectivity to build a superior digital experience for their users. By offering users the freedom to instantly access financial services anytime and anywhere, digital solutions improve convenience and are often faster and less expensive than traditional services. Once these services shift online and customers experience the convenience, control, transparency and cost savings, they do not go back to legacy methods of sending money home. In addition, the use and acceptance of cryptocurrency is beginning to span multiple financial functions including as a medium of exchange for sending money around the world.
•Imperative to drive financial inclusion. Immigrants in many cases are not given equal access to appropriate, affordable, and timely financial services, including savings, credit, investment, and insurance products, among others. Inherent barriers to financial inclusion can include the lack of social security numbers, disparate treatment based on immigration status, inability to build credit histories, and the desire or necessity to avoid scrutiny due to fears of immigration enforcement. This unbanked or underbanked population is put at risk of having to forego financial services or potentially having to pay predatory rates in order to transact in ways that most people take for granted. Broader financial inclusion is critical for providing greater economic security and is also linked with stronger and more sustainable economic growth and development. Access to a wide range of financial products and services which are affordable, timely, and adequate is the core of financial inclusion.
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Providing a Simple and Reliable Way of Sending Money on Your Phone with Our Mobile-Centric Suite of Products
Our journey began in digital cross-border remittances, and we have evolved to develop a portfolio of broader financial services. We designed and built a mobile-centric suite of products to address our customers’ discrete financial services needs, many of which are not met by legacy institutions.
Digital Cross-Border Remittances
We provide a digital cross-border remittance product that is accessible via our mobile app or the web—this is consistent with our philosophy to always meet our customers where they are. On June 30, 2021, over 85% of our customers engaged with us via our mobile app, shifting what traditionally required waiting in line to speak with an agent to the palm of their hands. Also as of June 30, 2021, our mobile app had a 4.9 iOS App Store rating with more than 450,000 reviewers and a 4.8 Android Google Play rating with more than 170,000 reviewers. Providing our customers with a convenient, easy, and safe mobile experience underpins our approach to product development, marketing, and customer success.
Seamless User Experience
We strive to make every interaction on our mobile app intuitive. We optimize for the entire customer experience by reducing friction from a customer’s first transaction on our platform to their most recent as a loyal Remitly customer.
New customers who have their information at hand can initiate a transaction in just minutes after setting up their account and adding their recipient’s information. Below are the key steps of a transaction from account log-in to transaction confirmation.
•Account set-up and log-in. Customers can quickly set up an account on our app by entering their relevant personal information and documentation in a way that is designed to be secure. They then link their choice of payment methods including their bank account, credit card or debit card, and certain alternative payment methods. We also employ biometric login to reduce ongoing password friction. Our customers enjoy increased security and a faster way to access their transactions.
•Choose the recipient. Our customers can send to an unlimited number of recipients, and adding new ones is easy. To add a new recipient, the customer simply fills in the key information necessary for them to
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receive funds. The recipient's details only need to be entered one time making repeat transactions quick and easy.
•Speed of delivery. In the vast majority of our customers’ transactions, after selecting their recipient, they have the flexibility to select the delivery speed, send amount, and payment method within the product.
•Delivery method. Our global network of partners allows us to offer a rich selection of digital delivery methods, including bank deposits and mobile wallets as well as traditional delivery methods such as cash pickup, where a recipient can conveniently collect the money sent at a nearby location using a picture ID and a transaction reference number. We also offer the convenience of home delivery in certain markets to further extend the accessibility of our customers’ recipients.
•Transaction confirmation. We provide peace of mind with our Perfect Delivery Promise which includes a projection of the exact date and time for delivery of funds. In addition, we believe we are the only scaled provider in the remittance market to provide a money back guarantee on timely delivery, a feature we are incredibly proud to stand behind. Both our customer and the recipient receive notifications at key stages of the transaction process including initiation and completion. Our customers also receive a transparent breakdown of their transaction costs.
Benefits for Our Customers
•Trusted and intuitive digital experience. Our digitally-native app is both easy to use and designed with security in mind. Customer onboarding and repeat logins are quick and easy, and we strive to keep customer data secure across log-in and transactions by leveraging multiple security layers. Our intuitive push notifications deliver real-time status updates and important reminders, keeping customers informed while providing peace of mind throughout the entire transaction process.
•Simple onboarding process. Our simple step-by-step onboarding flow was designed to minimize friction and ensure our customers have to enter their profile information only during their first transaction. Our electronic KYC, machine learning-based fraud scoring and payment authentication processes all take place in real-time to give our customers immediate feedback. When necessary, requests for additional information are designed to be intuitive and we offer in-app features to help automate document collection and identity verification. We also constantly evaluate and integrate new risk management tools to provide our immigrant customers with KYC and onboarding options that are tailored to their unique circumstances.
•Centralized portal for easy account management. MyRemitly is a one-stop hub for customers to manage their account and access a consolidated and detailed view of current and past transaction details. Customers can self-serve documentation requirements without contacting us. We also offer self-service amendments, giving our customers the flexibility to update recipient names, disbursement partners, etc. at any time. Additionally, we enable some customers to set up alerts when exchange rates reach their desired range, so that they can opportunistically send money at attractive rates.
•Best-in-class customer support. We offer contextual help, customized for a variety of scenarios that our customers may experience, which allows them to self-resolve issues on their own terms. Our in-app self-help center is a rich repository of information with Q&A informed by the needs of our customers over time. When live support is wanted or required, our app guides the customer through an intentional “help – chat – phone” journey. We believe that our multilingual 365x24x7 integrated in-app support combined with our agents and local partner relationships provides our customers with the quality and speed of service that we believe is unique to our customers.
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Digital Banking Services
In 2020, we launched Passbook in partnership with Sunrise, a digital banking service available through a mobile app and uniquely designed for immigrants.
Passbook promotes financial access by giving our customers a new way to store, spend and send money in a manner that is secure and compliant. With Passbook, our customers have access to banking services that don’t require them to pay account or international transaction fees, and they can personalize their Visa debit cards. With tailored KYC and identity verification processes using our existing technology platform, they can sign up for a Passbook account in under ten minutes.
Since the launch of Passbook in February 2020, we have seen encouraging early adoption and we continue to build out our suite of offerings. While Passbook is still in early stages, we believe that, over time, we will be able to utilize the data and insights gathered from our remittance customers to tailor meaningful financial services for the needs of our immigrant customers, which will give us a broad access to shared revenue and fees from the bank partners to whom we market these financial services. We expect this will broaden our customers’ options for accessing financial services while also diversifying our revenue base across multiple products serving the same core customers. We also believe we will be able to drive marketing synergy with our remittance product enabling more efficient customer acquisition.
Conveniently Putting Money Safely in the Hands of Our Customers’ Families, Wherever They Are, by Relying on Our Global Network
Our global network of funding and disbursement partners is at the core of our business. Over the last decade, we have strategically expanded our network in existing corridors to provide our customers with increasing disbursement options and in new corridors as part of our expansion strategy. Our partners, including those that are among the most trusted and recognized brands around the world, create a broad and effective payment acceptance (pay-in) and payment delivery (pay-out) ecosystem for our customers:
•Payment acceptance. We have relationships with more than 15 top tier banks including Barclays, Chase, HSBC, and Wells Fargo, and leading global payment processors including a direct relationship with Visa. These relationships provide our customers an array of payment (or pay-in) options to fund remittances with a bank account, card-based payment, or alternative payment method.
We can accept and settle transfers from hundreds of millions of consumer bank accounts as well as Visa and MasterCard credit and debit cards in the 17 send countries we operate in today. As a digital service, we do not have sending agents who accept cash. We, in turn, do not incur costs or commissions associated with physical agent-based sending and funding.
•Payment delivery. We have access to over 3,500 global disbursement partners including major banks, cash pick-up and mobile wallet partners. These relationships provide our customers with choice of delivery and enable us to send funds within minutes, or even seconds, to more than 3.5 billion bank accounts, over 630 million mobile wallets and alternative payment methods, and over 355,000 cash pickup locations (including retail outlets and banks).
We select our disbursement partners based on our recipients’ preferences, quality of service, brand recognition, and co-branding opportunities. Our disbursement partners make us a trusted source of remittances because our customers are typically already familiar with their chosen disbursement partner and recipients feel comfortable receiving money where they regularly bank or shop. In addition, we only select disbursement partners that meet or exceed: (1) our geographic coverage goals in the markets in which they operate, (2) our robust compliance and regulatory requirements, and (3) our specific operating metrics such as credit worthiness and error rates.
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Certain of our funding and disbursement partnerships are multi-faceted. For example, a bank can be a payment processor who helps Remitly facilitate payment acceptance, a settlement bank where Remitly deposits customer funds for payment delivery, or a corporate bank providing certain services such as treasury and cash management. In addition, we have redundancies built into our global network for our various partnerships
The map below illustrates the breadth of our global presence. Today, our customers primarily send money from the United States, Canada, the United Kingdom, other countries in Europe, and Australia. Our customers’ recipients are located in over 115 countries around the world; our largest receive countries include India, the Philippines, and Mexico.
Advantages of Our Global Network
The quality and diversity of our global network result in the following key advantages:
•Global reach. We believe the extensive reach and breadth of our global network provides us with a competitive advantage. Today, our network enables us to complete cross-border payments in over 1,700 corridors from 17 send countries to over 115 receive countries, in over 75 currencies.
•Local expertise. We designed our global network to leverage local relationships for access into some of the hardest-to-reach markets around the world and to serve the unique financial needs of diverse immigrant communities. We help our customers send money and their families receive money in the manner they prefer and to which they are individually or culturally accustomed.
•Control over the transaction lifecycle. Our ability to manage each transaction from pay-in to pay-out is made possible with our direct integrations to 100 partners around the globe. These direct integrations help drive faster availability of funds to our customers’ families, with more than 75% of total transactions in 2020 completed in less than one hour. Additionally, we have tools to reduce transaction declines or exceptions which help enhance conversion and facilitate faster processing. We can also optimize transaction routing for cost and risk and compliance management.
•Security focused and compliant. Our AI and machine learning-driven fraud detection and risk management engine is a foundational element that underpins our global network. We apply KYC and anti-money laundering standards that are tailored to meet local requirements of the jurisdictions where we operate with a focus on favoring options that reduce friction for immigrant populations. In addition, we
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leverage our in-depth knowledge of the markets in which we operate to execute tactically while complying with local licensing, compliance and regulatory requirements.
Remitly for Developers
In 2020, we began serving business customers with the launch of Remitly for Developers, our remittance-as-a-service offering that strategically leverages our custom-built global network and compliance and regulatory infrastructure. With Remitly for Developers, businesses and their developers can integrate this network and infrastructure into their existing applications and websites through our APIs. This enables them to offer digital cross-border remittances to their customers and introduce new digital banking solutions in emerging markets. For example, a business may utilize our Remitly for Developers service to send or receive payments utilizing the payment rails established by Remitly. We believe that Remitly for Developers will increase volume, transactions and revenue generated from the same network of global payment and disbursement partners developed to serve our core remittances business and that fees and FX markups paid by our customers for utilizing our network will lower the per transaction expense on such network (without additional marketing expense).
Creating Trusted and Personalized Experiences with Our Localization Expertise at Scale
What Does Localization Mean to Us?
Localization can mean many things. To us, it means speaking with our customers in their preferred language, reaching them through the media channels they frequent, and being culturally relevant throughout their journey.
While our business is global, we recognize the importance of a culturally relevant experience being delivered to our customers and their families in over 135 countries we serve. We strive to deliver marketing, product, and support experiences that connect with them in meaningful ways.
Why Does Localization Expertise Matter?
Our early success can, in part, be attributed to our localized approach within our initial corridors. As we have grown to over 1,700 corridors, we have found the appropriate balance of localization and scale by combining our customer-centric culture, investments in technology platforms, and data-driven decision making.
Our localization approach enables us to provide customers with a personalized experience that drives peace of mind – this experience and our focus on immigrant communities differentiates our brand. For the 14 languages we support in our marketing and product, we work to ensure that the customer experience – including messaging, promotions, payment methods, pricing, self-help content and more – is consistent and in their preferred language.
How Do We Localize At Scale?
Localized Marketing at Scale
We achieve localized marketing at scale through a blend of deep cultural insights, consistent branding, rigorous analytics, and sophisticated channel management. We do this efficiently through our proprietary marketing technology stack and multi-faceted targeting techniques. As a mobile-centric business, we have the ability to leverage native app capabilities such as language preference, geolocation, and communication preferences to tailor the customer experience and fine-tune programs like promotions, referral campaigns, and activation campaigns.
We continue to raise awareness of our brand and products through investments in brand and performance marketing, and organically through word-of-mouth referrals. Below are examples of our marketing content.
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Brand Marketing
Our brand promise is to build “peace of mind” into everything we do. We believe our voice and tone is authentic and approachable. We strive to position Remitly as a human-focused brand in a category of transaction-focused competitors. While our brand is consistently delivered across all of our markets, we develop modular templates that enable us to customize language, imagery and symbols, and currencies to ensure local relevance. For example, we know that English works best for our customers sending to India but not for our customers sending to Latin America (we use Spanish or Portuguese). Our messaging leverages a combination of native-first language authoring and high accuracy language transcreation. We rely on our proprietary, flexible content management system to deliver this content at scale.
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Performance Marketing
We utilize a highly-efficient, multi-channel marketing strategy that finds our customers where they live: in their communities, where they consume media, and through the referrals of people they trust. Our customers live in diverse communities and cities, mostly with large immigrant populations, and consume a combination of broad-based media (e.g., Facebook, Google) and content from their home countries. They also prefer to consume media in a mix of preferred and/or native languages.
We invest across the entire marketing funnel to ensure we drive awareness for our brand, while creating and capturing demand:
•At the top of the funnel, our Multicultural Media & Outreach team is focused on integrating our brand into targeted communities through community outreach programs, brand sponsorships, and targeted mass media such as streaming audio, local and/or TV broadcast from the receive country (e.g., The Filipino Channel, Telemicro, etc.), and connected/streaming TV. By connecting directly with immigrant communities, we learn about their specific customer pain points and expectations, and over time become a trusted brand within those communities.
•At the middle to the bottom of the funnel, digital marketing comprises the majority of our marketing investment and includes channels such as paid social, search, app campaigns, email marketing, app store optimization and more. The combination of machine-learning algorithms combined with scalable, modular creative strategies enable us to efficiently capture demand.
•We are able to further optimize customer acquisition through our custom promotions engine. We utilize promotional messaging in channels to drive customers to the most relevant of over 3,900 custom landing pages, where localized targeted offers are served to incentivize conversion. Our digital marketing program is highly scalable, enabling us to reach customers from all corridors Remitly serves.
Word-of-Mouth Referrals
Word-of-mouth is a key component to our growth and is driven by our strong customer satisfaction. We built a proprietary referral product that enables our customers to recommend Remitly to their friends and family members, with both the referrer and referee receiving promotions. Our community efforts, such as our free financial literacy classes, also drive word-of-mouth.
Localized Remittance Product at Scale
We strive to deliver an exceptional product experience for not just our customers (on the send side), but also for their families (on the receive side). For our customers, we localize the experience based on their preferred language,
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the receive country, and the specific payment options from the send country. Based on those factors, we also tailor promotional offers, delivery speeds, FX rates, payment options, and delivery method preferences. This means understanding local payment and pricing norms, as well as customer and recipient expectations, and incorporating them into our services and prices. Additionally, we have invested in innovative features such as simplified sending to a customer’s own overseas account, alerts when exchange rates are increasing, and the ability to schedule recurring transfers or send to charities for donation during times of crisis.
The illustrations below are examples of how we localize our remittance product on our app and in the app store.
Remitly App Store
Our app store listings are available in 14 native languages.
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Remitly App
When our customers enter their recipient details, the corridor selection screen dynamically displays the most popular disbursement partners for each destination.
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Remitly.com
We have over 3,900 mobile optimized landing pages that can be tailored by location, language, and promotion depending on the selected country, allowing us to surface the most resonant value proposition for each corridor while also enabling it at scale with our marketing content management system.
We have a global network of among the most trusted financial brands in our receive countries, including banks, mobile money accounts, cash pick up locations, and, in some countries, home delivery. We offer cash pick up at over 355,000 locations and can send funds to over 630 million mobile wallet accounts. Leveraging this network gives our customers and their recipients convenient and familiar options for where and how they can receive funds and our brand benefits from the trust and familiarity our customers feel for these providers.
We also invest in innovations and features to reduce friction in the recipient experience, such as cash pick-up locators and SMS or chat notifications at all points of the remittance.
Localized Customer Support at Scale
We deliver localized, and effective support and risk management to our customers around the world.
Our customer support team has a shared philosophy of protecting customers from fraud and abuse while solving customer issues with deep empathy. They are Remitly employees and the vast majority are trained in our risk systems and steeped in our customer-centric culture and values. Our team understands not only our customers but also our remittance product, systems, and processes. As a result, they are empowered and able to resolve customer issues smoothly and quickly. They deliver 24x7 local support through chat (in English, Spanish, or French) and via phone (in English or Spanish).
We have a rich self-help center in-app and on the web with solutions to most customer issues available in 14 languages. Approximately 50% of our customer service questions are handled via self-help and automation. We also serve customers via direct messaging in various social media channels (like Facebook and Twitter). In order to best
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localize our support experience, our service centers are located in certain key receive countries or countries with language capabilities that are relevant to our customers. Our in-house support teams who primarily specialize in customer protection and risk are in the Philippines, Nicaragua, and Ireland, and we have outsourced teams in several important receive countries.
Data-Driven Approach – Using Data To Better Serve Our Customers and Provide More Value
Leveraging data is at the core of how we grow our business, optimize our customer economics, and prioritize our investments. We possess a unique, rich data asset with over ten years of transaction data. We monitor metrics at each step of the customer journey and use this data to constantly improve the end-to-end customer experience.
Data-Driven Platform
We have built a data platform that fuels analytics and drives meaningful customer insights. This platform enables us to aggregate data from multiple sources, including customer interactions on our app and the entire transaction processing life cycle. In addition to a robust data platform, we have a “build-measure-iterate” mentality that further optimizes our customer experience. We test, learn and then automate insights at scale to react to changing market and customer dynamics. This enables us to optimize our marketing investment, pricing, promotions and product innovations.
Data-Driven Approach to Customer Acquisition
Establishing sustainable and attractive customer economics fuels our customer acquisition strategy. We manage our CAC to corridor-specific targets, which are based on customer lifetime value. We set our targets based on data that we collect in each corridor including market maturity and opportunity, market awareness of our brand, and the incremental CAC we are seeing in our marketing channels. As we improve customer lifetime value through product enhancements and changes to operating costs and pricing, we are able to invest more in marketing while maintaining our marketing efficiency.
Our test-and-learn strategy spans across all parts of the entire marketing funnel and all of our marketing channels. For established marketing programs, we utilize a channel-attribution methodology to inform investment decisions, incremental CAC, as well as channel mix. For our new channels, we test and evaluate creative, targeting, and promotional strategies using a rigorous analytics framework that allows us to track our learnings and ensure measurability.
Data-Driven Approach to Managing the Customer Experience
Removing friction and ensuring a smooth onboarding process are key pillars to acquiring new customers and ensuring they become loyal customers who refer others. We utilize machine learning and data science to identify areas of friction, provide fair and transparent corridor-specific pricing, and optimize our compliance process:
•Risk management. Risk management tailored to our immigrant demographic plays a central role in our onboarding process. We leverage newer KYC and diligence tools that provide less friction and sidelining of legitimate customers, who are often excluded by traditional services using less sophisticated methods. At the same time, our team continuously aims to optimize and improve our risk management platform and machine learning algorithms in order to accurately identify and stay one step ahead of bad actors, allowing our customers to feel peace of mind when using our product. The sophistication of our process also enables us to identify and cancel fraudulent transactions efficiently, and often in real-time, mitigating our exposure to fraud loss while minimizing the sidelining of our good customers.
•Pricing. We also utilize our dynamic, corridor-relevant pricing to ensure a successful customer experience and drive loyalty. We strive to set prices that deliver a great value to every single customer, while simultaneously accurately estimating our customer LTV. To achieve this, we incorporate corridor-specific
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customer behavior, competitor data, and market dynamics to manage prices through a proprietary pricing engine. Our pricing engine also utilizes machine learning algorithms to identify key pricing levers within each corridor, enabling nuanced prices at scale. This customer-first, tech-enabled, and data-driven approach to pricing allows us to quickly identify discrete customer use cases, the product features most valued by those customers, and then price them accordingly.
•Treasury. Our pricing is closely aligned with our robust treasury program, which minimizes our trading costs and mitigates currency risk, while ensuring that funds are delivered on time. The treasury program leverages a proprietary trading platform that incorporates advanced currency-level forecasting algorithms to estimate future demand and optimize our trading. The strong link between our treasury and pricing programs helps minimize the impact of currency volatility on our revenues and our customer experience.
•Customer support. While maintaining a high-level of multilingual customer support, we measure and set reduction goals for support contacts per transaction, and we analyze that data in detail to prioritize improvements to our policies and services. We also measure and continuously improve classic support metrics around quality and efficiency of digital (self-help, chatbot) and human support.
Data-Driven Approach to Customer Loyalty
We analyze our customer’s behavior from sign-up to first send to becoming a repeat customer. We manage customers by cohort including sign ups, active customers, inactive customers and lapsed customers to spot trends in behavior.
For corridors with lower performing product metrics (e.g., like order completion rate or second time transaction rate), we prioritize investments that drive better customer experience, which increases customer lifetime value and enables us to increase our marketing investment.
With actionable data informing improved engagement and retention, we see higher LTV, customer satisfaction, and organic growth rates that lead to higher marketing efficiency.
Our Technology Platform is at the Core of Everything We Do
Our technology platform powers our mobile-centric suite of products, enables us to localize our product and experiences, connects our global network, and drives our data-driven approach. Our technology platform, which includes a combination of internally developed and third-party solutions, was built to be scalable, extensible, and seamlessly integrated. Our technology unites critical front- and back-end functions into a single, vertically integrated stack. This allows us to provide a low-friction customer experience, efficiently operate the business, and maintain control over product development.
We utilize a cloud-hosted infrastructure which gives us cost and scale advantages. Everything is built with flexibility and configurability in mind, enabling our solutions to be dynamic as we continue to grow and expand into new geographies. We employ a Services Oriented Architecture to support fully decentralized, autonomous and high velocity engineering teams.
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Enables Localization at Scale. From customer acquisition through the disbursement of funds, many corridors display unique behaviors to which we tailor our technology. For example:
•Our platform enables marketing strategies to be executed with high efficiency and quality. We can intelligently tailor over 3,900 mobile-optimized landing pages by location, language, and promotion. We also test new marketing strategies and roll them out with high velocity. We use a turnkey A/B experimentation system to test different packaging, pricing, merchandising and user experiences, which enables us to learn from customer behavior and iterate.
•We can dynamically respond to a rapidly changing environment. Through our sophisticated marketing technology stack, we can set up new experimental channels in less than one week and launch new languages in less than one month.
•Once onboarded, our customers interact with our mobile app and website which are built to flexibly overlay one of our 14 local languages through automated and scalable translations.
Highly Integrated Across the Transaction Lifecycle. We deliver simplicity for customers through a robust, scalable and flexible transaction engine that seamlessly integrates various functions across the transaction lifecycle. Our highly integrated platform enables interoperability of our strategic partners’ multiple technology systems, functions and services through the entire remittance transaction from pay-in to pay-out. Key capabilities include:
•Funding. Acquires funding via batch, instant and push payment methods.
•Pricing. Using revenue optimization machine learning models and analysis, presents the exchange rate, fees, and promotional merchandising across the transaction lifecycle, from upper funnel marketing pages through the send experience.
•Transaction processing. Orchestrates all system processes and functions into a single end-to-end payment flow.
•Disbursement. Distributes funds through a diverse set of disbursement methods including bank deposit, mobile wallet, cash pickup, and home delivery. This system supports numerous integration approaches from traditional data file exchange and batch processing, to real-time push and pull APIs, all with the goal of creating a consistent and seamless customer experience regardless of disbursement method or partner integration approach.
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•Perfect Delivery Promise. Calculates the date and time of when the funds will be available to the recipient, a complex calculation done in real-time and made available to both our customer and their recipient. We provide a money back guarantee on timely delivery, a feature we are incredibly proud to stand behind.
•Enabling technology. Tightly integrates business operations processes across the customer journey to yield the best customer experience. Custom-built CRM solutions have use case specific workflows that are integrated with product delivery for seamless support at any stage of the transaction. Our treasury decision support system, supported by machine learning models, enables treasury operators to fund over 100 markets at scale ensuring a customer’s money is delivered reliably and on-time. Our custom-built ledger system enables fast and scalable reporting, including automated tracking and creation of ledger lines, losses, chargebacks / disputes, and financial-related transaction events.
Data-Driven Approach. All of our technology systems collect and manage data. We leverage this data to continuously test and iterate to optimize the customer experience and drive our various machine learning models.
•Marketing. We synthesize third-party analytics with Remitly website customer behavior to support channel-level spend optimization.
•Pricing and product. We use both internal and third-party licensed data to build and optimize our machine learning-based pricing models at scale across thousands of corridors. Using our proprietary A/B experimentation system, we execute, test, learn, and iterate cycles to improve our product offering, merchandising and customer experience.
•Fraud. We use internal data to build and optimize fraud machine learning models to detect fraudulent and illegitimate transactions. These models work in tandem with advanced user experience techniques including third-party step-up verification technologies and internally developed in-product mitigations to reduce friction while enhancing outcomes, identification and exclusion of illegitimate activity and fraud control.
•Treasury. We manage our FX inventory and risk across the globe on a daily basis through proprietary treasury decision support software that uses machine learning models that forecast demand and an integrated account management system bringing together hundreds of currency accounts.
Low-Friction Risk Mitigation.
•Advanced risk management system. The nature of our business subjects us to the ongoing risk of fraud and other illegitimate transactions, including, money laundering, scams and transactions subject to sanctions. To address these risks, we have advanced risk management and identity verification systems that both efficiently manage KYC and other compliance obligations and identify potential fraudulent transactions. Because of the efficiency of these systems we are able to maintain compliance while delivering a low-friction customer experience with low transaction loss rates.
Utilizing proprietary machine-learning algorithms and trusted third-party vendor software, our technology platform applies dynamic risk management measures by corridor that enable us to stay ahead of fraud and other types of unwanted activity. Additionally, we deliver a low-touch, risk-based KYC process including automated document upload and digital proof of account ownership. Our ongoing monitoring capability leverages multiple security layers, including third-party identity verification technologies and multi-factor authentication.
We believe our systems are scalable to meet future growth and are flexible and agile, which enable us to promptly respond to emerging fraud scenarios and changes in regulatory requirements. For example, with respect to new fraud risks, early warning systems trigger alarms when anomalous behavior appears, allowing us to shut down fraud attempts before they have an opportunity to scale. Alternatively, in the case of changing regulatory requirements, our policy engine allows us to dynamically configure KYC
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requirements. We continue to invest in our risk management capabilities including 24x7 expert human oversight to monitor transaction traffic and to spot evolving risks.
•Local and global regulatory compliance. We designed our technology platform to operate efficiently in a highly complex and changing regulatory environment.
We believe our technology and compliance expertise allows for a consistently low-friction customer experience, which new market entrants would likely find difficult to replicate. As we launch our services into new markets, we ensure that we have rigorously considered and tested compliance with local experts and regulators. In addition, we have high standards and apply a robust diligence process in selecting our global distribution partners, which allows us to leverage their local regulatory expertise.
Acquiring the U.S. federal, state and international regulatory approvals necessary to operate as a money transmitter is a time-consuming and capital-intensive process. We have developed disciplined controls and systems, powered by technology, to comply with the requirements of handling cross-border remittances. As a result, we are able to monitor money movement at every step of the process to both support our reporting obligations and keep our customers well informed of their transaction status, but also as a benefit to our customers.
Technology and Development Investment. We invest substantial time, energy, and resources to ensure we have a deep understanding of our customers’ needs, and we continually innovate to deliver value-added products and services through our platform. We therefore have significant resources dedicated to technology and development across multiple teams including product, engineering, customer research, design, analytics, compliance, marketing, and customer service. These teams are responsible for the design, development, and testing of our platform and services. We focus the majority of our investment on developing new functionality and further enhancing the usability, reliability, and performance of our platform and services.
Our Market Opportunity
We believe our addressable market is large, fragmented, underserved, and in the midst of being disrupted, while benefiting from powerful structural tailwinds. Based on estimates from the World Bank and the International Monetary Fund, the market for global money transfers was estimated to be approximately $1.5 trillion in total migrant remittance inflow volume in 2020 (including both approximately $702 billion in remittances in 2020 and $850 billion through informal channels), and has been growing at an approximately 4% CAGR over the past decade, with digital volumes significantly outpacing the rest of the market. In our core serviceable available market, remittance flows to developing countries reached $540 billion in 2020, according to the World Bank. To contextualize the size and importance of this market, according to the United Nations, global remittances are over two times larger than the amount of official development assistance (“ODA”).
As of June 30, 2021, we captured approximately 1% of the total migrant remittance inflow volume in this fragmented market. In addition, we believe we have a tremendous opportunity to significantly expand our total addressable market by leveraging our trusted brand and offer a broader set of financial services to today’s more than 280 million global immigrants and their families.
Our Long-Term Growth Strategy
Our strategy is designed to invest in our key strengths and create new opportunities that generate even greater value for our customers. The key elements of our strategy include:
•Gain share in existing corridors.
◦Grow our customer base. We plan on expanding our marketing efforts across existing corridors to increase brand awareness with customers and highlight the value of our products and services. We believe this will attract new customers to try Remitly. As we grow our customer base, we expect to
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benefit from increased operating leverage in the business and more data and insight to enhance our models.
◦Increase customer engagement and drive repeat use. The majority of our customers use our products and services multiple times per month. To further strengthen our customer relationships and brand loyalty, we will continue to enhance our products and services and develop new features to tailor and personalize our customers’ experiences. We will also continue to establish new disbursement partnerships and add new payment methods to enhance our cross-border payment remittance experience for current and potential customers in our existing corridors. We expect these initiatives will attract new customers and lead to larger and more frequent transactions across our growing customer base.
•Expand to new corridors and partner networks. While our global network spans across 1,700 corridors around the world, we have plans to increase our reach to thousands of additional corridors. We see an opportunity to generate value by expanding our remittance services, Passbook and Remitly For Developers more broadly in this way. We expect to leverage our data-driven approach to optimize our pricing, product features, marketing strategies, and customer economics as we expand and grow in these new geographies. Additionally, we expect to leverage our localization expertise and our technology platform to grow the number of disbursement, payment and other partners in our global network and increase the number of direct integrations with such partners.
•Continue expanding into broader financial services. We believe there is an enormous opportunity to create a more inclusive financial system that not only encompasses, but caters to the needs of immigrants. We believe that the insights we gain about immigrant customers through our data-driven platform will enable us to play an important role in developing products and services that meet this opportunity.
We will continue to invest in our platform, expanding our product and service offerings and our overall technological lead to actualize our opportunities in this area.
For example, our Passbook app started with deposit services, but we plan to build new products and features within the app in order to provide solutions to a broader array of our customers’ problems.
We will also continue to leverage our global network and infrastructure. We believe that empowering businesses to build on top of our leading distribution and compliance infrastructure, such as through Remitly For Developers, attracts a new set of potential customers and expands economic opportunities in developing markets.
•Pursue strategic partnerships and acquisitions. While our main growth strategy has historically been organic, we may selectively pursue strategic partnerships and acquisitions to accelerate our growth objectives or to enhance our competitive position within existing and new products and markets. For example, in March 2021, we extended our partnership with Visa3 and integration of Visa Direct within our global network, providing our customers with real-time4 cross-border payments options to more countries around the world.
Our Culture
Our customer-focused vision gives us purpose and motivates us to consistently think bigger, act more boldly, and deliver exceptional services for our customers. Our ability to deliver on our vision begins with our culture and values.
3 Visa Direct capability enabled through Remitly’s financial institution partner.
4 Actual fund availability depends on the receiving financial institution and region.
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Since our first day, culture has been a foundational and highly intentional imperative – never an afterthought. Grounded in our customers first, our values are aspirational behaviors that we are each growing into and use as a common language for feedback. Employee voice and engagement is a cornerstone to how we create a culture of belonging that allows everyone to be able to do their best work to deliver for our customers every day. This includes bi-annual engagement surveys, pulse surveys, feedback sessions, consistent leadership focus groups and 1:1s.
Our values are embedded into everything we do; they shape our culture, drive engagement, and act as a blueprint for how we get things done. Our founders took great care in defining Remitly’s “how” before ever executing on the “what”. Our values are living – they evolve as our customers’ needs evolve so we can continue delivering on promises to our customers. The one constant, and single most important of these values is customer centricity, which serves as our north star in all that we do. Our other core values fall broadly into three categories:
•Our purpose: Be joyful, aim for the stars, be an owner, hire and develop exceptional people, and don’t be afraid to fail;
•Building relationships: Lead authentically, act with integrity, be constructively direct, and be an empathetic partner; and
•Taking action: Have a bias for action, be data-driven, sweat the details, deliver on promises, and continuously improve.
These values influence our actions every day. They help us attract, inspire and retain a diverse, world-class team. We use them to coach and celebrate our teammates, including through the Remitly Founder’s Award that recognizes one Remitlian each quarter who champions and embodies our values. They are also a central aspect of our onboarding, performance management and development processes to ensure that employee growth enhances our distinct culture and produces customer-centric outcomes. Living up to our values builds customer trust, inspires employee engagement, and makes “Promises Delivered” our fundamental ethos and not merely a tagline.
Competition
We operate in a large and highly fragmented market. We have experienced and expect to continue to experience competition from a number of companies, including those who are well-established and may have greater resources, and those who may become meaningful competitors in the future. Our diverse array of competitors generally falls into the following categories:
•Incumbent providers with a scaled legacy platform. Traditional providers with large networks of brick-and-mortar locations and agents around the world that have been slow to adopt digital solutions.
•Traditional banks. Traditional bank networks that offer a wide variety of financial services, including international remittances, but have limited disbursement options.
•Digital-first cross-border payment providers. Digital-first providers of payments, money transfer and remittance products that aim to be convenient, transparent and affordable, with varying corridor-related focuses, such as developed-to-developing or developed-to-developed markets.
•Emerging players focused on broader financial services. Online-only banks, cryptocurrency players, and other emerging players typically offer a subset of the financial services offered by traditional banks, and generally place a greater emphasis on convenience and user experience. These players also typically rely on the global networks and regulatory and compliance infrastructure of certain digital-first cross border payment providers to offer remittances to their customers.
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•Informal person-to-person channels. Bringing cash home when immigrants travel, trusting others to deliver cash back home, established networks of “IOUs” based on documentation or passwords, and other systems of trust-based cash transfers that evade tracking and regulation.
Digital-first companies are increasingly gaining market share from legacy providers and traditional banks. We believe that the principal competitive factors across experience, product, network and technology include:
•Experience:
◦A trusted relationship with customers and their families
◦A simple and convenient customer experience
◦Appealing to customers and their families on a hyper-local level
•Product:
◦Fair and transparent product pricing
◦Speed and certainty of transactions
◦Adjacent suite of digital-first financial services
◦Global and local customer service
•Network:
◦Breadth of global network, including a vast array of easy-to-access disbursement options
◦Ability to accept alternative payment methods
•Technology:
◦Technological differentiation through service availability, performance, scalability, and reliability
◦Efficient fraud, compliance, and regulatory management
◦Ability to innovate
By focusing on the unique needs of immigrants and having a relentless customer focus, we believe that we have built a differentiated and compelling value proposition, and that we compete favorably on the basis of these factors.
Relationships with Third Parties
We have relationships with various third parties and utilize their technology systems, functions and services through the entire remittance transaction from pay-in to pay-out. On the pay-in stage, we partner with payment processors and financial institutions through our platform so our customers can initiate a transaction through our application and get their funds processed and converted into the recipient’s currency. The agreements with our payment processors and financial institutions contain customary terms and conditions for our industry, including licenses to use the relevant intellectual property, renewable terms of agreement, service commitments, publicity rights and indemnification provisions, as well as standard bank practices, as applicable. Between the pay-in and pay-out steps of the transaction, we also use various third party partners to run various KYC, risk and compliance processes. The agreements with our third party risk and compliance vendors contain customary terms and conditions for our industry, including licenses to use the relevant intellectual property, renewable terms of agreement, service commitments, minimum commitments and indemnification provisions. On the pay-out stage, we leverage disbursement partners and aggregators’ systems to disburse funds to the recipients. The agreements with our disbursement and payment partners contain customary terms and conditions for our industry, including licenses to
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use the relevant intellectual property, renewable terms of agreement, service commitments, publicity and marketing rights, compliance with applicable regulations and indemnification provisions.
Regulatory Environment
Our business is subject to a wide range of federal, state, and international laws and regulations in the jurisdictions in which we operate and conduct our activities, including (1) the jurisdictions from which our customers initiate transactions, the majority of which are located in the United States, Canada, EEA and the United Kingdom and/or (2) the jurisdictions in which recipients receive disbursements, the majority of which are located in Mexico, the Philippines, India and other developing countries. These include strict legal and regulatory requirements intended to help detect and prevent money laundering, terrorist financing, fraud, data use, theft and misappropriation and other illicit activity. They also include laws and regulations regarding money transmission licensing, financial services, consumer disclosure and protection, foreign exchange, currency controls, unclaimed property, privacy, and cyber security. Because these laws and regulations are complex, extensive, varied across jurisdictions, and subject to frequent change, we are subject to a number of risks associated with ongoing regulatory compliance. For more information, see the section titled “Risk Factors—Legal and Compliance Risks.”
The description of a subset of these laws and regulations that follows is designed to be a summary and is not exhaustive. We have developed and implemented a compliance program, including our anti-money laundering program, comprised of policies and procedures that are designed to comply with such laws and regulations as they apply to our business. We also monitor these areas closely to continue to adapt our business practices and strategies to help us comply with current and evolving laws and regulations.
Anti-Money Laundering. In the United States, our business is subject to anti-money laundering laws and regulations, including the Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001, as well as similar state laws and regulations. The BSA, among other things, requires companies engaged in money transmission to develop and maintain risk-based anti-money laundering programs, report suspicious activity, and collect and maintain personal information about consumers and all transaction records. These requirements may also apply to our distribution partners and sub-partners. Furthermore, the U.S. Department of the Treasury has interpreted the BSA to require money transmission companies to conduct due diligence and risk-based monitoring of their distribution partners.
Similar anti-money laundering laws and regulations apply to our business internationally, including in the countries where we are licensed: Canada, Ireland, the United Kingdom, Australia, and Singapore. As a cross-border remittance platform, our business includes the facilitation, through our global bank and partner network, of the acceptance and/or payout of funds. As such, we are subject to anti-money laundering laws, rules, regulations, policies and legal interpretations in the markets in which we operate. These include laws and regulations to detect and prevent money laundering and terrorist financing, including obligations to collect and maintain information about our users, recordkeeping, reporting and due diligence, and supervision of agents and subagents similar to, and in some cases exceeding, those required under the BSA. We are also, to a lesser extent, impacted by laws and regulations in the other countries in which our disbursement partners operate.
Compliance with anti-money laundering laws and regulations continues to be a focus of regulatory attention, with recent settlement agreements being reached with money transmitters and several large financial institutions. These regulations vary widely across jurisdictions, are highly complex, and are constantly evolving. We continuously monitor our compliance with these regulations and implement policies and procedures in each relevant jurisdiction to adapt our services to current and evolving legal requirements. As a money services business, we maintain a stringent anti-money laundering compliance program that includes internal policies and controls, designation of anti-money laundering compliance officers for each of our regulated subsidiaries, ongoing employee training and monitoring programs, and annual independent reviews.
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Sanctions. Our business must also comply with economic and trade sanctions programs administered by the OFAC in the United States and by other sanctions authorities in those jurisdictions in which we operate. These laws and regulations prohibit or restrict transactions in, to or from certain countries, regions or governments, as well as with certain individuals and entities such as traffickers in illegal goods or services, terrorists and terrorist organizations. We have implemented policies, procedures and internal controls that are designed to comply with these economic and trade sanctions programs. These measures include, without limitation, screening certain transactions and customer information against OFAC and other international government watch-lists, blocking funds of OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDNs”) and other persons and entities designated as prohibited persons by international sanctions authorities, including the United States Security Council, the European Union, Her Majesty’s Treasury, and other relevant sanctions authorities, and preparing and submitting blocking and other reports as required by relevant authorities.
Anti-Bribery. We are subject to regulations imposed by the Foreign Corrupt Practices Act (“FCPA”) in the United States, the U.K. Bribery Act in the United Kingdom and similar laws in the other jurisdictions in which we or our disbursement partners operate, which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of influencing official action or otherwise gaining an unfair business advantage, such as obtaining or retaining business. We maintain a compliance program designed to ensure our compliance with applicable anti-bribery laws and regulations.
Money Transmission and Stored Value Licensing or Registration. We are subject to licensing and registration requirements in relation to our money transmission and stored value issuance activities on a state by state and federal basis in the United States and in almost every other jurisdiction from which our customers initiate transactions, including the United States, Canada, the EEA, the United Kingdom, Australia, and Singapore.
In the United States, we hold licenses to operate as a money transmitter (or its equivalent) in 48 states where such licenses are required, as well as in the District of Columbia. As a licensed money transmitter, we are subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, minimum net worth requirements, customer disclosure requirements, regulatory approval of directors and senior management of the licensed entity, anti-money laundering and sanctions compliance, cybersecurity program requirements, and examination by state regulatory agencies. There are also different shareholding thresholds (as low as 10% or more of the total equity in us) that may require a shareholder to obtain regulatory approval prior to exceeding such thresholds in connection with certain licenses we hold in the United States.
Outside the United States, our money transmission business is subject to some form of regulation in almost all of the countries and territories in which we offer those services. We are licensed or registered as a money transmitter in key jurisdictions including Canada, the EEA, the United Kingdom, Australia, and Singapore. In Canada, we are licensed by the Financial Transactions and Reports Analysis Centre of Canada. In the EEA, we are licensed as a payment institution by the Central Bank of Ireland under the Second E.U. Payment Services Directive E.U. 2015/2366 and local implementing regulations. In the United Kingdom, we are licensed as an Authorised Payments Institution by the Financial Conduct Authority. In Australia, we are registered as a Remittance Services Provider by the Australian Transaction Reports and Analysis Centre. In Singapore, we are licensed by the Monetary Authority of Singapore as a Major Payment Institution. This list is not exhaustive, as there are numerous other regulatory agencies that may assert jurisdiction over our international business activities.
Under these licensing regimes and associated regulations and supervision, we are subject to requirements such as capital and safeguarding rules, certain consumer protection requirements, IT, and operational security risk management requirements, outsourcing oversight requirements, and periodic regulatory examinations. In certain countries, we are able to serve our customers through the use of disbursement partners instead of obtaining our own license. These entities are typically locally licensed businesses or regulated banks whom we believe are compliant with local laws. The laws and regulations applicable to our business in any given jurisdiction are extensive,
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complex, frequently changing, increasing in scope, and may impose overlapping and/or conflicting requirements or obligations.
Unclaimed Property. We must also comply with unclaimed property laws in the United States and in other countries where we or our disbursement partners operate. These laws require us to remit to certain government authorities the property of others held by us that has been unclaimed for a specified period of time, such as unpaid money transfers. We hold property subject to unclaimed property laws and we have an ongoing program designed to help us comply with these laws. We are subject to audits with regard to our escheatment practices.
Consumer Disclosure and Consumer Protection. We are subject to laws, regulations and disclosure requirements relating to consumer protection in the United States and other jurisdictions in which we have operations. In the U.S., the CFPB implements, examines compliance with, and enforces federal consumer protection laws governing financial products and services, including the Remittance Transfer Rule. The Remittance Transfer Rule requirements include (1) a disclosure requirement to provide consumers sending funds internationally from the United States enhanced pre-transaction written disclosures; (2) an obligation to resolve certain errors, including errors that may be outside our control; and (3) an obligation to cancel transactions that have not been completed at a customer’s request. As a larger participant in the market for international money transfers, the CFPB has direct supervisory authority over our business. In addition, under the Dodd-Frank Act, it is unlawful for any provider of consumer financial products or services to engage in unfair, deceptive or abusive acts or practices. The CFPB has substantial rule-making and enforcement authority to prevent unfair, deceptive or abusive acts or practices in connection with any transaction with a consumer for a financial product or service.
In addition, various jurisdictions in which we operate have consumer protection laws and regulations, and numerous governmental agencies are tasked with enforcing those laws and regulations. Consumer protection principles continue to evolve globally, and new or enhanced consumer protection laws and regulations may be adopted. As the scope of consumer protection laws and regulations change, we may experience increased costs to comply and other adverse effects to our business.
Indirect Regulatory Requirements. As a marketing agent for Sunrise for Passbook, a debit card-linked demand deposit account service offered and issued by Sunrise, we are indirectly subject to the oversight of the banking regulators of Sunrise and responsible for implementing certain aspects of Sunrise's anti-money laundering program with respect to the Passbook service. We are also subject to U.S. state banking law that prohibits non-banks, including state-licensed money transmitters, from holding themselves out as banks, providing banking services, or marketing, advertising, or soliciting customers in any manner suggesting that we are a bank or engaged in banking services.
Certain of our Remitly For Developers customers may be subject to various regulations and compliance obligations, including those that relate to cryptocurrency, that do not apply directly to us but impact the services that we provide to our customers. In addition, based on our relationships with our disbursement partners, we are, or may be, subject to indirect regulation and examination by our disbursement partners' regulators.
Intellectual Property
Intellectual property and proprietary rights are important to the success of our business. We rely on a combination of copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to establish, maintain and protect our intellectual property and proprietary rights, including our proprietary technology, software, know-how, and brand. However, these laws, agreements, and procedures provide only limited protection.
As of June 30, 2021, we owned six U.S. registered trademarks, three pending U.S. trademark applications, 56 foreign registered trademarks and 67 pending foreign trademark applications covering the mark REMITLY, our collapsed Clasped Hand logo, REMITLY (+ Clasped Hand Logo), PASSBOOK BY REMITLY, and Hui Mei Yi
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(Remitly in Chinese characters). We are pursuing additional trademark registrations to the extent we believe it would be beneficial and cost effective. Additionally, we own common law trademark rights in the above-referenced marks as well as the REMITLY PROMISES DELIVERED (+ Clasped Hand Logo) and PASSBOOK BY REMITLY (+ Clasped Hand Logo) mark in the United States and certain other jurisdictions where common law rights are recognized. We also own several domain names, including www.remitly.com.
We monitor our trademarks and service marks through watch services which notify us when applications for potentially conflicting marks have been filed in the United States and in other jurisdictions. We also enforce our trademarks, service marks, trade names and domain names against infringing third-party trademarks, trade names and domain names by sending cease and desist letters, filing complaints, and commencing administrative, and other legal proceedings in the United States and various other jurisdictions. Although we take steps to protect our trademarks, service marks, trade names and domain names, we cannot be certain that the steps we have taken will be sufficient to prevent others from using or seeking to register our trademarks, service marks, trade names and domain names. For example, rights in common law trademarks are generally limited to the geographic region in which the trademark is used. Also, owners of common law trademark rights in the United States are not entitled to the same remedies that are available to owners of federally registered trademarks. Additionally, although we take steps to protect our other intellectual property and proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, or the reverse engineering of our technology and other proprietary information, including by third parties who may use our technology or other proprietary information to develop services that compete with ours. Moreover, others may independently develop technologies or services that are competitive with ours or that infringe on, misappropriate, or otherwise violate our intellectual property and proprietary rights. Policing the unauthorized use of our intellectual property and proprietary rights can be difficult. The enforcement of our intellectual property and proprietary rights also depends on any administrative or legal actions we may bring against any such parties being successful, but these actions are costly, time-consuming, and may not be successful, even when our rights have been infringed, misappropriated, or otherwise violated.
We also rely upon the incorporation of a substantial amount of intellectual property licensed from third parties, including under certain open source licenses, to deliver our product offerings. The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our services.
Although we rely on intellectual property and proprietary rights, including copyrights, trademarks, service marks, trade names, licenses and trade secrets, as well as contractual protections, in our business, we also seek to preserve the integrity and confidentiality of our intellectual property and proprietary rights through appropriate technological restrictions, such as physical and electronic security measures. It is also our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf. We also enter into confidentiality agreements with other third parties in order to limit access to, and disclosure and use of, our confidential information and proprietary information. We further control the use of our proprietary technology and intellectual property through provisions in our terms of service. The contractual provisions that we enter into with employees, consultants, disbursement partners, vendors, and customers, however, may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. We also cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology or that our invention assignment agreements will be self-executing.
See the section titled “Risk Factors—Intellectual Property, Technology, Privacy and Security Risks” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
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Privacy and Cybersecurity
We collect and use, receive, store, transmit, disclose, use and process a wide variety of data and information (including personal information and sensitive personal information) for various purposes in our business, including managing KYC, transaction monitoring and money laundering risks, ensuring service levels and providing features and functionalities in our services. This aspect of our business, including the collection, use, receipt, storage, transmission, processing, disclosure, and protection of personal information and sensitive personal information we acquire in connection with the use of our services, is subject to numerous industry standards, laws, rules and regulations in the United States and globally. Regulation and proposed regulation in this area has increased significantly in recent years and is expected to continue to do so.
In addition to numerous privacy and data protection laws already in place, U.S. states are increasingly adopting laws imposing comprehensive privacy and data protection obligations, which may be more stringent, broader in scope, or offer greater individual rights, with respect to sensitive and personal information than foreign, federal, or other state laws, and such laws may differ from or conflict with each other. Non-sensitive consumer data generally may be used under current rules and regulations, subject to certain restrictions and exceptions, so long as the person does not affirmatively “opt-out” of the collection or use of such data.
For example, the CCPA, which became operative on January 1, 2020, gives California residents new rights to access and require deletion of their personal data, opt out of certain personal data sharing, and receive detailed information about how their personal data is processed. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that result in the loss of personal data, as discussed above. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. The CPRA, which will go into effect in 2023, imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain personal data and creating a new state agency to oversee implementation and enforcement efforts. The CCPA and CPRA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal data, on our financial condition, and on our operating results. Certain other state laws impose similar privacy obligations, and all 50 states have data security breach notification laws including obligations to provide notification of security breaches of computer databases that contain personal information in certain circumstances to affected individuals, state officers and others. Additionally, the CCPA and other new state privacy and cybersecurity regulations, such as those in New York, Nevada, Connecticut, Virginia, Massachusetts, and Colorado have prompted a number of proposals for new federal and state-level privacy legislation, such as in Maryland, New York, and others. If passed, these new laws could add additional complexity, impact our business strategies and the availability of previously useful data, increase our potential liability, increase our compliance costs, require changes in business practices and policies and adversely affect our business. Moreover, as a result of our marketing activities, we may also be subject to applicable marketing privacy laws, including the CAN-SPAM Act of 2003 and the Telephone Consumer Protection Act of 1991.
The GLBA (along with its implementing regulations) restricts certain collection, processing, storage, use, and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information. These rules also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines.
Internationally, many countries have established their own data privacy and security legal framework with which we, our customers and/or partners may need to comply. For example, in Europe, the GDPR took effect on May 25, 2018 and contains numerous requirements and changes from previously existing European law, including more robust obligations on data controllers and processors and more fulsome documentation requirements for data protection compliance programs by companies. As a result of our presence in Europe and our service offering in the European Union, we are subject to the GDPR, which imposes stringent data protection and cybersecurity
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requirements, and could increase the risk of non-compliance and the costs of providing our services in a compliant manner. A breach of the GDPR could result in regulatory investigations, reputational damage, fines and sanctions, orders to cease or change our processing of our data, enforcement notices, or assessment notices (for a compulsory audit). Such penalties are in addition to any civil litigation claims by customers and data subjects. We may also face civil claims including representative actions and other class action-type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to a “third country,” including the United States. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.
On July 16, 2020, the Court of Justice of the European Union, (“CJEU”), invalidated the European Union-United States, or E.U.-U.S., Privacy Shield (“Privacy Shield”) (under which personal data could be transferred from the European Union to U.S. entities that had self-certified under the Privacy Shield scheme) on the grounds that the Privacy Shield failed to offer adequate protections to E.U. personal data transferred to the United States. In addition, while the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case by case basis considering the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals. The use of standard contractual clauses for the transfer of personal data specifically to the United States remains under review by a number of European data protection supervisory authorities, along with those of some other E.U. member states. German and Irish supervisory authorities have indicated, and enforced in recent rulings, that the standard contractual clauses alone provide inadequate protection for E.U.-U.S. data transfers. On August 10, 2020, the U.S. Department of Commerce and the European Commission announced new discussions to evaluate the potential for an enhanced E.U.-U.S. Privacy Shield framework to comply with the July 16 judgment of the CJEU. Further, the European Commission published new versions of the standard contractual clauses for comment. The final version of the new standard contractual clauses was implemented on June 4, 2021, which became effective on June 27, 2021, and it significantly differs from the prior standard contractual clauses, imposing on companies additional obligations relating to data transfers, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer, to implement additional security measures and to update internal privacy practices. The CJEU’s decision, along with the subsequent guidance issued by the European Data Protection Board on November 11, 2020, and recent statements by E.U. supervisory authorities, and the new versions of the standard contractual clauses, have led to uncertainty regarding the legality of E.U.-U.S. data flows in general and those conducted under the Privacy Shield in particular. We rely on the standard contractual clauses for intercompany data transfers from the European Union to the United States. Additionally, certain countries have passed or are considering passing laws requiring data localization, which could increase the cost and complexity of delivering our services and operating our business. As supervisory authorities continue to issue further guidance on personal data, we could suffer additional costs, complaints, or regulatory investigations or fines, and if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
There are a number of pending legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations in areas affecting our business. We expect that our efforts to comply with the GDPR, CCPA, CPRA and other regulatory and legislative requirements will require substantial investments, including investments in compliance processes and technical infrastructure. In addition, some countries are considering or have passed legislation implementing cybersecurity requirements, including requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
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Additionally, the GLBA (along with its implementing regulations) restricts certain collection processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information. These rules also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines.
Additionally, the United Kingdom implemented the Data Protection Act 2018 (“Data Protection Act”), effective in May 2018 and statutorily amended in 2019, that contains provisions, including its own derogations, for how the GDPR is applied in the United Kingdom. Since December 31, 2020 (the day the transitional period following Brexit expired), we have been required to comply with both the GDPR and the Data Protection Act, with each regime having the ability to fine up to the greater of €20 million (£17 million) or 4% of global revenues. The relationship between the United Kingdom and the European Union remains uncertain. It is unclear how data transfers between the United Kingdom and the European Union and other jurisdictions will be treated, and the role of the United Kingdom’s supervisory authority is also unclear. In February 2021, the European Commission proposed to issue the United Kingdom with an “adequacy” decision to facilitate the continued free flow of personal data from E.U. member states to the United Kingdom; however, this decision is subject to the review and/or approval of the European Data Protection Board and a Committee composed of the representatives of the E.U. member states. In the meantime, the United Kingdom remains a "third country" for the purposes of data transfers from the European Union to the United Kingdom following the expiration of the four to six-month personal data transfer grace period (from January 1, 2021) set out in the E.U. and U.K. Trade and Cooperation Agreement, unless the adequacy decision is adopted in favor of the United Kingdom. These changes will lead to additional costs as we try to ensure compliance with new privacy legislation and will increase our overall risk exposure.
Financial technology companies such as us are prone to cyber-attacks by third parties seeking unauthorized access to our data or to disrupt our ability to provide access to our products and services. Any failure by us to prevent or mitigate security breaches and improper access to or disclosure of our data, including personal information, content, or payment information from consumers, could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (predominantly phishing attacks), vendor errors, and general hacking have become more prevalent in the industry, have occurred on our systems in the past, and will occur on our systems in the future. We regularly encounter attempts to create false or undesirable accounts or take other actions on its platform for purposes such as spamming, spreading misinformation, or other objectionable ends. Cyber-attacks may cause interruptions to our platform, degrade the user experience, cause users to lose confidence and trust in our platform, impair our internal systems, or result in financial harm to us. Our efforts to protect company data or the information that we receive may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance; government surveillance; or other threats that evolve.
In addition, third parties may attempt to fraudulently induce employees to disclose information in order to gain access to our data. Cyber-attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although we have developed systems and processes that are designed to protect our data, to prevent data loss, to disable undesirable accounts and activities on our platform, and to prevent or detect security breaches, we cannot assure you that such measures will provide absolute security, and we may incur significant costs in protecting against or remediating cyber-attacks.We are engaged in ongoing privacy and cybersecurity compliance and oversight efforts, including in connection with the requirements of privacy and cybersecurity laws, and other industry standards, and regulatory and legislative requirements. Many of these laws and regulations are subject to change and uncertain and inconsistent interpretation and enforcement, and may conflict with one another, other requirements or obligations, or practices of the features of our services. This could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business, operating results, and financial condition.
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For additional information about our privacy, cybersecurity and associated risks, see the section titled “Risk Factors—Intellectual Property, Technology, Privacy and Security Risks.”
Our People
Our Team. As of June 30, 2021, we had approximately 1,600 full-time equivalent employees either working out of our headquarters in Seattle, Washington, at one of our six other office locations around the world, or remotely. Our focus on our employees has been further heightened in light of the challenges brought on by the COVID-19 pandemic. We announced in March 2020 that most of our employees would have the flexibility to work from home during the COVID-19 pandemic. We expect that an increasing portion of employees will return to working from our offices over the next several months subject to international and U.S. federal, state and local guidelines, and we will also support others working from home on a permanent basis. None of our team members are represented by a labor union or are covered by a collective bargaining agreement. We believe the positive relationship between our customers, our team members and our mission-oriented culture differentiates us and is a key driver of our business success.
Diversity, Equity, and Inclusion. Diversity, Equity and Inclusion (“DEI”) is deeply rooted in our purpose and mission at Remitly. Our focus every day is to tirelessly deliver for our customers, many of whom may be underrepresented in the countries they've migrated to and have historically been left out of traditional financial systems. Effectively serving millions of customers sending money home to their families in over 115 different countries requires teams of committed individuals who demonstrate a deep level of empathy, genuine curiosity, value varied lived experiences, perspectives and backgrounds and appreciate the different ways we all think, process, present, and operate. Remitly’s working environment and culture are designed to unlock our employees’ best thinking and inspire impact from our diverse teams. All of this is made clear by the way we live our cultural values, as we engage with each other, our customers and the immigrant communities we serve all over the world.
To ensure we create an inclusive culture that embraces the diversity of our employees, we have invested in resources and created programs that encourage continuous learning and constructive dialogue at all levels of our organization, such as executive members co-hosting multiple DEI monthly meetings with our DEI Director; creating working groups of senior leaders, managers, and individual contributors focused on improving policies and practices to improve employee development, belonging and hiring; supporting 11 employee resource groups; requiring inclusive interview training; and investing in tools that deliver weekly DEI-related learning content to employees.
Training and Development. We encourage our employees to aim high and continuously improve not only on the products and services we tirelessly deliver to our customers, but also investing in themselves. We provide our employees with ongoing professional development, educational resources and leadership opportunities, including eight hours per employee per month for self-directed learning, reimbursements for continued education and conference attendance, access to online educational content, mentorship programs, lunch and learn programming, reimbursed travel to our corridor countries, and customer empathy programs and workshops.
Benefits and Compensation. We offer market-competitive compensation and benefits to attract and retain employees for the long-term. Equity ownership is a key element of our total compensation program, allowing employees to share in our successes and aligning their interests with our long-term goals. We believe that providing employees with equity ownership in our company is fundamental to employees feeling valued, engaged, and recognized for their contributions to our company and our mission. We award promotions and performance equity grants based on an employee’s customer and business impact and their demonstration of our values, aligned to market data. We benchmark our employee compensation with external sources and internally inspect for pay parity twice yearly during performance cycles to ensure fair and equitable pay.
We strive to provide comprehensive benefits and services that help meet the unique needs of our employees, including benefits such as medical, dental, and vision insurance, a health savings account with company contribution, family and medical leave, flexible work schedules, paid holidays and flexible vacation, as well as
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mental health services access to coaching and counseling support, and pet insurance. We sponsor a 401(k) plan that includes a discretionary matching contribution and offer financial coaching through a third-party provider.
Employee Wellness. Employee safety and well-being is paramount to us ever more so than in 2020 in light of the COVID-19 pandemic. We provide productivity and collaboration tools and resources for employees working remotely, including training and toolkits to help leaders effectively lead and manage remote teams. In addition to expanding our mental health benefits, we also created informal routines that include Wellness Wednesdays and virtual Kitchen Conversations to promote employee connection and wellness through the pandemic. We also provided stipends and a virtual ergonomic assessment program to help employees set up home workspaces. For parents with school age children, we provided a teacher coach who offered office hours and tips for teaching at home during a pandemic. And, we temporarily instituted 3-4 day weekends once per month to give our employees an opportunity to rest and recharge during the pandemic.
Corporate Philanthropy
Our focus on serving immigrant communities extends beyond our services.
We intend to subscribe to the Pledge 1% campaign, which publicly acknowledges our intent to give back and increase social impact, in order to sustainably fund a portion of our corporate social responsibility goals and further our mission to expand financial inclusion for immigrants. As such, in July 2021, our board of directors approved the reservation of up to 1,819,609 shares of our common stock (which was approximately 1.0% of our fully-diluted capitalization as of June 30, 2021) that we may issue to or for the benefit of a 501(c)(3) nonprofit foundation or a similar charitable organization pursuant to our Pledge 1% commitment in equal installments over ten years. We expect to issue to a donor advised fund for the benefit of that foundation 181,961 shares pursuant to our Pledge 1% campaign on or about the completion of this offering. We also have a multifaceted social good program that aligns with our partnership with Pledge 1%. This includes:
•Funding
◦Corporate Giving. We have funded over $500,000 in financial assistance through our Remitly Scholars Program that helps students at the University of the Philippines pay for school fees, books, food, school supplies and other resources they might need to successfully graduate from college.
◦Employee Giving. In the past year, our employees and we (through matching) have collectively donated nearly $100,000 to support immigrant communities impacted by the COVID-19 pandemic globally and anti-racist movements that have supported Black, Asian and Latino communities in the United States.
•Product Deployment. When natural disasters hit, especially in the global south where many of our customers' families reside, we support our customers who need to send money home quickly by providing fee waivers so more of their remittances can be deployed to address immediate needs.
•Volunteering. In 2020, we focused on virtual volunteering and engagement and delivered several Employee Action Guides that provide resources for employees to volunteer virtually or engage safely in-person. The Action Guides also provide employees with self-paced learning and mental health resources that can be shared with their online and offline networks.
•Civic Engagement. In addition to volunteering, we encourage our employees to use their voice through learning about the civic process, register to vote and learn about how to engage with community leaders to influence change. We host several workshops to help employees learn about civic engagement and community issues.
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Facilities
Our corporate headquarters are located in Seattle, Washington, where we occupy facilities totaling approximately 37,703 square feet under a lease that expires in December 2022. We use these facilities for administration, finance, legal, human resources, IT, marketing software engineering, and customer success.
We maintain other leased facilities throughout the world. We intend to procure additional space as we add employees and expand geographically. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations.
Legal and Regulatory Proceedings
From time to time, we may be subject to legal or regulatory proceedings and claims in the ordinary course of business, including patent, privacy, cybersecurity, commercial, product liability, employment, class action, whistleblower, and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. In addition, third parties may from time to time assert claims against us in the form of letters and other communications. We are not currently a party to any legal or regulatory proceedings that we believe to be material to our business or financial condition. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
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MANAGEMENT
Executive Officers, Key Employees, and Directors
The following table provides information regarding our executive officers, key employees, and directors as of June 30, 2021 (unless otherwise indicated):
| Name | Age | Position(s) | ||||||||||||
| Executive Officers: | ||||||||||||||
| Matthew Oppenheimer | 38 | President, Chief Executive Officer, and Director | ||||||||||||
| Joshua Hug | 42 | Chief Operating Officer and Director | ||||||||||||
| Susanna Morgan | 52 | Chief Financial Officer | ||||||||||||
| Key Employees: | ||||||||||||||
| Vishal Ghotge | 42 | Executive Vice President, North America | ||||||||||||
| Robert Kaskel | 48 | Executive Vice President, People | ||||||||||||
| Karim Meghji | 53 | Chief Technology Officer | ||||||||||||
| Robert Singer | 50 | Chief Marketing Officer | ||||||||||||
| Saema Somalya | 44 | General Counsel and Secretary | ||||||||||||
| René Yoakum | 62 | Chief Customer and People Officer | ||||||||||||
| Non-Employee Directors: | ||||||||||||||
William Bryant (2) | 63 | Director | ||||||||||||
Bora Chung (3) | 48 | Director | ||||||||||||
| Laurent Le Moal | 50 | Director | ||||||||||||
Nigel Morris(1)* | 63 | Director | ||||||||||||
Phillip Riese (3) | 71 | Director | ||||||||||||
Ron Shah (1), (3) | 38 | Director | ||||||||||||
Margaret M. Smyth (2) | 57 | Director | ||||||||||||
Charles Stonecipher (2) | 60 | Director | ||||||||||||
(1)Member of the nominating and governance committee.
(2)Member of the audit and risk committee.
(3)Member of the talent and compensation committee.
*Mr. Morris was appointed to our board of directors in July 2021.
Executive Officers
Matthew Oppenheimer co-founded our company in 2011 and serves as our Chief Executive Officer and a member of our board of directors. Prior to co-founding Remitly, Mr. Oppenheimer worked for Barclays plc, a multinational bank and financial services company, from August 2009 to May 2011. Mr. Oppenheimer currently serves on the board of directors of BECU, a credit union. Mr. Oppenheimer holds an M.B.A. from Harvard Business School and a B.A. in Psychology from Dartmouth College. We believe that Mr. Oppenheimer is qualified to serve on our board of directors because of his banking industry experience and his service and experience as our co-founder and Chief Executive Officer.
Joshua Hug co-founded our company in 2011 and has served as our Chief Operating Officer since October 2016 and as a member of our board of directors since November 2011. Mr. Hug previously served as our Chief Product Officer from November 2011 to October 2016. Prior to co-founding Remitly, Mr. Hug led Shelfari at Amazon.com, Inc., a multinational technology company, from August 2008 to October 2011. Mr. Hug co-founded Shelfari, a private social cataloging website, and served as its Chief Executive Officer from May 2006 to August 2008 prior to its acquisition by Amazon. Mr. Hug holds a B.S. in Computer Science and B.A. in Mathematics from
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Whitworth University. We believe that Mr. Hug is qualified to serve on our board of directors because of his deep product and industry experience and his service and experience as our co-founder and Chief Operating Officer.
Susanna Morgan has served as our Chief Financial Officer since August 2018. Ms. Morgan previously served as the SVP, Finance and Investor Relations at Apptio, Inc., a SaaS provider of technology business management solutions, from July 2015 to August 2018. Prior to that, Ms. Morgan served as SVP of Finance at Concur Technologies, Inc., a travel and expense software company, from May 2013 to June 2015, and as SVP at Vertafore, Inc., an insurance technology provider, from July 2007 to September 2012. Ms. Morgan previously served in Corporate Development leadership roles at Charles Schwab Corporation, a multinational financial services company, and Oracle, a multinational technology company, after beginning her career in strategy consulting. Ms. Morgan holds an M.B.A. from Harvard Business School, an M.A. in International Policy Studies from Stanford University, and a B.A. in Quantitative Economics from Stanford University.
Key Employees
Vishal Ghotge has served as our EVP, North America since April 2021. Previously, Mr. Ghotge served as Chief Product Officer for PayScale, Inc., a compensation software and data company, from September 2020 to April 2021 and as SVP of Product from December 2019 to September 2020. Prior to that, Mr. Ghotge served as VP of Product from August 2019 to December 2019 and as Senior Director of Product from April 2016 to August 2019, for Groupon, Inc., an online marketplace company. Mr. Ghotge holds an M.S. in Computer Science from University of Illinois at Urbana-Champaign and a B.E. in Computer Engineering from Veermata Jijbai Technological Institute (University of Mumbai).
Robert Kaskel has served as our EVP, People since May 2021. Previously, Dr. Kaskel served as Director, People Experience & Technology at Amazon.com, Inc., a multinational e-commerce company, in Finance and Global Business Services from June 2020 to May 2021, and as Director, Consumer People Analytics at Amazon.com, Inc. from December 2017 to June 2020, as well as other roles at Amazon.com, Inc. since February 2013. Prior to Dr. Kaskel’s roles at Amazon.com, Inc., he held previous managerial roles at Microsoft Corporation, a multinational technology company, and Mattel, Inc., a toy manufacturing company. Dr. Kaskel holds a Ph.D. and M.A. in Organizational Psychology from the California School of Professional Psychology, as well as a B.A. in Psychology from California State University, Long Beach.
Karim Meghji has served as our Chief Technology Officer since October 2020, and previously served as our Chief Product Officer from October 2016 to October 2020. Prior to joining Remitly, Mr. Meghji served as Head of Product for BookingSuite (USA), Inc., a subsidiary of Booking.com, B.V., an online travel service provider, from January 2015 to September 2016. From July 2013 to January 2015, Mr. Meghji served as Chief Product Officer and VP of Engineering at buuteeq Inc., an automation platform for hotels. Mr. Meghji holds a B.S. in Computer Science from San Jose State University.
Robert Singer has served as our Chief Marketing Officer since October 2018. Previously, Mr. Singer served as Chief Marketing Officer for Habit, LLC, a personalized nutrition company, from July 2017 to October 2018, as Chief Marketing Officer for Smule, Inc., a social music-making app company, from July 2016 to July 2017, and as Chief Marketing Officer for Ancestry.com LLC, a genealogy company, from November 2010 to July 2016. Mr. Singer holds a B.S. in Math from James Madison University.
Saema Somalya has served as our General Counsel since December 2020. Prior to joining Remitly, Ms. Somalya served as SVP, Deputy General Counsel (Corporate) and Assistant Secretary for Fifth Third Bancorp and Fifth Third Bank, N.A., a bank, from May 2016 to November 2020 and as SVP, General Counsel and Corporate Secretary for Warren Resources, Inc., an energy company, from February 2014 to January 2016. From April 2009 to January 2014, Ms. Somalya served as Senior Legal Director and Corporate Counsel to PepsiCo, Inc., a multinational food, snack, and beverage corporation. Ms. Somalya holds a J.D. from Yale Law School and a B.A. in International Relations and Affairs from Yale University.
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René Yoakum has served as our Chief Customer and People Officer since May 2019 and previously served as our Chief Customer Officer from July 2018 to March 2019. Prior to joining Remitly, Ms. Yoakum served as VP Customer Service and Support for Pearson Education, Inc., an education publishing and assessment company, from June 2016 to June 2018, and in various positions at Microsoft Corporation, a multinational technology company, from September 1997 to May 2016, including most recently as GM, Global Consumer Support from June 2011 to May 2016. Ms. Yoakum holds a Post Graduate Marketing Certificate from Chartered Institute of Marketing and a B.A. in Mathematics and Computer Science from Pacific Lutheran University.
Directors
William Bryant has served as a member of our board of directors since March 2015. Mr. Bryant has served as a general partner of Threshold Ventures, a venture capital firm, since 2007 and has been a founder, board member, advisor and investor in over twenty venture backed startups. Mr. Bryant holds a Ph.C. in Business Strategy and an M.B.A. in Business Strategy and Entrepreneurship from the University of Washington. We believe Mr. Bryant is qualified to serve as a member of our board of directors because of his extensive experience in venture capital and as a public company board member.
Bora Chung has served as a member of our board of directors since November 2020. Ms. Chung currently serves as Chief Experience Officer for Bill.com Holdings, Inc., a cloud-based software company that automates back-office financial operations for small and midsize businesses. Prior to joining Bill.com, Ms. Chung served as Chief Product Officer for eBay Korea Co. Ltd., a subsidiary of eBay Inc. and an online marketplace, from September 2016 to November 2018, and as Vice President, Product Management for eBay Inc., a multinational e-commerce corporation, from December 2014 to August 2016. Ms. Chung also previously served as the Director of Worldwide Payments and Financing for Apple Online Stores at Apple Inc., a multinational technology company, from October 2010 to December 2014. Ms. Chung holds an A.B. in Economics from Harvard University and a M.B.A. from the Stanford University Graduate School of Business. We believe Ms. Chung is qualified to serve as a member of our board of directors because of her extensive industry experience, as well as her experience serving as an officer of public companies.
Laurent Le Moal has served as a member of our board of directors since October 2017. Since September 2019, Mr. Le Moal has served on the Executive Team of Prosus N.V., the international assets division of Naspers Group, a global internet and entertainment group, and as Chief Executive Officer of PayU, a payments and financial technology company division of Naspers Group, since January 2016. Mr. Le Moal has also served as a member of the Global Future Council on the Future of Financial and Monetary Systems of the World Economic Forum since October 2019. From September 2004 to July 2015, Mr. Le Moal was employed at PayPal Holdings, Inc., an online payments company, in various capacities, including most recently as Vice President and Managing Director for Continental Europe, Russia, Middle East and Africa. Mr. Le Moal has served as a director of Monese Ltd, a U.K. digital bank from October 2017 until April. Mr. Le Moal received an M.B.A. from the London Business School, a Master in International Management from HEC School of Management in Paris, France and a Master in International Management from Universita Commerciale Luigi Bocconi in Milan, Italy. We believe Mr. Le Moal is qualified to serve as a member of our board of directors because of his extensive industry experience.
Nigel Morris has served as a member of our board of directors since July 2021. Since January 2008, Mr. Morris has served as Managing Partner of QED Investors, a venture capital fund. Previously, Mr. Morris served as Co-Founder, President and Chief Operating Officer of Capital One Financial Corporation, a bank holding company, from January 1994 to January 2004. Mr. Morris currently serves on the board of several privately held companies. Mr. Morris received an M.B.A. from the London Business School and a Bsc in Psychology from the University of East London. We believe Mr. Morris is qualified to serve as a member of our board of directors because of his extensive financial industry experience and his knowledge of the finance industry.
Phillip Riese has served as a member of our board of directors since December 2016. Mr. Riese currently serves on the board of Flywire Corporation and several privately held companies. From 1980 to 1998, Mr. Riese served as
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President, Consumer Card Services and Chairman of American Express Centurion Bank for American Express Financial Corporation, a multinational financial services corporation. From 1977 to 1980, Mr. Riese served as the Division Executive and Vice President, Merchant Services for Chase Bank. Mr. Riese holds an S.M. from Massachusetts Institute of Technology, an M.B.A. from the University of Cape Town and a B. Com. in Textile Engineering and Economics from Leeds University. We believe Mr. Riese is qualified to serve as a member of our board of directors because of his extensive financial industry experience and his knowledge of technology companies.
Ron Shah has served as a member of our board of directors since April 2016. Mr. Shah has served as Partner of Stripes, LLC, a venture capital firm, since 2007, and currently serves on the board of several privately held companies. Mr. Shah holds a B.A. in Philosophy from Duke University. We believe Mr. Shah is qualified to serve as a member of our board of directors because of his extensive experience in the venture capital industry and his knowledge of technology companies.
Margaret M. Smyth has served as a member of our board of directors since May 2021. Ms. Smyth has also served on the board of directors of Etsy, Inc., an e-commerce website, since June 2016 and on the board of directors of Frontier Communications, a telecommunications company, since June 2021, and currently serves on other privately held company boards as well. Ms. Smyth has served as the U.S. Chief Financial Officer of National Grid plc, a multinational energy company between October 2014 and June 2021. Prior to that, Ms. Smyth was Vice President of Finance at ConEdison, Inc., an energy company, from August 2012 through September 2014. Earlier in her career, Ms. Smyth served as a Senior Managing Partner at Deloitte & Touche and Arthur Andersen. Ms. Smyth also served on the board of directors of Vonage Holdings Corp., a cloud based communications provider from September 2012 to June 2016. Ms. Smyth holds an M.S. in Accounting from NYU Stern School of Business and a B.A. in Economics from Fordham University. Ms. Smyth is also experienced in advancing sustainability accounting practices and is a Sustainability Accounting Standards Board (“SASB”) FSA Credential Holder. We believe that Ms. Smyth is qualified to serve on our board of directors because of her deep experience in public company finance, accounting and strategic planning and her significant international experience and leadership through her service as an executive and director of global public companies.
Charles Stonecipher has served as a member of our board of directors since December 2012. Mr. Stonecipher has served as Managing Director of Trilogy Equity Partners, LLC, a venture capital firm, since November 2007, and currently serves on the board of several privately held companies. Mr. Stonecipher holds an M.B.A. from Harvard School of Business, a M.S. in Mechanical Engineering from Stanford University, and a B.S. in Mechanical Engineering from Stanford University. We believe Mr. Stonecipher is qualified to serve as a member of our board of directors because of his extensive experience in the venture capital industry and his knowledge of technology companies.
Corporate Governance
Appointment of Officers
Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships between any of our directors or executive officers.
Board Composition
The number of directors is fixed by our board of directors, subject to the terms of our amended and restated certificate of incorporation and restated bylaws. Our board of directors currently consists of ten members. Currently serving members of our board of directors will continue to serve as directors until their resignations or until their successors are duly elected by the holders of our common stock. Pursuant to our fifth amended and restated voting agreement, dated as of August 3, 2020, (1) the seat occupied by Mr. Stonecipher is elected by the holders of a majority of our Series Seed Preferred Stock and Series A Preferred Stock, voting together as a single class, as the
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designee of Trilogy Equity Partners, LLC; (2) the seat occupied by Mr. Bryant is elected by the holders of a majority of our Series B Preferred Stock, voting separately as a single class, as the designee of Threshold Ventures I, L.P. and Threshold Ventures I Partners Fund, LLC; (3) the seat occupied by Mr. Shah is elected by the holders of a majority of our Series C Preferred Stock, voting separately as a single class, as the designee of SG Growth Partners III, LP; (4) the seat occupied by Mr. Le Moal is elected by the holders of a majority of our Series D Preferred Stock, voting separately as a single class, as the designee of PayU Fintech Investments B.V. and its affiliates, Naspers; and (5) the seat occupied by Ms. Chung is elected by the holders of a majority of our Series E Preferred Stock, voting separately as a single class, as the designee of Generation IM Sustainable Solutions Fund III, L.P. The provisions of our amended and restated certificate of incorporation and the fifth amended and restated voting agreement by which the directors are currently elected will terminate in connection with this offering and there will be no contractual obligations regarding the election of our directors following this offering.
Classified Board of Directors
Upon the completion of this offering, our board of directors will consist of 10 members and be divided into three classes of directors that will serve staggered three-year terms. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors will be divided among the three classes as follows:
•the Class I directors will be William Bryant, Ron Shah and Charles Stonecipher, and their terms will expire at the first annual meeting of stockholders to be held after the completion of this offering;
•the Class II directors will be Bora Chung, Laurent Le Moal and Nigel Morris, and their terms will expire at the second annual meeting of stockholders to be held after the completion of this offering; and
•the Class III directors will be Joshua Hug, Matthew Oppenheimer, Phillip Riese and Margaret Smyth, and their terms will expire at the third annual meeting of stockholders to be held after the completion of this offering.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our amended and restated certificate of incorporation and restated bylaws to be in effect upon the completion of this offering will authorize only our board of directors to fill vacancies on our board of directors. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. For more information, see the section titled “Description of Capital Stock—Anti-Takeover Provisions.”
Director Independence
In connection with this offering, we have applied to list our common stock on the Nasdaq. Under the rules of the Nasdaq, independent directors must comprise a majority of a listed company’s board of directors within a specified period after the completion of this offering. In addition, the rules of the Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Under the rules of the Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Additionally, talent and compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a talent and compensation committee member.
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Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the completion of this offering.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that all of our non-employee directors are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the Nasdaq. In making these determinations, our board of directors reviewed and discussed information provided by the directors and by us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our common stock by each non-employee director and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”
Role of the Board in Risk Oversight
One of the key functions of our board of directors is informed oversight of our risk management process. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its oversight function directly as a whole. Our board of directors will also administer its oversight through various standing committees, which will be constituted prior to the completion of this offering, that address risks inherent in their respective areas of oversight. For example, our audit and risk committee will be responsible for overseeing the management of risks associated with our financial reporting, accounting and auditing matters, as well as compliance, cybersecurity and enterprise risk management; our talent and compensation committee will oversee the management of risks associated with our compensation policies and programs; and our nominating and corporate governance committee will oversee the management of risks associated with director independence, conflicts of interest, composition and organization of our board of directors, and director succession planning.
Committees of the Board of Directors
Our board of directors has an audit and risk committee, a talent and compensation committee, and a nominating and corporate governance committee, each of which, pursuant to its respective charter, will have the composition and responsibilities described below upon the completion of this offering. Following the completion of this offering, copies of the charters for each committee will be available on the investor relations portion of our website. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Audit and Risk Committee
Our audit and risk committee is composed of Ms. Smyth, Mr. Bryant and Mr. Stonecipher. Ms. Smyth is the chair of our audit and risk committee. The members of our audit and risk committee meet the independence requirements under Nasdaq and SEC rules. Each member of our audit and risk committee is financially literate. In addition, our board of directors has determined that each member is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not, however, impose on her any supplemental duties, obligations, or liabilities beyond those that are generally
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applicable to the other members of our audit and risk committee and board of directors. Our audit and risk committee’s principal functions are to assist our board of directors in its oversight of:
•selecting a firm to serve as our independent registered public accounting firm to audit our consolidated financial statements;
•ensuring the independence of the independent registered public accounting firm;
•discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and that firm, our interim and year-end operating results;
•establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters;
•considering the adequacy of our internal controls and internal audit function;
•reviewing related-party transactions that are material or otherwise implicate disclosure requirements; and
•approving or, as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm;
•reviewing major financial risks and enterprise exposures and the steps management has taken to monitor or mitigate such risks and exposures;
•reviewing cybersecurity, data privacy and other information technology risks, controls and procedures; and
•reviewing compliance programs and risk exposures related to legal and regulatory matters and requirements.
Talent and Compensation Committee
Our talent and compensation committee is composed of Mr. Shah, Ms. Chung and Mr. Riese. Mr. Shah is the chair of our talent and compensation committee. The members of our talent and compensation committee meet the independence requirements under Nasdaq and SEC rules. Each member of this committee is also a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act. Our talent and compensation committee is responsible for, among other things:
•reviewing and approving, or recommending that our board of directors approve, the compensation of our executive officers;
•reviewing and approving, or recommending that our board of directors approve, the terms of any compensatory agreements with our executive officers;
•reviewing and recommending to our board of directors the compensation of our directors;
•administering our stock and equity incentive plans;
•reviewing and approving, or making recommendations to our board of directors with respect to, incentive compensation and equity plans; and
•establishing our overall compensation philosophy.
Nominating and Corporate Governance Committee
Our nominating and governance committee is composed of Mr. Morris and Mr. Shah. Mr. Morris is the chair of our nominating and governance committee. The members of our nominating and governance committee meet the
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independence requirements under Nasdaq and SEC rules. Our nominating and governance committee’s principal functions include:
•identifying and recommending candidates for membership on our board of directors;
•recommending directors to serve on board committees;
•reviewing and recommending to our board of directors any changes to our corporate governance principles;
•reviewing proposed waivers of the code of conduct for directors and executive officers;
•overseeing the process of evaluating the performance of our board of directors; and
•advising our board of directors on corporate governance matters.
Talent and Compensation Committee Interlocks and Insider Participation
None of the members of the talent and compensation committee is currently, or has been at any time, one of our officers or employees. None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board or talent and compensation committee during the year ended December 31, 2020.
Code of Business Conduct and Ethics
Our board of directors has adopted, effective prior to the completion of this offering, a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive officers. The full text of our code of business conduct and ethics will be posted on the investor relations page on our website. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act.
Non-Employee Director Compensation
In the year ended December 31, 2020, no cash compensation was paid to the non-employee members of our board of directors. All compensation paid to Mr. Oppenheimer and Mr. Hug, our employee directors, is set forth below in the section titled “Executive Compensation—Summary Compensation Table.” The following table provides information regarding compensation of our non-employee directors for director service for the year ended December 31, 2020. Other than as set forth in the table and described more fully below, during the year ended December 31, 2020, we did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our board of directors.
| Name | Stock Awards ($)(1) | Total ($) | |||||||||
| William Bryant | — | — | |||||||||
| Bora Chung | 329,011(2) | 329,011 | |||||||||
| Laurent Le Moal | — | — | |||||||||
| Phillip Riese | 329,011(3) | 329,011 | |||||||||
| Ron Shah | — | — | |||||||||
| Charles Stonecipher | — | — | |||||||||
_______________
(1)The amounts reported in the Stock Awards column represent the grant date fair value of the RSU awards granted to our non-employee directors during the year ended December 31, 2020 as computed in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in calculating the grant date fair value of the RSU awards reported in the Stock Awards column are set forth in Note 10 of the notes to our consolidated financial statements included in this prospectus. Note that the amounts reported in this column reflect the accounting cost for these RSU awards and do not correspond to the actual economic value that may be received by our non-employee directors from the RSU awards.
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(2)As of December 31, 2020, Ms. Chung held an RSU award with respect to 92,941 shares, which is subject to two vesting requirements: a liquidity event requirement and a service-based requirement. The liquidity event requirement will be satisfied on the earliest to occur of (i) an initial public offering of the Company’s securities or (ii) the consummation of certain acquisition of the Company (the earliest of prong (i) or (ii) to occur, the “Initial Vesting Event”). The service-based requirement will be satisfied (a)(i) if the Initial Vesting Event has not occurred before November 20, 2021, with respect to 1/16th of the shares subject to the RSU on each Quarterly Vesting Date (defined below) between November 20, 2020 and the Initial Vesting Event or (ii) if the Initial Vesting Event has occurred before November 20, 2021, with respect to 25% of the shares subject to the RSU on the first Quarterly Vesting Date following November 20, 2021 and (b) with respect to an additional 1/16th of the shares subject to the RSU thereafter on each subsequent February 25, May 25, August 25 and November 25 (each, a “Quarterly Vesting Date”).
(3)As of December 31, 2020, Mr. Riese held an RSU award with respect to 92,941 shares and a fully vested stock option to purchase 500,000 shares. No other non-employee directors held option awards that were outstanding as of such date.
Before this offering, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our board of directors or committees of our board of directors. In connection with this offering, our board of directors approved the following non-employee director compensation policy, which will take effect following the completion of this offering.
Non-Employee Director Cash Compensation
Upon completion of this offering, each non-employee director will be entitled to receive an annual cash retainer of $35,000, paid quarterly in arrears and pro-rated for partial quarters served, for service on the board of directors and additional annual cash compensation for committee membership as follows:
•audit and risk committee chair: $20,000;
•audit and risk committee member: $10,000;
•talent and compensation committee chair: $15,000;
•talent and compensation committee member: $7,500;
•nominating and corporate governance committee chair: $8,000; and
•nominating and corporate governance committee member: $4,000.
In addition, the non-executive chairperson of the board shall receive an additional $60,000 (in lieu of any cash compensation for lead independent director compensation), and the lead independent director of the board shall receive an additional $16,000.
Each director may elect to receive all of the cash fees for which they are eligible in the form of RSUs (the “Fee RSUs”), subject to the director’s timely execution of written election form and the terms and conditions of our non-employee director compensation policy, which Fee RSUs will generally vest quarterly over a one-year period (or earlier upon the next annual meeting of our stockholders following the grant date or the consummation of a corporate transaction (as defined in our 2021 Plan). The Fee RSUs are separate from the non-employee director equity grants noted below.
Non-Employee Director Equity Grants
Initial Appointment RSU Grant
Each new non-employee director appointed to our board of directors following this offering will be granted restricted stock units (“Initial Appointment RSUs”), on the date of his or her appointment to our board of directors, under our 2021 Equity Incentive Plan, having an aggregate value of $330,000 based on the average daily closing price of the common stock on the Nasdaq Global Select Market in the 10 trading days ending on the day preceding the date of grant. The Initial Appointment RSUs will vest as to one-third of the Initial Appointment RSUs on each of the first three anniversaries following the date of grant so long as the non-employee director continues to provide
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services to us through such date. In addition, the Initial Appointment RSUs will fully vest upon the consummation of a corporate transaction (as defined in our 2021 Plan).
If an individual is first elected as a non-employee director at an annual meeting of stockholders, he or she will be granted an annual RSU grant, as described below, in lieu of the Initial Appointment RSUs.
Annual RSU Grant
On the date of each annual meeting of stockholders following the completion of this offering, commencing with our 2022 annual meeting of stockholders, each non-employee director who is serving on our board of directors, and will continue to serve on our board of directors following the date of such annual meeting, will automatically be granted restricted stock units (“Annual RSUs”), under our 2021 Equity Incentive Plan, having an aggregate value of $165,000 based on the average daily closing price of the common stock on the Nasdaq Global Select Market for the 10 trading days ending on the day preceding the date of grant. The Annual RSUs will fully vest on the earlier of (1) the date of the following year’s annual meeting of stockholders and (2) the date that is one year following the date of grant. In addition, the Annual RSUs will fully vest upon the consummation of a corporate transaction (as defined in our 2021 Plan).
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EXECUTIVE COMPENSATION
The following tables and accompanying narrative set forth information about compensation for the year ended December 31, 2020 provided to our principal executive officer and the two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers as of December 31, 2020. These executive officers are Matthew Oppenheimer, our Chief Executive Officer, Joshua Hug, our Chief Operating Officer, and Susanna Morgan, our Chief Financial Officer, and we refer to them in this section as our “named executive officers.”
Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to, earned by, or paid to our named executive officers for the year ended December 31, 2020.
| Name and Principal Position | Salary ($) | Bonus ($) | Option Awards ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||
| Matthew Oppenheimer, President and Chief Executive Officer | 281,667 | — | — | — | 3,065(1) | 284,732 | ||||||||||||||||||||||||||||||||
| Joshua Hug, Chief Operating Officer | 287,500 | — | — | — | 7,774(2) | 295,274 | ||||||||||||||||||||||||||||||||
| Susanna Morgan, Chief Financial Officer | 287,500 | — | — | — | 1,660(3) | 289,160 | ||||||||||||||||||||||||||||||||
__________________
(1)This amount represents $2,065 in life insurance premiums paid on Mr. Oppenheimer’s behalf and a $1,000 contribution to Mr. Oppenheimer’s 401(k).
(2)This amount represents $5,454 in life insurance premiums paid on Mr. Hug’s behalf, a $1,320 contribution to Mr. Hug’s Health Savings Account, and a $1,000 contribution to Mr. Hug’s 401(k).
(3)This amount represents a $660 contribution to Ms. Morgan’s Health Savings Account and a $1,000 contribution to Ms. Morgan’s 401(k).
Equity Compensation
From time to time, we may grant equity awards in the form of stock options and RSUs to our named executive officers, which are generally subject to vesting based on each named executive officer’s continued service with us. Each of our named executive officers currently holds outstanding options to purchase shares of our common stock that were granted under our 2011 Plan, as set forth in the table below titled “—Outstanding Equity Awards at 2020 Fiscal Year-End.”
Outstanding Equity Awards at 2020 Fiscal Year-End
The following table presents, for each of our named executive officers, information regarding outstanding equity awards as of December 31, 2020.
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| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date(1) | Number of Securities Underlying Unexercised Options Exercisable (#)(2) | Number of Securities Underlying Unexercised Options Unexercisable (#)(3) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(4) | |||||||||||||||||||||||||||||||||||||
| Matthew Oppenheimer | 7/13/2018 | 159,494 | 1,543,533(5) | 1.70 | 7/13/2028 | $ | — | |||||||||||||||||||||||||||||||||||||
| Joshua Hug | 7/13/2018 | — | — | — | — | 466,667(6) | $ | 2,310,002 | ||||||||||||||||||||||||||||||||||||
| Susanna Morgan | 8/31/2018 | 421,666 | 458,334(7) | 1.70 | 8/31/2028 | — | — | |||||||||||||||||||||||||||||||||||||
________________
(1)All of the outstanding equity awards were granted under the 2011 Plan.
(2)This column reflects options that are early exercisable and vested as of December 31, 2020.
(3)This column reflects options that are early exercisable and unvested as of December 31, 2020, subject to our right to repurchase unvested shares in the event that the named executive officer’s service with us terminates.
(4)This amount reflects the fair market value of our common stock of $4.95 per share as of December 31, 2020 (the determination of the fair market value by our board of directors) multiplied by the amount shown in the column for the number of shares that have not vested.
(5)This amount reflects the remaining unexercised and unvested shares subject to an option granted to Mr. Oppenheimer following Mr. Oppenheimer’s early exercise of 800,000 shares. Subject to Mr. Oppenheimer’s continued service with us through each vesting date, the shares underlying the stock option vest as follows: with a vesting commencement date of April 1, 2018, (a) 10% of the shares subject to the option vested monthly during the first year following the vesting commencement date; (b) 15% of the shares subject to the option vested monthly during the year following the second anniversary of the vesting commencement date; (c) 20% of the shares subject to the option vested monthly during the year following the third anniversary of the vesting commencement date; (d) 25% of the shares subject to the option shall vest monthly during the year following the fourth anniversary of the vesting commencement date; and (e) 30% of the shares subject to the option shall vest monthly during the year following the fifth anniversary of the vesting commencement date.
(6)This amount represents shares acquired upon the early exercise of a stock option award that remains subject to vesting conditions and forfeiture. Subject to Mr. Hug’s continued service with us through each vesting date, 16,666 shares vest monthly, subject to our right of repurchase in the event of Mr. Hug’s termination of services.
(7)25% of the shares underlying Ms. Morgan’s stock option vested on the one-year anniversary of the August 22, 2018 vesting commencement date and an additional 1/48th of the shares of our common stock underlying the stock option vests each month thereafter, subject to Ms. Morgan’s continuous service through each such vesting date.
Employment Agreements
We have entered into amended and restated offer letters with each of our named executive officers. Any potential payments and benefits due upon a termination of employment or a change in control of us are further described below in the section titled “--Change in Control and Severance Agreements.”
Matthew Oppenheimer
In July 2018, we entered into an offer letter with Mr. Oppenheimer, our President and Chief Executive Officer, as amended and restated in August 2021. The offer letter provides that Mr. Oppenheimer will receive an annual base salary and states that Mr. Oppenheimer is an at-will employee and does not have a fixed employment term. Mr. Oppenheimer is eligible to participate in our employee benefit plans to the extent he meets eligibility requirements.
Joshua Hug
In July 2018, we entered into an offer letter with Mr. Hug, our Chief Operating Officer, as amended and restated in August 2021. The offer letter provides that Mr. Hug will receive an annual base salary and states that Mr. Hug is an at-will employee and does not have a fixed employment term. Mr. Hug is eligible to participate in our employee benefit plans to the extent he meets eligibility requirements.
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Susanna Morgan
In July 2018, we entered into an offer letter with Ms. Morgan, our Chief Financial Officer, as amended and restated in August 2021. The offer letter provides that Ms. Morgan will receive an annual base salary and states that Ms. Morgan is an at-will employee and does not have a fixed employment term. Ms. Morgan is eligible to participate in our employee benefit plans to the extent she meets eligibility requirements.
Change in Control and Severance Agreements
Our board has approved, and we intend to enter into Change in Control and Severance Agreements with each of our named executive officers, which Change in Control and Severance Agreements will become effective on the effectiveness of the registration statement of which this prospectus forms a part. The Change in Control and Severance Agreements will, once effective, supersede and replace any prior severance or acceleration protections to which the named executive officers were entitled.
These agreements would provide for benefits upon either a termination by us of the executive officer's employment without “cause” or a resignation by the executive officer for “good reason” (each as defined in the Change in Control and Severance Agreement); provided, however that Ms. Morgan is not entitled to good reason protection outside of the change in control period (defined below). We refer to either of these terminations as a “qualifying termination.” The benefits provided under the Change in Control and Severance Agreements vary depending on whether the executive officer is subject to a qualifying termination within a period commencing three months prior to a “change in control” (as defined in the Severance and Change in Control Agreement) and ending 12 months following such change of control, which period we refer to as the change in control period.
If a qualifying termination occurs prior to or after the change of control period, subject to the executive officer's timely execution and non-revocation of a release of claims, the executive officer will be entitled to:
•a lump sum cash payment equal to 12 months’ base salary, in the case of Messrs. Oppenheimer and Hug, and 6 months' base salary in the case of Ms. Morgan, in each case payable no later than the first regular payroll date occurring after the 60th day following the termination and subject to applicable withholdings;
•if the named executive officer elects to continue his or her health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, payment of the premiums for the named executive officer’s continued health insurance (or equivalent taxable cash payment, if applicable law so requires) for up to 12 months in the case of Messrs. Oppenheimer and Hug and up to 6 months in the case of Ms. Morgan; and
•in the case of Messrs. Oppenheimer and Hug, 25% of his then-unvested and outstanding equity awards will accelerate and become vested and, as applicable, exercisable (with any unearned performance-based awards to be deemed earned based on actual performance or, if not determinable, on 100% of target, unless otherwise set forth in an award agreement).
If a qualifying termination occurs during the change of control period, subject to the named executive officer's timely execution and non-revocation of a release of claims, the named executive officer will be entitled to:
•a lump sum cash payment of 18 months’ base salary, in the case of Messrs. Oppenheimer and Hug and 12 months' base salary in the case of Ms. Morgan, in each case payable no later than the first regular payroll date occurring after the 60th day following the termination and subject to applicable withholdings;
•150% of the executive's annual target bonus, in the case of Messrs. Oppenheimer and Hug, and 100% of the executive's annual target bonus in the case of Ms. Morgan, in each case payable no later than the first regular payroll date occurring after the 60th day following the termination and subject to applicable withholdings;
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•if the named executive officer elects to continue his or her health insurance coverage under COBRA, payment of the premiums for continued health insurance (or equivalent cash payment, if applicable law so requires) for up to 18 months in the case of Messrs. Oppenheimer and Hug and up to 12 months in the case of Ms. Morgan; and
•100% of each of the named executive officer’s then-outstanding and unvested equity awards will accelerate and become vested and, as applicable, exercisable (with any unearned performance-based awards to be deemed earned based on actual performance or, if not determinable, on 100% of target, unless otherwise set forth in an award agreement).
The Change in Control and Severance Agreements will be in effect for three years from the effective date in the case of Messrs. Oppenheimer and Hug, and two years from the effective date in the case of Ms. Morgan, in each case unless renewed, or earlier terminated, subject to certain limitations.
Employee Benefit and Stock Plans
We believe that our ability to grant equity-based awards is a valuable compensation tool that enables us to attract, retain, and motivate our employees, consultants, and directors by aligning their financial interests with those of our stockholders. The principal features of our equity incentive plans are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which are filed as exhibits to the registration statement of which this prospectus is a part.
2011 Equity Incentive Plan
In November 2011, we adopted the 2011 Plan, as most recently amended on February 17, 2021. The purpose of the 2011 Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to our success.
Share Reserve. As of June 30, 2021, we had 43,899,677 shares of our common stock reserved for issuance pursuant to grants under our 2011 Plan, of which 1,934,742 shares remained available for grant. As of June 30, 2021, options to purchase 15,627,636 shares had been exercised; options to purchase 25,355,906 shares remained outstanding, with a weighted-average exercise price of $3.13 per share; and 617,696 RSUs were issued and outstanding. As of June 30, 2021, no shares of restricted stock were granted under the 2011 Plan, and no such awards are expected to be granted prior to the offering; provided that certain options granted under the 2011 Plan are early exercisable and may be exercised for unvested shares of our common stock subject to a repurchase right. No new awards will be granted under the 2011 Plan after the offering.
Administration. Our 2011 Plan is administered by our board of directors or a committee appointed by our board of directors, referred to herein as the “administrator.” Subject to the terms of the 2011 Plan, the administrator has the authority to, among other things, select the persons to whom awards will be granted, construe and interpret our 2011 Plan, as well as to prescribe, amend, and rescind rules and regulations relating to the 2011 Plan and awards granted thereunder. The administrator may modify awards subject to the terms of the 2011 Plan.
Eligibility. Pursuant to the 2011 Plan, we may grant incentive stock options (“ISOs”) only to our employees or the employees of our parent or subsidiaries, as applicable (including officers and directors who are also employees). We may grant non-statutory stock options (“NQSOs”), RSUs, and shares of restricted stock to our employees (including officers and directors who are also employees), non-employee directors, and consultants, or the employees, directors, and consultants of our parent and subsidiaries, as applicable.
Options. The 2011 Plan provides for the grant of both (1) ISOs, which are intended to qualify for tax treatment as set forth under Section 422 of the Internal Revenue Code of 1988, as amended (“Code”) and (2) non-statutory stock options to purchase shares of our common stock, each at a stated exercise price. The exercise price of each option must be at least equal to the fair market value of our common stock on the date of grant (unless otherwise
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determined by the administrator). However, the exercise price of any ISO granted to an individual who owns more than ten percent of the total combined voting power of all classes of our capital stock must be at least equal to 110% of the fair market value of our common stock on the date of grant. The administrator will determine the vesting schedule applicable to each option. The maximum permitted term of options granted under our 2011 Plan is ten years from the date of grant, except that the maximum permitted term of ISOs granted to an individual who owns more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted Stock, RSUs. In addition, the 2011 Plan allows for the grant of restricted stock awards (“RSAs”) and RSUs, with terms as generally determined by the administrator (in accordance with the 2011 Plan) and to be set forth in an award agreement. We have not granted any shares of restricted stock under the 2011 Plan and no such awards are expected to be granted prior to the offering; provided that certain options granted under the 2011 Plan are early exercisable and may be exercised for unvested shares of our common stock subject to a repurchase right. As of June 30, 2021, we had 617,696 RSUs issued and outstanding.
Limited Transferability. Unless otherwise determined by the administrator, awards under the 2011 Plan generally may not be transferred or assigned other than by will, the laws of descent and distribution and, with respect to non-statutory stock options, by instrument to an inter vivos or testamentary trust in which the non-statutory stock options are to be passed to beneficiaries upon the death of the trustor, or by gift to a qualified family member.
Change of Control. In the event that we are subject to an “acquisition” or “other combination” (as defined in the 2011 Plan and generally meaning, collectively, a merger, a sale or transfer of more than 50% of the voting power of all of our outstanding securities, or a sale of all or substantially all of our assets), the 2011 Plan provides that awards will be subject to the agreement evidencing such acquisition or other combination, which agreement need not treat all awards in a similar manner. Such agreement may, without the participant’s consent, provide for the continuation of outstanding awards, the assumption or substitution of awards, the acceleration of vesting of awards, the settlement of awards (whether or not vested) in cash, securities, or other consideration, or the cancellation of such awards for no consideration.
Adjustments. In the event that the number of outstanding shares of our common stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, or similar change in our capital structure affecting our shares without consideration, then in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2011 Plan (1) the number of shares reserved for issuance under the 2011 Plan, (2) the exercise prices of and number of shares subject to outstanding options, and (3) the purchase prices of and/or number of shares subject to other outstanding awards will be proportionately adjusted (subject to required action by the board or our stockholders).
Exchange, Repricing, and Buyout of Awards. The administrator may, with the consent of the respective participants, issue new awards in exchange for the surrender and cancellation of any or all outstanding awards. The administrator may also buy an award previously granted with payment in cash, shares, or other consideration, in each case, subject to the terms of the 2011 Plan.
Amendment; Termination. Our board of directors may amend or terminate the 2011 Plan at any time and may terminate any and all outstanding options or RSUs upon a dissolution or liquidation of us, provided that certain amendments will require stockholder approval or participant consent. We expect to terminate the 2011 Plan and will cease issuing awards thereunder upon the effective date of our 2021 Equity Incentive Plan (described below), which is the date immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part. Any outstanding awards granted under the 2011 Plan will remain outstanding following the offering, subject to the terms of our 2011 Plan and applicable award agreements, until such awards are exercised or until they terminate or expire by their terms.
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2021 Equity Incentive Plan
In August 2021, our board of directors and our stockholders approved our 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to our 2011 Plan that will become effective on the date immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. The 2021 Plan authorizes the award of both ISOs, which are intended to qualify for tax treatment under Section 422 of the Code, and NQSOs, as well for the award of RSAs, stock appreciation rights (“SARs”), RSUs, and performance and stock bonus awards. Pursuant to the 2021 Plan, ISOs may be granted only to our employees. We may grant all other types of awards to our employees, directors, and consultants.
Share Reserve. We have initially reserved shares of our common stock, plus any reserved shares not issued or subject to outstanding grants under the 2011 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our talent and compensation committee, or by our board of directors acting in place of our talent and compensation committee.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our 2021 Plan:
•shares subject to options or SARs granted under our 2021 Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2021 Plan that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 Plan that otherwise terminate without such shares being issued;
•shares subject to awards granted under our 2021 Plan that are surrendered, canceled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options granted under our 2011 Plan that, after the effective date of the 2021 Plan, forfeited;
•shares subject to awards granted under our 2011 Plan that are forfeited or repurchased by us at the original price after the effective date of the 2021 Plan; and
•shares subject to awards under our 2011 Plan or our 2021 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
The shares of common stock underlying awards granted under the 2011 Plan that are forfeited, canceled, or otherwise returned to the 2021 Plan pursuant to the foregoing will become available for grant and issuance under the 2021 Plan.
Administration. Our 2021 Plan will be administered by our talent and compensation committee or by our board of directors acting in place of our talent and compensation committee. Subject to the terms and conditions of the 2021 Plan, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that the administrator may delegate its authority, including the authority to grant awards, to one or more
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executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Options. The 2021 Plan provides for the grant of both ISOs intended to qualify under Section 422 of the Code, and NQSOs to purchase shares of our common stock at a stated exercise price. ISOs may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our common stock on the date of grant. ISOs granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. ISOs may only be granted to employees, including officers and directors who are also employees, and no more than shares may be issued pursuant to incentive stock options. The maximum term of options granted under our 2021 Plan is ten years from the date of grant, except that the maximum permitted term of ISOs granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted Stock Awards. An RSA is an offer by us to grant or sell shares of our common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Holders of RSAs, unlike holders of options, will have the right to vote and any dividends or distributions paid with respect to such shares, which will be subject to the same vesting terms and other restrictions as the RSA and will be accrued and paid when the vesting terms on such shares lapse. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock Appreciation Rights. A SAR provides for a payment, in cash or shares of our common stock (up to a specified maximum of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
Restricted Stock Units. RSUs represent the right to receive the value of shares of our common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 Plan. No RSU may have a term that is longer than ten years from the date of grant.
Performance Awards. Performance awards granted pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock Bonus Awards. A stock bonus award provides for payment in the form of cash, shares of our common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend Equivalents Rights. Dividend equivalent rights may be granted at the discretion of the administrator and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our
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common stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only when the underlying award becomes vested or may be deemed to have been reinvested by us. Dividend equivalent rights, if any, will be credited to participants in the form of additional whole shares.
Change of Control. Our 2021 Plan provides that, in the event of a corporate transaction that constitutes a change of control of Remitly under the terms of the plan, outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (1) the continuation of the outstanding awards, (2) the assumption of the outstanding awards by the surviving corporation or its parent, (3) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards, (4) the full or partial acceleration of exercisability or vesting or lapse of our right to repurchase or other terms of forfeiture and accelerated expiration of the award, or (5) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the 2021 Plan, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change of control the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control. In the event the successor refuses to assume, convert, replace or substitute awards as provided above pursuant to a corporate transaction, such awards will vest and, as applicable, become exercisable, and our right to repurchase will lapse at a time to be determined by our talent and compensation committee and our talent and compensation committee will notify each participant that such award will, if exercisable, be exercisable for a period of time determined by the committee and expire after such period. The vesting of all awards held by non-employee directors will accelerate upon the consummation of a corporate transaction.
Adjustment. In the event of a change in the number or class of outstanding shares of our common stock by reason of a stock dividend, extraordinary dividend or distribution (other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off, or similar change in our capital structure, proportional adjustments will be made to (1) the number and class of shares reserved for issuance under our 2021 Plan, (2) the exercise prices, number and class of shares subject to outstanding options or SARs, (3) the number and class of shares subject to other outstanding awards and (4) the maximum number of shares that may be issued as ISOs under the 2021 Plan, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, Repricing and Buyout of Awards. The administrator may, without prior stockholder approval, (1) reduce the exercise price of outstanding options or SARs without the consent of any participant and (2) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 Plan.
Director Compensation Limits. No non-employee director may receive awards under our 2021 Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceed $750,000 in a calendar year or $1,000,000 in the calendar year of his or her initial services as a non-employee director on our board of directors.
Clawback; Transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
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Sub-plans. Subject to the terms of the 2021 Plan, the plan administrator may establish a sub-plan under the 2021 Plan and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment; Termination. Our board of directors or talent and compensation committee may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate ten years from the date our board of directors adopts the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 Plan.
2021 Employee Stock Purchase Plan
In August 2021, our board of directors and our stockholders approved our 2021 Employee Stock Purchase Plan (the “ESPP”) that will become effective upon the date the registration statement of which this prospectus forms a part becomes effective to enable eligible employees to purchase shares of our common stock with accumulated payroll deductions. Our ESPP is intended to qualify under Section 423 of the Code, provided that the administrator may adopt sub-plans under our ESPP designed to be outside of the scope of Section 423 for participants who are non-U.S. residents.
Share Reserve. We have initially reserved shares of our common stock for issuance and sale under our ESPP. The number of shares reserved for issuance and sale under our ESPP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our talent and compensation committee, or by our board of directors acting in place of our talent and compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than shares of our common stock may be issued over the term of our ESPP.
Administration. Our ESPP will be administered by our talent and compensation committee or by our board of directors acting in place of our talent and compensation committee, subject to the terms and conditions of our ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in our ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to our ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who have been employed for less than two years, are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in our ESPP, will not be eligible to participate in our ESPP. The administrator may impose additional restrictions on eligibility from time to time.
Offerings. Under our ESPP, eligible employees will be offered the option to purchase shares of our common stock at a discount over a series of offering periods through accumulated payroll deductions over the period. Each offering period may itself consist of one or more purchase periods. No offering period may be longer than 27 months. The purchase price for shares purchased under our ESPP during any given purchase period will be 85% of the lesser of the fair market value of our common stock on (1) the first trading day of the applicable offering period or (2) the last trading day of the purchase period.
No participant may purchase more than 2,000 shares of our common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined as of the
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date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion may set a lower maximum number of shares which may be purchased.
Adjustments Upon Recapitalization. If the number of outstanding shares of our common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the number of shares of our common stock that are available under our ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Change of Control. If we experience a change of control transaction as determined under the terms of our ESPP, any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge, or otherwise dispose of payroll deductions credited to his or her account or any rights with regard to an election to purchase shares pursuant to our ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The board of directors or talent and compensation committee may amend, suspend or terminate our ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under our ESPP, change the class or designation of employees eligible for participation in the plan or otherwise as required by law. If our ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, our ESPP will terminate upon the earlier to occur of the issuance of all shares of common stock reserved for issuance under our ESPP, or the tenth anniversary of the effective date.
401(k) Plan
We sponsor a retirement plan intended to qualify for favorable tax treatment under Section 401(a) of the Code, containing a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the Code. With certain exceptions, all employees who have attained at least 21 years of age are eligible to participate in the plan on the first day of the month occurring after the employee satisfies the eligibility requirements. Participants may make pre-tax contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit on contributions under the Code. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. An employee’s interest in his or her deferral contributions is 100% vested when contributed. We make discretionary and matching contributions, which contributions will be subject to vesting conditions, and may make discretionary profit sharing contributions.
Limitations on Liability and Indemnification Matters
Our amended and restated certificate of incorporation that will become effective in connection with this offering contains provisions that will limit the liability of our directors for monetary damages to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”). Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
•any breach of the director’s duty of loyalty to us or our stockholders;
•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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•unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•any transaction from which the director derived an improper personal benefit.
Our amended and restated certificate of incorporation and our restated bylaws that will become effective in connection with this offering will require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL. Subject to certain limitations, our restated bylaws will also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted, subject to very limited exceptions.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers, and certain of our other employees. These agreements, among other things, require us to indemnify our directors, officers, and key employees for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts actually and reasonably incurred by such director, officer, or key employee in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers, and key employees for the defense of any action for which indemnification is required or permitted.
We believe that these provisions in our amended restated certificate of incorporation and indemnification agreements are necessary to attract and retain qualified persons such as directors, officers, and key employees. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
At present, we are not aware of any pending litigation or proceeding arising out of any indemnitee’s service to us or any of our subsidiaries or any other company or enterprise to which the person provides services at our request, involving any person who is or was one of our directors, officers, employees, or other agents or is or was serving at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers, or persons controlling us, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We describe below transactions since January 1, 2018 to which we were a party or will be a party, in which the amounts involved exceeded or will exceed $120,000 and any of our directors, executive officers, or beneficial holders of more than 5% of any class of our capital stock had or will have a direct or indirect material interest. Other than as described below, there have not been transactions to which we have been a party other than compensation arrangements, which are described under “Executive Compensation.”
Series F Convertible Preferred Stock Financing
Between July 2020 and March 2021, we sold an aggregate of 9,622,110 shares of our Series F convertible preferred stock at a purchase price of $9.1456 per share for an aggregate purchase price of approximately $88.0 million. Each share of our Series F convertible preferred stock converts automatically into one share of our common stock immediately prior to the completion of this offering.
The purchasers of our Series F convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
The following table summarizes the Series F convertible preferred stock purchased by affiliates of members of our board of directors and holders of more than 5% of our outstanding capital stock:
| Name of Stockholder | Shares of Series F Convertible Preferred Stock | Total Purchase Price ($) | ||||||||||||
PayU Fintech Investments B.V.(1) | 5,740,465 | 52,499,997 | ||||||||||||
Stripes III LP(2) | 475,179 | 4,345,797 | ||||||||||||
Entities affiliated with Threshold Ventures(3) | 27,335 | 249,995 | ||||||||||||
Generation IM Sustainable Solutions Fund III, L.P.(4) | 1,640,132 | 14,999,991 | ||||||||||||
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(1)PayU Fintech Investments B.V. (together with its affiliates, “Naspers”) holds more than 5% of our outstanding capital stock. Laurent Le Moal, a member of our board of directors, is a member of the executive team of Prosus N.V., and Chief Executive Officer of PayU, which are affiliates of Naspers, and a designee of Naspers.
(2)Stripes III LP (“Stripes”) holds more than 5% of our outstanding capital stock. Ron Shah, a member of our board of directors, is a designee of Stripes.
(3)Consists of shares purchased by Threshold Ventures I, L.P. and Threshold Ventures I Partners Fund, LLC (collectively, “Threshold”), which holds more than 5% of our outstanding capital stock. William Bryant, a member of our board of directors, is a general partner and designee of Threshold.
(4)Generation IM Sustainable Solutions Fund III, L.P. (“Generation”) holds more than 5% of our outstanding capital stock. Bora Chung, a member of our board of directors, is a designee of Generation.
2019 Tender Offer
In September 2019, we commenced a tender offer to purchase up to an aggregate maximum of $24 million of shares of our outstanding common stock at a purchase price of $5.3609 per share of common stock and our outstanding Series Seed preferred stock, Series Seed Prime preferred stock and Series A convertible preferred stock (collectively, “eligible preferred stock”) at a purchase price of $5.6588 per share of eligible preferred stock pursuant to an Offer to Purchase. In October 2019, upon the closing of the tender offer, we repurchased an aggregate of 2,053,690 shares of our common stock for an aggregate repurchase price of approximately $11.0 million and repurchased an aggregate of 2,295,603 shares of eligible preferred stock for an aggregate repurchase price of
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approximately $13.0 million. Among other sellers, the following directors and executive officers participated in the tender offer:
•Matthew Oppenheimer, our President, Chief Executive Officer and Director, sold 211,753 shares of common stock for an aggregate price of approximately $1.1 million;
•Arthur Oppenheimer, a stockholder and an immediate family member of Matthew Oppenheimer, our President, Chief Executive Officer and Director, sold 79,980 shares of common stock for an aggregate price of approximately $0.5 million;
•Joshua Hug, our Chief Operating Officer, Secretary and Director, sold 161,314 shares of common stock for an aggregate price of approximately $0.9 million; and
•Trilogy Equity Partners, LLC, our 5% stockholder, sold 368,188 shares of Series A convertible preferred stock for an aggregate price of approximately $2.1 million.
Series E Convertible Preferred Stock Financing
Between May 2019 and July 2019, we sold an aggregate of 22,663,933 shares of our Series E convertible preferred stock at a purchase price of $5.9566 per share for an aggregate purchase price of approximately $135.0 million. Each share of our Series E convertible preferred stock converts automatically into one share of our common stock immediately prior to the completion of this offering.
The purchasers of our Series E convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
The following table summarizes the Series E convertible preferred stock purchased by affiliates of members of our board of directors and holders of more than 5% of our outstanding capital stock:
| Name of Stockholder | Shares of Series E Convertible Preferred Stock | Total Purchase Price($) | ||||||||||||
PayU Fintech Investments B.V.(1) | 1,678,810 | 10,000,000 | ||||||||||||
Stripes III LP(2) | 335,762 | 2,000,000 | ||||||||||||
Generation IM Sustainable Solutions Fund III, L.P.(3) | 10,072,860 | 59,999,998 | ||||||||||||
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(1)Naspers holds more than 5% of our outstanding capital stock. Laurent Le Moal, a member of our board of directors, is a member of the executive team of Prosus N.V., and Chief Executive Officer of PayU, which are affiliates of Naspers, and a designee of Naspers.
(2)Stripes holds more than 5% of our outstanding capital stock. Ron Shah, a member of our board of directors, is a partner and designee of Stripes.
(3)Generation IM Sustainable Solutions Fund III, L.P. holds more than 5% of our outstanding capital stock. Bora Chung, a member of our board of directors, is a designee of Generation.
Series D Convertible Preferred Stock Financing
Between November 2017 and February 2018, we sold an aggregate of 30,331,802 shares of our Series D convertible preferred stock at a purchase price of $3.7914 per share for an aggregate purchase price of approximately $115.0 million. Each share of our Series D convertible preferred stock converts automatically into one share of our common stock immediately prior to the completion of this offering.
The purchasers of our Series D convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
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The following table summarizes the Series D convertible preferred stock purchased by affiliates of members of our board of directors and holders of more than 5% of our outstanding capital stock:
| Name of Stockholder | Shares of Series D Convertible Preferred Stock | Total Purchase Price ($) | ||||||||||||
PayU Fintech Investments B.V.(1) | 26,375,481 | 99,999,999 | ||||||||||||
Stripes III LP(2) | 2,110,038 | 7,999,998 | ||||||||||||
Entities affiliated with Threshold Ventures(3) | 1,318,774 | 5,000,000 | ||||||||||||
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(1)Naspers holds more than 5% of our outstanding capital stock. Laurent Le Moal, a member of our board of directors, is a member of the executive team of Prosus N.V., and Chief Executive Officer of PayU, which are affiliates of Naspers, and a designee of Naspers.
(2)Stripes holds more than 5% of our outstanding capital stock. Ron Shah, a member of our board of directors, is a partner and designee of Stripes.
(3)Threshold holds more than 5% of our outstanding capital stock. William Bryant, a member of our board of directors, is a general partner and designee of Threshold.
Corporate Reorganization
In January 2019, we consummated a reorganization by forming Remitly Global, Inc. (“Remitly Global”), which was incorporated in Delaware on October 3, 2018, and Remitly Merger Sub, Inc. (“Merger Sub”) as a wholly owned subsidiary of Remitly Global. We merged Merger Sub with Remitly, Inc. as the surviving entity, by issuing identical shares of our capital stock to the stockholders of Remitly, Inc. in exchange for their equity interest in Remitly, Inc. After the merger, all of the stockholders of Remitly, Inc. became 100% stockholders of Remitly Global, and Remitly, Inc. became a wholly owned subsidiary of Remitly Global.
2018 Tender Offer
In December 2017, Remitly, Inc. commenced a tender offer to purchase up to an aggregate maximum of 3,956,322 shares of outstanding eligible preferred stock at a purchase price of $3.7914 per share in cash pursuant to an Offer to Purchase. In January 2018, upon the closing of the tender offer, we repurchased an aggregate of 3,956,322 shares of our common stock and eligible preferred stock for an aggregate repurchase price of approximately $15.0 million. Among other sellers, the following directors and executive officers participated in the tender offer:
•Matthew Oppenheimer, our President, Chief Executive Officer and director, sold 499,800 shares of common stock for an aggregate price of approximately $1.9 million;
•Arthur Oppenheimer, a stockholder and an immediate family member of Matthew Oppenheimer, our President, Chief Executive Officer and director, sold 59,161 shares of Series Seed preferred stock for an aggregate price of approximately $0.2 million; and
•Joshua Hug, our Chief Operating Officer and director, sold 381,276 shares of common stock for an aggregate price of approximately $1.4 million.
Loans to our Founders
In October 2018, in connection with the partial exercise of a stock option award granted under the 2011 Plan, we loaned Matthew Oppenheimer, our President, Chief Executive Officer, and director, $1.36 million at an interest rate of 2.83%. As collateral for the loan, an aggregate of 800,000 shares of our common stock beneficially owned by Mr. Oppenheimer were pledged to us pursuant to a stock pledge agreement dated October 7, 2018. The loan was repaid in full on August 23, 2021.
In October 2018, in connection with the exercise of a stock option award granted under the 2011 Plan, we loaned Joshua Hug, our Chief Operating Officer, Secretary and director, $1.7 million at an interest rate of 2.83%. As
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collateral for the loan, an aggregate of 1,000,000 shares of our common stock beneficially owned by Mr. Hug were pledged to us pursuant to a stock pledge agreement dated October 7, 2018. The loan was repaid in full on August 23, 2021.
Seventh Amended and Restated Investors’ Rights Agreement
We have entered into an amended and restated investors’ rights agreement with certain holders of our redeemable convertible preferred stock, including entities with which certain of our directors are affiliated. These stockholders are entitled to rights with respect to the registration of their shares following this offering. For a description of these registration rights, see the section titled “Description of Capital Stock—Registration Rights.” Other than these registration rights, all other terms of the amended and restated investors’ rights agreement will terminate in connection with this offering.
Indemnification Agreements
We will enter into indemnification agreements with each of our directors and executive officers. The indemnification agreements and our restated bylaws will require us to indemnify our directors to the fullest extent not prohibited by DGCL. Subject to very limited exceptions, our restated bylaws will also require us to advance expenses incurred by our directors and officers. For more information regarding these agreements, see the section titled “Executive Compensation—Limitations on Liability and Indemnification Matters.”
Policies and Procedures for Related Party Transactions
Our written related party transactions policy and the charters of our audit committee and nominating and corporate governance committee, which were adopted by our board of directors and will be in effect immediately prior to the completion of this offering, require that any transaction with a related person that must be reported under applicable rules of the SEC must be reviewed and approved or ratified by our audit and risk committee. However, if the related party is, or is associated with, a member of the audit and risk committee, the transaction must be reviewed and approved by our nominating and governance committee.
Prior to this offering we had no formal, written policy for the review and approval of related party transactions. However, our practice has been to have all related party transactions reviewed and approved by a majority of the disinterested members of our board of directors, including the transactions described above.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of June 30, 2021, and as adjusted to reflect the sale of common stock by us and the selling stockholders in this offering, for:
•each of our named executive officers;
•each of our directors;
•all of our current directors and executive officers as a group;
•each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock; and
•each selling stockholder.
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
Applicable percentage ownership is based on 153,796,274 shares of our common stock outstanding as of June 30, 2021, which assumes the conversion of all outstanding shares of convertible preferred stock into an aggregate of 127,410,631 shares of our common stock. For purposes of the table below, we have assumed that shares of common stock will be issued by us and the sale of shares of common stock by the selling stockholders in this offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options held by that person or entity that are currently exercisable or that will become exercisable within 60 days of June 30, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership
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of any other person. Unless otherwise indicated, the address of each beneficial owner in the table below is c/o Remitly Global, Inc., 1111 Third Avenue, Suite 2100, Seattle WA 98101.
| Shares Beneficially Owned Before this Offering | Number of Shares of Common Stock Being Offered | Shares Beneficially Owned After this Offering (assuming no exercise of the option to purchase additional shares) | Shares Beneficially Owned After this Offering (assuming full exercise of the option to purchase additional shares) | ||||||||||||||||||||||||||||||||||||||
| Name of Beneficial Owner | Shares | % | Shares | % | Shares | % | |||||||||||||||||||||||||||||||||||
| Named Executive Officers and Directors: | |||||||||||||||||||||||||||||||||||||||||
Matthew Oppenheimer(1) | 7,466,474 | 4.8 | |||||||||||||||||||||||||||||||||||||||
Joshua Hug(2) | 4,757,410 | 3.1 | |||||||||||||||||||||||||||||||||||||||
Susanna Morgan(3) | 1,321,667 | * | |||||||||||||||||||||||||||||||||||||||
William Bryant(4) | — | — | |||||||||||||||||||||||||||||||||||||||
| Bora Chung | — | — | |||||||||||||||||||||||||||||||||||||||
Laurent Le Moal(5) | — | — | |||||||||||||||||||||||||||||||||||||||
| Nigel Morris | — | — | |||||||||||||||||||||||||||||||||||||||
Phillip Riese(6) | 500,000 | * | |||||||||||||||||||||||||||||||||||||||
Ron Shah(7) | — | — | |||||||||||||||||||||||||||||||||||||||
| Margaret M. Smyth | — | — | |||||||||||||||||||||||||||||||||||||||
Charles Stonecipher(8) | — | — | |||||||||||||||||||||||||||||||||||||||
Total Executive Officers and Directors as a Group (11 people)(9) | 14,045,551 | 8.9 | |||||||||||||||||||||||||||||||||||||||
| 5% Stockholders: | |||||||||||||||||||||||||||||||||||||||||
PayU Fintech Investments B.V.(5) | 36,760,350 | 23.9 | |||||||||||||||||||||||||||||||||||||||
Stripes III LP(7) | 18,596,453 | 12.1 | |||||||||||||||||||||||||||||||||||||||
Entities affiliated with Threshold Ventures(4) | 14,421,913 | 9.4 | |||||||||||||||||||||||||||||||||||||||
Generation IM Sustainable Solutions Fund III, L.P.(10) | 12,306,523 | 8.0 | |||||||||||||||||||||||||||||||||||||||
Trilogy Equity Partners, LLC(8) | 9,516,597 | 6.2 | |||||||||||||||||||||||||||||||||||||||
| Other Selling Stockholders: | |||||||||||||||||||||||||||||||||||||||||
__________________
(*) Represents beneficial ownership of less than one percent.
(1)Represents (a) 5,388,447 shares of common stock and (b) 2,078,027 shares underlying options to purchase common stock that are exercisable within 60 days of June 30, 2021, of which 1,543,079 shares are unvested, early exercisable and, if exercised, subject to repurchase by us.
(2)Represents (a) 4,462,410 shares of common stock, of which 366,667 shares are unvested and subject to repurchase by us as of June 30, 2021 and (b) 295,000 shares underlying options to purchase common stock that are exercisable within 60 days of June 30, 2021, of which 280,417 shares are unvested, early exercisable and, if exercised, subject to repurchase by us.
(3)Represents (a) 395,000 shares of common stock and (b) 926,667 shares underlying options to purchase common stock that are exercisable within 60 days of June 30, 2021, of which 496,667 shares are unvested, early exercisable and, if exercised, subject to repurchase by us.
(4)Represents (a) 12,979,723 shares held by Threshold Ventures I, L.P. (“Threshold L.P.”) and (b) 1,442,190 shares held by Threshold Ventures I Partners Fund, LLC (“Threshold Partners LLC”). Threshold Ventures I General Partner LLC (“Threshold GP LLC”) is the general partner of Threshold L.P. Josh Stein and Andreas Stavropoulos are the managing members of each of Threshold GP LLC and Threshold Partners LLC, and thus may be deemed to have shared voting and dispositive control over the shares held by both Threshold L.P. and Threshold Partners LLC. William Bryant, a member of our board of directors, is a partner of Threshold Ventures, but has no voting or dispositive control over the shares held by Threshold L.P. or Threshold Partners LLC. The address for Threshold Partners LLC is 2882 Sand Hill Road, Suite 150, Menlo Park, CA 94025.
(5)Represents 36,760,350 shares held by PayU Fintech Investments B.V. (“PayU”). PayU is a subsidiary of MIH Fintech Holdings B.V., which in turn is a subsidiary of MIH e-Commerce Holdings B.V., which in turn is a subsidiary of MIH Internet Holdings B.V., which is in turn a subsidiary of Prosus N.V., which is an indirect, majority-owned subsidiary of Naspers Ltd. PayU is controlled by Prosus N.V. and Naspers Ltd., which share voting and dispositive control over the shares held by PayU. Laurent Le Moal, a member of our board of directors, is the Chief Executive Officer of PayU, but has no voting or dispositive control over the shares held by PayU. The address of PayU is Gustav Mahlerplein 5, 1082 MS, Amsterdam, Netherlands.
(6)Represents 500,000 shares underlying options to purchase common stock that are exercisable within 60 days of June 30, 2021. Such amount does not include 46,470 shares underlying a restricted stock unit award as of June 30, 2021, which shares have vested but will not be settled within 60 days of June 30, 2021.
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(7)Represents 18,596,453 shares of common stock held by Stripes III LP (“Stripes LP”). Stripes Holdings, LLC (“Stripes Holdings”) is the managing member of Stripes GP III, LLC (“Stripes GP”), which is the general partner of Stripes LP. Kenneth A. Fox is the managing member of Stripes Holdings and may be deemed to have sole voting and dispositive control over the shares held by Stripes LP. Ron Shah, a member of our board of directors, is a partner at Stripes GP but has no voting or dispositive control over the shares held by Stripes LP. The address of Stripes LP is 402 West 13th Street, 4th Floor, New York, NY 10014.
(8)Represents 9,516,597 shares of common stock held by Trilogy Equity Partners, LLC (“Trilogy”). John Stanton, Theresa Gillespie, Mikal Thomsen, Peter van Oppen, and Amy McCullough are the members of the board of managers of Trilogy, which has voting and dispositive power over the shares held by Trilogy. Charles Stonecipher, a member of our board of directors, is a managing director at Trilogy, but has no voting or dispositive control over the shares held by Trilogy. The address for Trilogy is 155 108th Ave NE, Suite 400, Bellevue, WA 98004.
(9)Represents (a) 10,245,857 shares of our common stock held directly and indirectly by our executive officers and directors; and (b) 3,779,694 shares of our common stock issuable to them upon exercise of stock options within 60 days of June 30, 2021, of which 2,320,163 shares are unvested and subject to repurchase by us. Such amount does not include 58,088 shares underlying a restricted stock unit award, which shares have vested but will not be settled within 60 days of June 30, 2021.
(10)Represents 12,306,523 shares held by Generation IM Sustainable Solutions Fund III, L.P. (“Generation III”). Al Gore, David Blood, Lisa Anderson, Mark Ferguson, Esther Gilmore, Alex Marshall, Miguel Nogales and Lila Preston are the members of the management committee, which has voting and dispositive power over the shares held by Generation III. The address for Generation III is PO BOX 255 Trafalgar Court, Les Banques, St Peter Port Guernsey, GYI 3QL (c/o 20 Air Street, London, W1B 5AN).
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DESCRIPTION OF CAPITAL STOCK
The following description summarizes the most important terms of our capital stock, as they will be in effect following this offering. Because it is only a summary, it does not contain all the information that may be important to you. We expect to adopt an amended and restated certificate of incorporation and restated bylaws that will become effective immediately prior to the completion of this offering, and this description summarizes provisions that are expected to be included in these documents. For a complete description, you should refer to our amended and restated certificate of incorporation and restated bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
Upon the completion of this offering, our authorized capital stock will consist of 725,000,000 shares of common stock, $0.0001 par value per share, and 50,000,000 shares of undesignated preferred stock, $0.0001 par value per share.
Pursuant to the provisions of our current certificate of incorporation, immediately prior to the completion of this offering, each outstanding share of our redeemable convertible preferred stock will automatically convert into common stock at a ratio of 1:1. Assuming the conversion of all outstanding shares of our redeemable convertible preferred stock into 127,410,631 shares of our common stock and the issuance of shares of our common stock based upon an assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, as of June 30, 2021, there were:
•153,796,274 shares of our common stock outstanding, held by 293 stockholders of record;
•25,355,906 shares of our common stock issuable upon exercise of outstanding stock options;
•617,696 shares of our common stock issuable upon the settlement of outstanding RSUs; and
•256,250 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock outstanding as of June 30, 2021.
Common Stock
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section titled “Dividend Policy.”
Voting Rights
Holders of our common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. We have not provided for cumulative voting for the election of directors in our amended and restated certificate of incorporation. Accordingly, holders of a majority of the shares of our common stock will be able to elect all of our directors. Our amended and restated certificate of incorporation establishes a classified board of directors, to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights, and is not subject to redemption or sinking fund provisions.
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Right to Receive Liquidation Distributions
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Preferred Stock
After the completion of this offering, no shares of our preferred stock will be outstanding. Following this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in our control and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.
Stock Options
As of June 30, 2021, we had outstanding stock options to purchase an aggregate of 25,355,906 shares of our common stock, with a weighted-average exercise price of $3.13 per share. Between June 30, 2021 and July 31, 2021, we granted stock options to purchase 231,500 shares of our common stock under the 2011 Plan, with an exercise price of $9.65 per share.
Warrants
As of June 30, 2021, we had outstanding warrants to purchase an aggregate of 256,250 shares of our common stock, with a weighted-average exercise price of $0.42 per share.
Registration Rights
Following the completion of this offering, the holders of shares of our common stock or their permitted transferees will be entitled to rights with respect to the registration of these shares under the Securities Act. These rights are provided under the terms of an amended and restated investors’ rights agreement between us and the holders of these shares, which was entered into in connection with our convertible preferred stock financings, and includes demand registration rights, Form S-3 registration rights, and piggyback registration rights. In any registration made pursuant to such amended and restated investors’ rights agreement, all fees, costs, and expenses of underwritten registrations will be borne by us and all selling expenses, including estimated underwriting discounts, selling commissions, and stock transfer taxes, will be borne by the holders of the shares being registered.
The registration rights terminate three years following the completion of this offering or, with respect to any particular stockholder, at the time that stockholder can sell all of its shares during any 90-day period pursuant to Rule 144 of the Securities Act.
Demand Registration Rights
The holders of an aggregate of shares of our common stock, or their permitted transferees, are entitled to demand registration rights at any time after the earlier of (1) five years after the date of the amended and
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restated investors rights agreement or (2) 180 days after the effective date of the registration statement for this offering. Under the terms of the amended and restated investors’ rights agreement, we will be required, upon the request of holders of at least 40% of the shares that are entitled to registration rights under the amended and restated investors’ rights agreement, to file a registration statement on Form S-1 to register, as soon as practicable and in any event within 90 days of the date of the request, all or a portion of these shares for public resale, if the aggregate price to the public of the shares offered is at least $15 million, net of selling expenses. We are required to effect only two registrations pursuant to this provision of the amended and restated investors’ rights agreement. We may postpone the filing of a registration statement for up to 90 days in a 12-month period if our board of directors determines that the filing would be materially detrimental to us. We are not required to effect a demand registration under certain additional circumstances specified in the amended and restated investors’ rights agreement, including at any time earlier than 180 days after the effective date of this offering.
Form S-3 Registration Rights
The holders of an aggregate of shares of our common stock or their permitted transferees are also entitled to Form S-3 registration rights. One or more holders of 40% of the outstanding shares having registration rights can request that we register all or part of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $3.0 million, net of selling expenses. We will be required, as soon as practicable and in any event within 45 days of the request, to file a registration statement on Form S-3 to register these shares for public resale. The holders may only require us to effect at most two registrations on Form S-3 in any 12-month period. We may postpone the filing of a registration statement for up to 90 days in a 12-month period if our board of directors determines that the filing would be materially detrimental to us. We are not required to effect a Form S-3 registration under certain additional circumstances specified in the amended and restated investors’ rights agreement.
Piggyback Registration Rights
If we register any of our common stock for public sale under the Securities Act and solely for cash, holders of an aggregate of shares of our common stock or their permitted transferees having registration rights will have the right to include their shares in the registration statement. However, this right does not apply to a registration relating to employee benefit plans, a registration relating to an SEC Rule 145 transaction, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the common stock, or a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered.
The underwriters of any underwritten offering will have the right to limit the number of shares registered by these holders if they determine that marketing factors require limitation, in which case the number of shares to be registered will be apportioned among the holders in such other proportion as shall mutually be agreed to by all such selling holders. However, the number of shares to be registered by these holders cannot be reduced (1) unless all other securities (other than securities to be sold by our company) are first excluded from the offering or (2) below 30% of the total shares covered by the registration statement, other than in the initial public offering.
Anti-Takeover Provisions
The provisions of the DGCL, various state money transmitter laws to which we are subject, our amended and restated certificate of incorporation, and our restated bylaws following this offering could have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and encourage persons seeking to acquire control of our company to first negotiate with our board of directors or seek approval from the appropriate regulators. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
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Section 203 of the DGCL
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
•before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
•upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans in some instances, but not the outstanding voting stock owned by the interested stockholder; or
•at or after the time the stockholder became interested, the business combination was approved by our board and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines a business combination to include:
•any merger or consolidation involving the corporation and the interested stockholder;
•any sale, transfer, lease, pledge, or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
•subject to exceptions, any transaction that results in the issuance of transfer by the corporation of any stock of the corporation to the interested stockholder;
•subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and
•the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Money Transmitter Licensing Statutes
Acquisitions of our stock above certain thresholds will be subject to prior regulatory notice or approval under state money transmitter licensing laws. While state statutes governing money transmitters vary, most require investors to receive the approval of, or provide notice to, the relevant licensing authority before exceeding a certain ownership threshold, including indirect ownership, in a licensed money transmitter. These ownership thresholds vary by state, with the lowest being at 10% of voting or non-voting shares outstanding. Accordingly, current or prospective investors seeking to acquire 10% or greater ownership of our stock in the aggregate would need to first obtain such regulatory approvals and provide such notices to the relevant regulators.
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Amended and Restated Certificate of Incorporation and Restated Bylaw Provisions
Our amended and restated certificate of incorporation and our restated bylaws will include a number of provisions that may have the effect of deterring hostile takeovers, or delaying or preventing changes in control of our management team or changes in our board of directors or our governance or policy, including the following:
•Board Vacancies. Our restated bylaws and certificate of incorporation will authorize generally only our board of directors to fill vacant directorships resulting from any cause or created by the expansion of our board of directors. In addition, the number of directors constituting our board of directors may be set only by resolution adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
•Classified Board. Our amended and restated certificate of incorporation and restated bylaws will provide that our board of directors is classified into three classes of directors. The existence of a classified board of directors could delay a successful tender offeror from obtaining majority control of our board of directors, and the prospect of that delay might deter a potential offeror. See the section titled “Management—Corporate Governance—Classified Board of Directors” for additional information.
•Directors Removed Only for Cause. Our amended and restated certificate of incorporation will provide that stockholders may remove directors only for cause.
•Supermajority Requirements for Amendments of Our Amended and Restated Certificate of Incorporation and Restated Bylaws. Our amended and restated certificate of incorporation will further provide that the affirmative vote of holders of at least 66 2/3% of our outstanding common stock will be required to amend certain provisions of our amended and restated certificate of incorporation, including provisions relating to the classified board, the size of the board of directors, removal of directors, special meetings, actions by written consent, and designation of our preferred stock. The affirmative vote of holders of at least 66 2/3% of our outstanding common stock will be required to amend or repeal our restated bylaws, although our restated bylaws may be amended by a simple majority vote of our board of directors.
•Stockholder Action; Special Meetings of Stockholders. Our amended and restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Our amended and restated certificate of incorporation and our restated bylaws will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of our board of directors, or our Chief Executive Officer, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.
•Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our restated bylaws also will specify certain requirements regarding the form and content of a stockholder’s notice. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
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•No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation and restated bylaws will not provide for cumulative voting.
•Issuance of Undesignated Preferred Stock. We anticipate that after the filing of our amended and restated certificate of incorporation, our board will have the authority, without further action by the stockholders, to issue up to shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock enables our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or otherwise.
•Choice of Forum. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court which recently found that such provisions are facially valid under Delaware law or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and the Federal Forum Provision will, to the fullest extent permitted by law, apply to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court, to the fullest extent permitted by law. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC. The transfer agent’s address is 6201 15th Avenue, Brooklyn, NY 11219, and its telephone number is (800) 937-5449.
Exchange Listing
We have to applied to list our common stock on the Nasdaq Global Select Market under the symbol “RELY.”
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding stock options, shares issued upon settlement of RSUs and shares issued upon exercise of outstanding warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, based on the shares of our common stock outstanding as of June 30, 2021, we will have a total of shares of our common stock outstanding. Of these outstanding shares, all of the shares of common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, only would be able to be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, each of our directors, executive officers, and the holders of substantially all of our outstanding equity securities have entered into market standoff agreements with us or will be subject to a lock-up period under the lock-up agreements described below.
As a result of the market standoff agreements with us or lock-up agreements with the underwriters and subject to the provisions of Rule 144 and Rule 701, shares of our common stock will be available for sale in the public market as follows:
•beginning on the first trading day on which our common stock is traded on Nasdaq, all of the shares sold in this offering will be immediately available for sale in the public market;
•beginning on the first trading day on which our common stock is traded on Nasdaq, up to approximately shares will become eligible for sale in the public market, which shares are held by our current and former service providers (includes approximately shares issuable upon exercise of vested options);
•immediately prior to the commencement of trading on November 24, 2021, up to approximately shares (includes approximately shares issuable upon exercise of vested options and vesting of RSUs) may become eligible for sale in the public market if (i) we release our earnings announcement for the quarter ending September 30, 2021 on or before November 15, 2021 and (ii) the closing price of our common stock on the Nasdaq is at least 20% greater than the price per share set forth on the cover page of this prospectus for at least four of the five trading days during the period commencing on November 15, 2021 and ending on November 19, 2021;
•on the 181st day after the date of this prospectus (subject to earlier termination if such date would occur during a blackout period under our insider trading policy as described under the section titled “Underwriting”), all remaining shares held by our stockholders not previously eligible for sale, subject to the volume and other restrictions of Rule 144 applicable to affiliates, as described below, will become eligible for sale in the public market.
Lock-Up Agreements
All of our executive officers, directors and other holders of substantially all of our equity securities are subject to lock-up agreements that prohibit them from offering for sale, selling, contracting to sell, pledging, granting any
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option to purchase, lend or otherwise dispose of any shares of our common stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of such common stock (such options, warrants or other securities, collectively, “derivative instruments”), engaging in any hedging or other transaction or arrangement which is designed to or which reasonably could be expected to lead to or result in a sale, loan, pledge or other disposition or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of any shares of such common stock or derivative instruments, or publicly disclosing the intention to engage in any such transaction, for a period of 180 days following the date of this prospectus, subject to earlier termination if such date would occur during a blackout period under our insider trading policy as described under the section titled “Underwriting”, without the prior written consent of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC , provided that:
•The First Release: on the first trading day on which our common stock is traded on Nasdaq, up to 15% of the shares of our common stock (including shares issuable upon exercise of options and shares of common stock that are subject to vesting conditions due to the early exercise of options that, in each case, will vest on or prior to September 30, 2021) held by current or former employees, consultants and advisors (excluding our current executive officers and directors) on the date of the initial preliminary prospectus filed in connection with this offering may be sold; and
•The Second Release: if the conditions to the Second Release described under the section titled “Underwriting” are satisfied, then beginning on November 24, 2021:
◦current or former employees, consultants and advisors (excluding our current executive officers and directors) may sell up to 15% of the shares of common stock held as of November 19, 2021 (including shares issuable upon exercise of options, shares of common stock that are subject to vesting conditions due to the early exercise of options and RSUs that, in each case, will vest on or prior to December 15, 2021) (the “Second Release Eligible Securities”); and
◦all other stockholders may sell up to the greater of (x) the number of shares of common stock that would result in receipt of net proceeds to the holder in an amount equal to the exercise and tax costs incurred by such holder with respect to options exercised in the 18 months preceding this offering and (y) 15% of the Second Release Eligible Securities.
We currently expect that the number of shares eligible to be sold in the First Release would equal approximately shares, including approximately shares issuable upon exercise of vested options. We currently expect that the number of shares eligible to be sold in the Second Release would equal approximately shares, including approximately shares issuable upon exercise of vested options and settlement of RSUs and assuming all shares that were eligible to be sold on the First Release were sold during such period.
These lock-up agreements are also subject to certain customary exceptions. Additionally, if the 180-day lock-up period is scheduled to end during a broadly applicable period during which trading in our securities would not be permitted under our insider trading policy, or a blackout period, or within the five trading days prior to a blackout period, then the lock-up period applicable to our directors, officers, and securityholders will instead end prior to the commencement of trading on the second trading day following the release of our regular earnings announcement for the fiscal year ended December 31, 2021; provided that in no event will the lock-up period end prior to 120 days after the date of this prospectus. We will publicly announce the date of any early release described in this paragraph at least two trading days prior to such early release. See the section titled “Underwriting” for additional information.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled
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to sell those shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
•1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or
•the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
Stock Options and Restricted Stock Units
As soon as practicable after the completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act covering all of the shares of our common stock subject to outstanding options and restricted stock units and the shares of common stock reserved for issuance under our equity incentive plans. In addition, we intend to file a registration statement on Form S-8 or such other form as may be required under the Securities Act for the resale of shares of our common stock issued upon the exercise of options that were not granted under Rule 701. We expect to file this registration statement as soon as permitted under the Securities Act. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice, and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject.
Registration Rights
We have granted demand, piggyback, and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. For a further description of these rights, see the section titled “Description of Capital Stock—Registration Rights.”
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK
The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the alternative minimum tax or the Medicare contribution tax on net investment income, and does not deal with state or local taxes, U.S. federal gift or estate tax laws (except to the limited extent provided below), or any non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular circumstances.
Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Internal Revenue Code of 1988, as amended (the “Code”), such as:
•insurance companies, banks, and other financial institutions;
•tax-exempt organizations (including private foundations) and tax-qualified retirement plans;
•persons required for U.S. federal income tax purposes to conform the timing of income accruals to their financial statements under Section 451(b) of the Code;
•“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;
•non-U.S. governments and international organizations;
•broker-dealers and traders in securities;
•U.S. expatriates and certain former citizens or long-term residents of the United States;
•persons that own, or are deemed to own, more than five percent of our common stock;
•“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
•persons that hold our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” or integrated investment or other risk reduction strategy;
•persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); and
•partnerships and other pass-through entities, and investors in such pass-through entities (regardless of their places of organization or formation).
Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them.
Furthermore, the discussion below is based upon the provisions of the Code, Treasury Regulations, rulings, and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked, or modified, possibly retroactively, and are subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service (the “IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or that the IRS will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not be sustained by a court.
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PERSONS CONSIDERING THE PURCHASE OF OUR COMMON STOCK PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION, INCLUDING ANY STATE, LOCAL, OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
For the purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of common stock that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. A “U.S. Holder” means a beneficial owner of our common stock that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof, 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 (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
If you are an individual non-U.S. citizen, you may be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted.
Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.
Distributions
We do not anticipate paying any distributions on our common stock in the foreseeable future. If we do make distributions on our common stock, however, such distributions made to a Non-U.S. Holder of our common stock will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common stock as described below under “—Gain on Disposition of Our Common Stock.”
Any distribution on our common stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the Non-U.S. Holder’s behalf, the Non-U.S. Holder will be required to provide appropriate documentation to such agent. The Non-U.S. Holder’s agent will then be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax
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under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the Non-U.S. Holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to the applicable withholding agent. In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments.
See also the section below titled “—Foreign Accounts” for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Gain on Disposition of Our Common Stock
Subject to the discussions below per the sections titled “—Backup Withholding and Information Reporting” and “—Foreign Accounts,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other disposition of our common stock unless (1) the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the holder maintains in the United States), (2) the Non-U.S. Holder is a nonresident alien individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (3) we are or have been a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or the Non-U.S. Holder’s holding period in the common stock.
If you are a Non-U.S. Holder, gain described in (1) above will be subject to tax on the net gain derived from the sale at the regular U.S. federal income tax rates applicable to U.S. persons. If you are a corporate Non-U.S. Holder, gain described in (1) above may also be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an individual Non-U.S. Holder described in (2) above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by certain U.S. source capital losses (even though you are not considered a resident of the United States), provided you have timely filed U.S. federal income tax returns with respect to such losses. With respect to (3) above, in general, we would be a U.S. real property holding corporation if U.S. real property interests (as defined in the Code and the Treasury Regulations) comprised (by fair market value) at least half of our assets. We believe that we are not, and do not anticipate becoming, a U.S. real property holding corporation. However, there can be no assurance that we will not become a U.S. real property holding corporation in the future. Even if we are treated as a U.S. real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly, and constructively, no more than five percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the Non-U.S. Holder’s holding period and (2) our common stock is regularly traded on an established securities market for purposes of the relevant rules. There can be no assurance that our common stock will qualify as regularly traded on an established securities market for this purpose.
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and, therefore, will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise. The terms “resident” and “nonresident”
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are defined differently for U.S. federal estate tax purposes than for U.S. federal income tax purposes. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the ownership or disposition of our common stock.
Backup Withholding and Information Reporting
Generally, we or an applicable withholding agent must report information to the IRS with respect to any dividends we pay on our common stock, including the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the Non-U.S. Holder to whom any such dividends are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.
Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise establishes an exemption, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.
Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or through a U.S. office of any broker, U.S. or non-U.S., unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise meets documentary evidence requirements for establishing non-U.S. person status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the Non-U.S. Holder is, in fact, a U.S. person. For information reporting purposes only, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.
Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine whether you are able to obtain a tax refund or credit of the overpaid amount.
Foreign Accounts
In addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act (“FATCA”), on certain types of payments, including dividends on our common stock, made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution agrees to undertake certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial U.S. owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. The 30% federal withholding tax described in this paragraph is not generally subject to reduction under income tax treaties with the United States. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under previously finalized Treasury Regulations and administrative guidance, withholding under FATCA generally also would apply to payments of gross proceeds from
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the sale or other disposition of common stock, but proposed Treasury Regulations provide that no withholding will apply with respect to payments of gross proceeds with respect to the disposition of our common stock. The preamble to the proposed regulations specifies that taxpayers are permitted to rely on such proposed Treasury Regulations pending finalization.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
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UNDERWRITING
We, the selling stockholders and the underwriters named below will enter into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter will severally agree to purchase the number of shares of common stock indicated in the following table. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and William Blair & Company, L.L.C. are the representatives of the underwriters.
| Underwriters | Number of Shares | ||||
| Goldman Sachs & Co. LLC | |||||
| J.P. Morgan Securities LLC | |||||
| Barclays Capital Inc. | |||||
| Citigroup Global Markets Inc. | |||||
| William Blair & Company, L.L.C. | |||||
| JMP Securities LLC | |||||
| KeyBanc Capital Markets Inc. | |||||
| Nomura Securities International, Inc. | |||||
| Total | |||||
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
The underwriters have an option to buy up to an additional shares of common stock from the selling stockholders to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days from the date of this prospectus. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares from the selling stockholders.
| Per Share | Total | ||||||||||||||||||||||
| No Exercise | Full Exercise | No Exercise | Full Exercise | ||||||||||||||||||||
| Underwriting discounts and commissions paid by: | |||||||||||||||||||||||
| Us | |||||||||||||||||||||||
| The selling stockholders | |||||||||||||||||||||||
| Expenses payable by us | |||||||||||||||||||||||
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Certain of the underwriters may offer and sell the shares through one or more of their respective affiliates or other registered broker-dealers or selling agents. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
Our executive officers, directors and other holders of substantially all of our equity securities, have agreed with the underwriters, subject to certain exceptions, not to, except with the prior written consent of Goldman Sachs & Co.
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LLC and J.P. Morgan Securities LLC, in their sole discretion, through the date 180 days after the date of this prospectus:
•offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of any shares of common stock, or any options or warrants to purchase any shares of such common stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of such common stock (we refer to such options, warrants or other securities, collectively, as derivative instruments);
•engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to or which reasonably could be expected to lead to or result in a sale, loan, pledge or other disposition or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of any shares of such common stock or derivative instruments, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of such common stock or other securities, in cash or otherwise; or
•otherwise publicly announce any intention to engage in any of the foregoing.
Notwithstanding the foregoing,
•The First Release: on the first trading day on which our common stock is traded on Nasdaq, up to 15% of the shares of our common stock (including shares issuable upon exercise of options and shares of common stock that are subject to vesting conditions due to the early exercise of options that, in each case, will vest on or prior to September 30, 2021) held by current or former employees, consultants and advisors (excluding our current executive officers and directors) on the date of the initial preliminary prospectus filed in connection with this offering may be sold; and
•The Second Release: if we have announced our earnings results for the quarter ended September 30, 2021 by November 15, 2021 and the last reported closing price of our common stock is at least 20% greater than the initial public offering price for 4 out of 5 trading days during the period commencing on November 15, 2021 and ending on November 19, 2021, then beginning on November 24, 2021:
▪current or former employees, consultants and advisors (excluding our current executive officers and directors) may sell up to 15% of the shares of common stock held as of November 19, 2021 (including shares issuable upon exercise of options, shares of common stock that are subject to vesting conditions due to the early exercise of options and RSUs that, in each case, will vest on or prior to December 15, 2021) (the “Second Release Eligible Securities”); and
▪all other stockholders may sell up to the greater of (x) the number of shares of common stock that would result in receipt of net proceeds to the holder in an amount equal to the exercise and tax costs incurred by such holder with respect to options exercised in the 18 months preceding this offering and (y) 15% of the Second Release Eligible Securities.
The foregoing restrictions do not apply to, among other things, and subject in certain cases to various conditions (including no filing requirements and the transfer of the lock-up restrictions), to transfers of common stock or derivative instruments:
i.acquired in open market transactions after the completion of this offering;
ii.as a bona fide gift or charitable contribution, or for bona fide estate planning purposes;
iii.to an immediate family member or a trust, partnership, limited liability company or any other entity for the direct or indirect benefit of the lock-up party or an immediate family member of such lock-up party;
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iv.to any beneficiary of or estate of a beneficiary of the lock-up party pursuant to a trust, will, other testamentary document or intestate succession or applicable laws of descent in connection with the death of the lock-up party;
v.by operation of law, such as pursuant to a qualified domestic order of a court (including a divorce settlement, divorce decree or separation agreement) or regulatory agency;
vi.to limited partners, general partners, members, stockholders or holders of similar equity interests of the lock-up party, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the lock-up party, or to any affiliates of the lock-up party (including, for the avoidance of doubt, where the lock-up party is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership, and where the lock-up party is a corporation, to any wholly-owned subsidiary of such corporation);
vii.if the lock-up party is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust;
viii.to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (ii) through (vii);
ix.to us or our subsidiaries in connection with the repurchase of the lock-up party’s shares in connection with the termination of such lock-up party’s employment or any other relationship with us pursuant to contractual agreements with us;
x.through the disposition or forfeiture of the lock-up party’s shares to us or our subsidiaries to satisfy any income, employment or tax withholding and remittance obligations of the lock-up party or the employer of the lock-up party in connection with the vesting of restricted stock, restricted stock units or other incentive awards settled in shares of common stock held by the lock-up party or the payment due for the exercise of options (including a transfer to us for the “net” or “cashless” exercise of options);
xi.to us or our subsidiaries through the exercise of a stock option granted under a stock incentive plan or stock purchase plan or a warrant described in this prospectus by the lock-up party, and the receipt by the lock-up party from us of shares of common stock upon any such exercise;
xii.pursuant to a bona fide third party tender offer for all outstanding common stock, merger, consolidation or other similar transaction involving a change of control of us and approved by our board of directors;
xiii.to us in connection with the reclassification, repurchase, redemption, conversion or exchange of our common stock or outstanding preferred stock in connection with the consummation of this offering;
xiv.sales of shares of common stock pursuant to the terms of the Underwriting Agreement; or
xv.in the case of our Chief Executive Officer and Chief Operating Officer, as an existing pledge by the lock-up party that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction for so long as the lock-up party continues to exercise voting control over such pledged shares.
Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.
Additionally, if the 180-day lock-up period is scheduled to end during a broadly applicable period during which trading in our securities would not be permitted under our insider trading policy, or a blackout period, or within the five trading days prior to a blackout period, then the lock-up period applicable to our directors, officers, and securityholders will instead end prior to the commencement of trading on the second trading day following the release of our regular earnings announcement for the fiscal year ended December 31, 2021; provided that in no event
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will the lock-up period end prior to 120 days after the date of this prospectus. We will publicly announce the date of any early release described in this paragraph at least two trading days prior to such early release.
We have agreed with the underwriters, subject to certain exceptions, not to, except with the prior written consent of , during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus:
•offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or publicly file with the SEC a registration statement under the Securities Act relating to, any shares of common stock, or any derivative instruments;
•enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock, or any derivative instruments; or
•otherwise publicly announce any intention to engage in any of the foregoing.
Prior to the offering, there has been no public market for the shares of our common stock. The initial public offering price will be negotiated among us. the selling stockholders, and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “RELY.”
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of
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these activities at any time. These transactions may be effected on the , in the over-the-counter market or otherwise.
We estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $ million. We have agreed to reimburse the underwriters for certain expenses incurred by them in connection with the offering, including up to $ relating to the clearance of this offering with FINRA. We, the selling stockholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of our shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make internet distributions on the same basis as other allocations.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to us and to persons and entities with relationships with us, for which they received or will receive customary fees and expenses. Affiliates of certain of the underwriters are also lenders under our Credit Agreement and may be lenders under the New Revolving Credit Facility in the future. In the ordinary course of our business, we have relationships with affiliates of certain of the underwriters governing payment acceptance.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of ours (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Selling Restrictions
European Economic Area
In relation to each member state of the EEA (each a “Relevant State”), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
(a)to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
(b)to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of representatives; or
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(c)in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of the shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters have been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to the shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
(a)to any legal entity which is a qualified investor as defined under Article 2 of the U.K. Prospectus Regulation;
(b)to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the U.K. Prospectus Regulation), subject to obtaining the prior consent of the representatives; or
(c)in any other circumstances falling within Section 86 of the FSMA;
provided that no such offer of the shares shall require us or any underwriter to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the U.K. Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression “U.K. Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the shares may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to us.
All applicable provisions of the FSMA must be complied with in respect to anything done by any person in relation to the shares of our common stock in, from or otherwise involving the United Kingdom.
Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the
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Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Canada
The shares may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong by means of any document other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore
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(the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where the shares are subscribed for or purchased under Section 275 of the SFA by a relevant person which is:
(a)a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b)a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
(1)to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(2)where no consideration is or will be given for the transfer;
(3)where the transfer is by operation of law;
(4)as specified in Section 276(7) of the SFA; or
(5)as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Solely for the purposes of its obligations pursuant to Section 309B of the SFA, we have determined, and hereby notify all relevant persons (as defined in the CMP Regulations 2018), that the shares are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Japan
The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
China
This prospectus will not be circulated or distributed in the PRC and the shares will not be offered or sold, and will not be offered or sold to any person for re-offering or resale directly or indirectly, to any residents of the PRC except pursuant to any applicable laws and regulations of the PRC. Neither this prospectus nor any advertisement or other offering material may be distributed or published in the PRC, except under circumstances that will result in compliance with applicable laws and regulations.
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Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Brazil
The shares have not been, and will not be, registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários) (the “CVM”). The shares may not be offered or sold in Brazil, except in circumstances that do not constitute a public offering or unauthorized distribution under Brazilian laws and regulations. The shares are not being offered into Brazil. Documents relating to the offering of the shares, as well as information contained therein, may not be supplied to the public in Brazil, nor be used in connection with any public offer for subscription or sale of the shares to the public in Brazil.
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LEGAL MATTERS
Fenwick & West LLP, Seattle, Washington, which has acted as our counsel in connection with this offering, will pass upon the validity of the issuance of the shares of our common stock offered by this prospectus. Davis Polk & Wardwell LLP, New York, New York, is acting as counsel to the underwriters.
EXPERTS
The consolidated financial statements as of December 31, 2019 and 2020 and for the years then ended included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock covered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and our common stock, we refer you to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance, we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy, and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
Immediately upon the effectiveness of the registration statement of which this prospectus forms a part, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the website of the SEC referred to above. We also maintain a website at www.remitly.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The inclusion of our website address in this prospectus is an inactive textual reference only. The information contained in or accessible through our website is not part of this prospectus or the registration statement of which this prospectus forms a part, and investors should not rely on such information in making a decision to purchase shares of our common stock.
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REMITLY GLOBAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
| Financial Statement Schedules. | |||||
| Schedule II—Valuation and Qualifying Accounts | |||||
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Remitly Global, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Remitly Global, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive loss, of redeemable convertible preferred stock and stockholders' deficit and of cash flows for the years then ended, including the related notes and schedule of valuation and qualifying accounts for the years ended December 31, 2020 and 2019 appearing under Item 16(b) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ PricewaterhouseCoopers LLP | |||||
| Seattle, Washington | |||||
| April 1, 2021 | |||||
We have served as the Company's auditor since 2016.
F-2
REMITLY GLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| As of December 31, | June 30, | ||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Assets | |||||||||||||||||
| Current assets | |||||||||||||||||
| Cash and cash equivalents | $ | 182,354 | $ | 186,694 | $ | 173,363 | |||||||||||
| Disbursement prefunding | 31,839 | 101,558 | 51,248 | ||||||||||||||
| Customer funds receivable | 29,522 | 50,729 | 59,567 | ||||||||||||||
| Prepaid expenses and other current assets | 4,816 | 6,350 | 12,188 | ||||||||||||||
| Total current assets | 248,531 | 345,331 | 296,366 | ||||||||||||||
| Restricted cash | 1,166 | 1,381 | 271 | ||||||||||||||
| Property and equipment, net | 9,353 | 9,675 | 9,397 | ||||||||||||||
| Operating lease right-of-use assets | 6,458 | 5,605 | 4,518 | ||||||||||||||
| Other non-current assets | 551 | 997 | 2,081 | ||||||||||||||
| Total assets | $ | 266,059 | $ | 362,989 | $ | 312,633 | |||||||||||
| Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Deficit | |||||||||||||||||
| Current liabilities | |||||||||||||||||
| Accounts payable | $ | 202 | $ | 4,256 | $ | 7,332 | |||||||||||
| Borrowings | 45,000 | 80,000 | — | ||||||||||||||
| Customer liabilities | 83,015 | 54,819 | 72,398 | ||||||||||||||
| Accrued expenses and other current liabilities | 13,735 | 39,742 | 47,930 | ||||||||||||||
| Operating lease liabilities | 2,618 | 2,959 | 2,826 | ||||||||||||||
| Total current liabilities | 144,570 | 181,776 | 130,486 | ||||||||||||||
| Operating lease liabilities, non-current | 5,397 | 4,008 | 2,703 | ||||||||||||||
| Other non-current liabilities | 15 | 827 | 892 | ||||||||||||||
| Total liabilities | 149,982 | 186,611 | 134,081 | ||||||||||||||
| Commitments and contingencies (Note 14) | |||||||||||||||||
| Redeemable convertible preferred stock, $0.0001 par value; 122,833,938, 132,674,735 and 132,674,735 shares authorized as of December 31, 2019, December 31, 2020 and June 30, 2021 (unaudited), respectively; 117,788,521, 127,082,605 and 127,410,631 shares issued and outstanding as of December 31, 2019, December 31, 2020 and June 30, 2021 (unaudited), respectively; liquidation preference of $314,815, $399,815, and $402,815 as of December 31, 2019 and 2020 and June 30, 2021 (unaudited), respectively | 302,873 | 387,707 | 390,687 | ||||||||||||||
| Stockholders' deficit | |||||||||||||||||
| Common stock, $0.0001 par value; 168,000,000 as of December 31, 2019 and 190,000,000 shares authorized as of December 31, 2020 and June 30, 2021 (unaudited), respectively; 22,425,112, 24,289,906 and 26,385,643 shares issued and outstanding, as of December 31, 2019, December 31, 2020 and June 30, 2021 (unaudited), respectively | 2 | 2 | 3 | ||||||||||||||
| Additional paid-in capital | 1,292 | 8,766 | 17,193 | ||||||||||||||
| Accumulated other comprehensive income | 34 | 591 | 575 | ||||||||||||||
| Accumulated deficit | (188,124) | (220,688) | (229,906) | ||||||||||||||
| Total stockholders' deficit | (186,796) | (211,329) | (212,135) | ||||||||||||||
| Total liabilities, redeemable convertible preferred stock, and stockholders' deficit | $ | 266,059 | $ | 362,989 | $ | 312,633 | |||||||||||
F-3
REMITLY GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
Revenue | $ | 126,567 | $ | 256,956 | $ | 105,149 | $ | 202,106 | |||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
Transaction Expenses(1) | 55,858 | 110,414 | 46,210 | 87,615 | |||||||||||||||||||
Customer Support and Operations(1) | 17,445 | 25,428 | 10,163 | 20,430 | |||||||||||||||||||
Marketing(1) | 43,542 | 73,804 | 32,107 | 52,274 | |||||||||||||||||||
Technology and Development(1) | 32,008 | 40,777 | 19,059 | 26,842 | |||||||||||||||||||
General and Administrative(1) | 25,658 | 31,656 | 14,341 | 22,890 | |||||||||||||||||||
| Depreciation and Amortization | 2,658 | 4,060 | 1,857 | 2,571 | |||||||||||||||||||
| Total costs and expenses | 177,169 | 286,139 | 123,737 | 212,622 | |||||||||||||||||||
| Loss from operations | (50,602) | (29,183) | (18,588) | (10,516) | |||||||||||||||||||
| Interest income | 1,111 | 273 | 174 | 10 | |||||||||||||||||||
| Interest expense | (1,608) | (1,189) | (780) | (536) | |||||||||||||||||||
| Other (expense) income, net | (34) | (1,302) | (1,496) | 2,648 | |||||||||||||||||||
| Loss before provision for income taxes | (51,133) | (31,401) | (20,690) | (8,394) | |||||||||||||||||||
| Provision for income taxes | 259 | 1,163 | 440 | 824 | |||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Deemed dividend on redeemable convertible preferred stock | (12,134) | — | — | — | |||||||||||||||||||
| Net loss attributable to common stockholders | $ | (63,526) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic and diluted | $ | (2.98) | $ | (1.52) | $ | (1.01) | $ | (0.40) | |||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic and diluted | 21,290,784 | 21,459,062 | 20,840,834 | 23,216,865 | |||||||||||||||||||
_______________
(1) Exclusive of depreciation and amortization, shown separately, above
F-4
REMITLY GLOBAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | 67 | 557 | (63) | (16) | |||||||||||||||||||
| Comprehensive loss | $ | (51,325) | $ | (32,007) | $ | (21,193) | $ | (9,234) | |||||||||||||||
F-5
REMITLY GLOBAL, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND DECEMBER 31, 2020
(In thousands, except share amounts)
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of January 1, 2019 | 97,420,191 | $ | 173,958 | 22,595,886 | $ | 2 | $ | 2,773 | $ | (33) | $ | (123,746) | $ | (121,004) | ||||||||||||||||||||||||||||||||||||
| Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $5,230 | 22,663,933 | 129,770 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of preferred and common stock in connection with tender offer | (2,295,603) | (855) | (2,053,690) | — | (6,173) | — | (12,986) | (19,159) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with stock option exercises and vesting of early exercised options | — | — | 1,882,916 | — | 1,044 | — | — | 1,044 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 3,648 | — | — | 3,648 | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 67 | — | 67 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (51,392) | (51,392) | ||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2019 | 117,788,521 | 302,873 | 22,425,112 | 2 | 1,292 | 34 | (188,124) | (186,796) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series F redeemable convertible preferred stock, net of issuance costs of $167 | 9,294,084 | 84,834 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of preferred and common stock in connection with tender offer | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with stock option exercises and vesting of early exercised options | — | — | 1,864,794 | — | 2,212 | — | — | 2,212 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 5,262 | — | — | 5,262 | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 557 | — | 557 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (32,564) | (32,564) | ||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2020 | 127,082,605 | $ | 387,707 | 24,289,906 | $ | 2 | $ | 8,766 | $ | 591 | $ | (220,688) | $ | (211,329) | ||||||||||||||||||||||||||||||||||||
F-6
REMITLY GLOBAL, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2021
(In thousands, except share amounts)
(unaudited)
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of January 1, 2020 | 117,788,521 | $ | 302,873 | 22,425,112 | $ | 2 | $ | 1,292 | $ | 34 | $ | (188,124) | $ | (186,796) | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options and vesting of early exercised options | — | — | 701,803 | — | 926 | — | — | 926 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 2,523 | — | — | 2,523 | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (63) | — | (63) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (21,130) | (21,130) | ||||||||||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2020 | 117,788,521 | $ | 302,873 | 23,126,915 | $ | 2 | $ | 4,741 | $ | (29) | $ | (209,254) | $ | (204,540) | ||||||||||||||||||||||||||||||||||||
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of January 1, 2021 | 127,082,605 | $ | 387,707 | 24,289,906 | $ | 2 | $ | 8,766 | $ | 591 | $ | (220,688) | $ | (211,329) | ||||||||||||||||||||||||||||||||||||
| Issuance of Series F redeemable convertible preferred stock, net of issuance costs | 328,026 | 2,980 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options and vesting of early exercised options | — | — | 2,069,978 | 1 | 4,033 | — | — | 4,034 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | 25,759 | — | 169 | — | — | 169 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 4,225 | — | — | 4,225 | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (16) | — | (16) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (9,218) | (9,218) | ||||||||||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2021 | 127,410,631 | $ | 390,687 | 26,385,643 | $ | 3 | $ | 17,193 | $ | 575 | $ | (229,906) | $ | (212,135) | ||||||||||||||||||||||||||||||||||||
F-7
REMITLY GLOBAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities | |||||||||||||||||||||||
| Depreciation and amortization | 2,658 | 4,060 | 1,857 | 2,571 | |||||||||||||||||||
| Stock-based compensation expense | 3,648 | 5,264 | 2,523 | 4,225 | |||||||||||||||||||
| Other | 37 | 2 | 50 | (38) | |||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||
| Disbursement prefunding | 17,105 | (69,719) | (794) | 50,310 | |||||||||||||||||||
| Customer funds receivable | (17,410) | (20,028) | (8,260) | (8,863) | |||||||||||||||||||
| Prepaid expenses and other assets | (2,235) | (1,959) | (2,617) | (5,527) | |||||||||||||||||||
| Operating lease right-of-use assets | 1,997 | 2,376 | 1,690 | 1,336 | |||||||||||||||||||
| Accounts payable | (1,488) | 4,044 | 409 | 1,845 | |||||||||||||||||||
| Customer liabilities | 54,182 | (29,073) | (27,658) | 17,376 | |||||||||||||||||||
| Accrued expenses and other liabilities | 3,526 | 25,935 | 8,188 | 7,937 | |||||||||||||||||||
| Operating lease liabilities | (2,193) | (2,547) | (1,844) | (1,678) | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 8,435 | (114,209) | (47,586) | 60,276 | |||||||||||||||||||
Cash flows from investing activities | |||||||||||||||||||||||
| Purchases of property and equipment | (5,049) | (2,064) | (1,394) | (671) | |||||||||||||||||||
| Capitalized internal-use software costs | (2,160) | (2,306) | (978) | (1,581) | |||||||||||||||||||
| Net cash used in investing activities | (7,209) | (4,370) | (2,372) | (2,252) | |||||||||||||||||||
Cash flows from financing activities | |||||||||||||||||||||||
| Proceeds from exercise of stock options | 1,034 | 2,382 | 1,019 | 4,374 | |||||||||||||||||||
| Repurchase and retirement of common stock in connection with tender offer | (7,024) | — | — | — | |||||||||||||||||||
| Repayment of term loan | (2,772) | — | — | — | |||||||||||||||||||
| Proceeds from (payments of) revolving credit facility borrowings, net | 9,000 | 35,000 | (27,000) | (80,000) | |||||||||||||||||||
| Repurchase and retirement of redeemable convertible preferred stock in connection with tender offer | (12,991) | — | — | — | |||||||||||||||||||
| Net proceeds from issuance of Series F and E redeemable convertible preferred stock, net of issuance costs | 129,770 | 84,834 | — | 2,980 | |||||||||||||||||||
| Net cash provided by (used in) financing activities | 117,017 | 122,216 | (25,981) | (72,646) | |||||||||||||||||||
| Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | 329 | 918 | (122) | 181 | |||||||||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 118,572 | 4,555 | (76,061) | (14,441) | |||||||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 64,948 | 183,520 | 183,520 | 188,075 | |||||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 183,520 | $ | 188,075 | $ | 107,459 | $ | 173,634 | |||||||||||||||
| Supplemental disclosure of cash flow information | |||||||||||||||||||||||
| Cash paid for interest | $ | 1,563 | $ | 1,061 | $ | 611 | $ | 497 | |||||||||||||||
| Cash paid for income taxes | $ | 186 | $ | 421 | $ | 213 | $ | 93 | |||||||||||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | 8,455 | $ | 1,523 | $ | 1,899 | $ | 251 | |||||||||||||||
| Vesting of early exercised options | $ | 36 | $ | 185 | $ | 20 | $ | 101 | |||||||||||||||
| Net change in deferred offering costs, accrued but not paid | $ | — | $ | — | $ | — | $ | 1,231 | |||||||||||||||
| Reconciliation of cash, cash equivalents and restricted cash | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 182,354 | $ | 186,694 | $ | 106,276 | $ | 173,363 | |||||||||||||||
| Restricted cash | 1,166 | 1,381 | 1,183 | 271 | |||||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 183,520 | $ | 188,075 | $ | 107,459 | $ | 173,634 | |||||||||||||||
F-8
REMITLY GLOBAL, INC.
Notes to Consolidated Financial Statements
1.Description of Business
Remitly Global, Inc. (the “Company”) was incorporated in the State of Delaware in October 2018 and is headquartered in Seattle, Washington, with various other global office locations.
Remitly, Inc. is a wholly owned subsidiary of Remitly Global, Inc. and was incorporated in the State of Delaware in May 2011. Remitly, Inc. provides integrated financial services to immigrants, including helping customers send money internationally in a quick, reliable, and more cost-effective manner by leveraging digital channels. Remitly, Inc. supports cross-border transmissions across the globe.
2.Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Remitly Global, Inc. and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Unaudited Interim Consolidated Financial Information
The accompanying interim consolidated balance sheet as of June 30, 2021, the interim consolidated statements of operations, of comprehensive loss, of cash flows, and of redeemable convertible preferred stock and stockholders’ deficit for the six months ended June 30, 2020 and 2021, and the related notes to such interim consolidated financial statements are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2021 and the results of operations and cash flows for the six months ended June 30, 2020 and 2021.The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
Risks and Uncertainties
The Company continues to be subject to the risks and challenges associated with other companies at a similar stage of development, including risks associated with: dependence on key personnel; successful marketing and use of its service and adaptation of such solutions to changing market dynamics and customer preferences; competition from alternative products and services, including from larger companies that have greater name recognition, longer operating histories, more and better established customer relationships and greater resources than the Company; and the ability to raise additional borrowing or capital to support future growth. The Company believes that existing cash and cash equivalents will be sufficient to meet projected operating requirements for at least the next 12 months from the annual issuance of April 1, 2021 and the interim issuance of August 30, 2021 (unaudited). Since inception through December 31, 2019 and 2020 and June 30, 2021 (unaudited), the Company has incurred losses from operations, negative cash flows from operations, and had an accumulated deficit of $188.1 million, $220.7 million and $229.9 million, respectively, and has been dependent on equity and debt financing to fund operations.
The Company’s ability to provide a reliable service largely depends on the efficient and uninterrupted operation of its computer information systems and those of its service providers. Any significant interruptions could harm its
F-9
business and reputation and result in a loss of business. Further, the Company has been and continues to be the subject of cyber-attacks, including distributed denial of service attacks. These attacks are primarily aimed at interrupting its business, exposing the Company to financial losses, or exploiting information security vulnerabilities. Historically, none of these attacks or breaches has individually or in the aggregate resulted in any material liability to the Company or any material damage to its reputation, and disruptions related to cybersecurity have not caused any material disruption to the Company’s business. Although the Company has taken steps and made investments to prevent security breaches and systems disruptions, the Company’s measures may not be successful, and it may experience material breaches, disruptions or other problems in the future.
COVID-19
The COVID-19 pandemic has caused significant disruption worldwide and many of the Company’s customers and employees have been impacted. With travel restrictions and shelter-in-place policies, the demand for digital remittances has increased, and this has driven a significant acceleration in the Company’s new customer and revenue growth.
The Company has also experienced, and may continue to experience, a modest adverse impact on the Company’s business practices, including as a result of transitioning part of the Company’s workforce to work from home and establishing strict health and safety protocols for the Company’s offices. The Company’s customer support and operations teams, both internal and third-party, have been impacted, which has affected the Company’s ability to service customer needs due to longer wait times and its ability to hire personnel quickly.
Certain operating expenses have grown more slowly due to reduced business travel and the virtualization or cancellation of events. While a reduction in some operating expenses may have an immediate positive impact on the Company’s operating results, the Company does not yet have visibility into the full impact this will have on the Company’s business longer term. As COVID-19 vaccination rates increase and people begin to return to offices and other workplaces and travel more, the positive impacts of the COVID-19 pandemic on the Company’s business may slow or decline.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. The Company does not yet know the full extent of potential impacts on its business or operations.
The Company will continue to actively monitor the situation and may take further actions that may alter its business practices as may be required by federal, state, or local authorities or that it determines are in the best interests of the Company’s employees, customers, or business partners.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to, revenue recognition including the treatment of sales incentive programs, reserves for transaction losses, stock-based compensation including the estimated fair value per share of common stock, the carrying value of operating lease right-of-use assets, the recoverability of deferred tax assets, and capitalization of software development costs. The Company bases its estimates on historical experience and on assumptions that management considers reasonable. Actual results could differ from these estimates and assumptions, and these differences could be material to the consolidated financial statements.
F-10
Cash and Cash Equivalents
The Company holds its cash and cash equivalents with financial institutions throughout the world, which management assesses to be of high credit quality. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents, so long as the Company has legal title to such amounts held in these accounts. Amounts that are held in accounts for which the Company does not have legal title to are recorded separately in our consolidated balance sheets, typically as disbursement prefunding balances. Cash and cash equivalents consist of cash on hand and various deposit accounts.
Restricted Cash
Restricted cash primarily consists of cash collateral that the Company maintains with various payment processors in connection with its contractual obligation. The Company has relationships with certain payment processors that are responsible for processing the Company’s incoming customer payments. These processors require the Company to maintain certain restricted cash balances as collateral throughout the term of the processor arrangement. As of December 31, 2019 and 2020 and June 30, 2021 (unaudited), the Company had $1.2 million, $1.4 million and $0.3 million of restricted cash, respectively.
Restricted cash has been classified as a non-current asset on the consolidated balance sheets as it is not expected to be released within one year of the balance sheet date.
Disbursement Prefunding
The Company maintains relationships with disbursement partners in various countries. These partners are responsible for disbursing funds to recipients. The Company may maintain prefunding balances with these disbursement partners, so they are able to fulfill customer requests. The Company does not earn interest on these balances. The balances are not compensating balances and are not legally restricted. The Company is exposed to the risk of loss in the event the Company’s disbursement partners fail, for any reason, to disburse funds to recipients according to the Company’s instructions. Such reasons could include mistakes by the Company’s disbursement partners in processing payment instructions or failing to correctly classify and process error categories, or insolvency or fraud by the Company’s disbursement partners. The Company maintains a loss reserve for these accounts and is included in accrued expenses and other current liabilities within the consolidated balance sheets. However, historical losses for the disbursement funding accounts have been inconsequential.
Customer Funds Receivable
When customers fund their transactions using credit cards or debit cards, there is a clearing period before the cash is received by the Company from the payment processors of usually one business day. Similarly, when customers provide bank information and authorization for the Company to receive funds via electronic funds transfer, the transactions are submitted via batch and received into cash usually in one to three business days. These card and electronic funds are treated as a receivable from the bank until the cash is received by the Company. The Company does not maintain a reserve as historical losses have not been material.
Foreign Currency Translation
The functional currencies of the Company’s international subsidiaries in Australia, Canada, Ireland, United Kingdom, and Singapore are each country’s local currency. The functional currency of the Company’s international subsidiaries in Poland and Nicaragua is the U.S. dollar. The results of operations for the Company’s international subsidiaries, with functional currencies other than the U.S. dollar, are translated from the local currency into U.S. dollars using the average exchange rates during each period. All assets and liabilities are translated using exchange rates at the end of each period. All equity transactions and certain assets are translated using historical rates. The consolidated financial statements are presented in U.S. dollars.
F-11
Fair Value of Financial Instruments
The Company establishes the fair value of its certain assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which to transact and the market-based risk. The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The carrying values of cash equivalents, disbursement prefunding, customer funds receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities, and customer liabilities approximate their respective fair values due to their relative short maturities.
Fair value principles require disclosures regarding the manner in which fair value is determined for assets and liabilities and establishes a three-tiered fair value hierarchy into which these assets and liabilities must be grouped, based upon significant levels of inputs as follows:
Level 1Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3Inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, disbursement prefunding, restricted cash, and customer funds receivable. The Company maintains cash and cash equivalents and restricted cash balances that may exceed the insured limits by the Federal Deposit Insurance Corporation. In addition, the Company funds its international operations using accounts with institutions in Australia, Canada, Nicaragua, the Philippines, Poland, Singapore, India and the United Kingdom. The Company also prefunds amounts which are held by the Company’s disbursement partners, primarily in the Philippines and Mexico. The Company has not experienced any significant losses on its deposits of cash and cash equivalents, disbursement prefunding, restricted cash or customer funds receivable for the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (unaudited).
For the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (unaudited), no individual customer represented 10% or more of the Company’s total revenue or customer funds receivable.
Deferred Offering Costs
Deferred offering costs of $1.2 million have been recorded as other non-current assets on the consolidated balance sheet as of June 30, 2021 (unaudited) and consist of expenses incurred in connection with the anticipated sale of the Company's common stock in an initial public offering ("IPO"), including legal, accounting, printing, and other IPO-related costs. Upon completion of the IPO, these deferred offering costs will be reclassified to stockholders' deficit and recorded against the proceeds from the offering. If the Company terminates its planned IPO or if there is a significant delay, all of the deferred offering costs will be immediately written off to operating expenses in the consolidated statement of operations. As of December 31, 2020, the Company had not incurred such costs.
F-12
Property and Equipment, Net
Property and equipment is stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows:
| Estimated Useful Lives | |||||
| Capitalized internal-use software | 3 years | ||||
| Computer and office equipment | 3 years | ||||
| Furniture and fixtures | 5 years | ||||
| Leasehold improvements | Lesser of useful life or remaining lease term | ||||
When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the consolidated statements of operations in the period of disposition. Maintenance and repairs that do not improve or extend the lives of the respective assets are charged to expense in the period incurred.
Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company adopted ASU No. 2016-02 “Leases - Topic 842” (“ASC 842”) and all subsequent ASUs that modified ASC 842 on January 1, 2020 and elected to apply the guidance to the comparative period.
The Company’s lease portfolio is primarily office space that is classified as operating leases. The Company determines if an arrangement is or contains a lease at inception by evaluating various factors, including if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration and other facts and circumstances. Lease classification is determined at the lease commencement date. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The lease liability is recognized at commencement date based on the present value of lease payments over the lease term. The ROU asset is initially measured at cost, which is based on the lease liability adjusted for lease prepayments, plus any initial direct costs incurred less any lease incentives received. As the rate implicit in most of its leases is not readily determinable, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The Company’s lease terms may include options to extend the lease when it is reasonably certain that the Company will exercise that option.
The Company utilized certain practical expedients and policy elections available under the lease accounting standard. The Company has elected to combine lease and non-lease components as a single lease component for its real estate leases. The Company also elected not to recognize ROU assets and lease liabilities on it’s consolidated balance sheets for leases that have a lease term of 12 months or less. The Company recognizes lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.
Lease expense for operating leases is recognized on a straight-line basis over the lease term, which is the non-cancelable term adjusted for any renewal and termination options that are considered reasonably certain. Operating leases are included in operating lease ROU assets, operating lease liabilities, and operating lease liabilities, non-current on the consolidated balance sheets.
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During the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (unaudited), the Company did not have any material finance leases.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the carrying value of the asset. If impairment exists, the asset is written down to its estimated fair value. During the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (unaudited), no impairment of long-lived assets was recorded.
Customer Liabilities
The Company recognizes transactions processed from customers but not yet disbursed to recipients as customer liabilities on the accompanying consolidated balance sheets. Customer liabilities are typically funds in-transit and the duration is typically one-two days.
Revenue Recognition
See Note 3 for information related to the Company’s revenue recognition.
Sales Incentives
The Company provides sales incentives to customers in a variety of forms. Cash incentives given to customers are accounted for as reductions to revenue, up to the point where net historical cumulative revenue, at the customer level, is reduced to zero. Those additional incentive costs that would have caused the customer level revenue to be negative are classified as advertising expenses and are included as a component of marketing expenses. In addition, referral credits given to a referrer are classified as marketing expenses.
For the years ended December 31, 2019 and 2020, payments made to customers resulted in: reductions to revenue of $7.9 million and $15.7 million, respectively; and, charges to sales and marketing expense of $6.1 million and $9.8 million, respectively.
For the six months ended June 30, 2020 and 2021 (unaudited), payments made to customers resulted in: reductions to revenue of $8.5 million and $9.0 million, respectively; and, charges to sales and marketing expense of $5.2 million and $5.8 million, respectively.
Transaction Expenses
Transaction expenses include fees paid to disbursement partners for paying funds to the recipient, provisions for transaction losses, fees paid to payment processors for funding transactions, bad debt expense, fraud prevention costs and costs for compliance tools.
Reserve for Transaction Losses
The Company is exposed to transaction losses including chargebacks, unauthorized credit card use, and fraud associated with customer transactions. The Company establishes reserves for such losses based on historical trends and any specific risks identified in processing customer transactions. This reserve is included in accrued expenses and other current liabilities on the consolidated balance sheets. The provision for transaction losses is included as a component of transaction expenses in the consolidated statements of operations and comprehensive loss.
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The table below summarizes the Company’s reserve for transaction losses for the years ended December 31, 2019 and 2020:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2019 | 2020 | |||||||||
| Balance at the beginning of year | $ | 497 | $ | 798 | |||||||
| Provisions for transaction losses | 7,859 | 19,663 | |||||||||
| Losses incurred, net of recoveries | (7,558) | (17,211) | |||||||||
| Balance at end of year | $ | 798 | $ | 3,250 | |||||||
The table below summarizes the Company’s reserve for transaction losses for the six months ended June 30, 2020 and 2021:
| Six Months Ended June 30, | |||||||||||
| (in thousands) | 2020 | 2021 | |||||||||
| (unaudited) | |||||||||||
| Balance at the beginning of period | $ | 798 | $ | 3,250 | |||||||
| Provisions for transaction losses | 8,625 | 14,573 | |||||||||
| Losses incurred, net of recoveries | (7,662) | (15,502) | |||||||||
| Balance at end of period | $ | 1,761 | $ | 2,321 | |||||||
Advertising
Advertising expenses are charged to operations as incurred and are included as a component of marketing expenses. Advertising expenses totaled $33.0 million and $62.0 million during the years ended December 31, 2019 and 2020, respectively, and are used primarily to attract new customers.
Advertising expenses totaled $26.6 million and $44.5 million during the six months ended June 30, 2020 and 2021 (unaudited), respectively.
Customer Support and Operations
Customer support and operations expenses consist primarily of personnel-related expenses associated with the Company’s customer support and operations organization, including salaries, benefits, and stock-based compensation, as well as third-party costs for customer support services, and travel and related office expenses. This includes the Company’s customer service teams which directly support the Company’s customers, consisting of online support and call centers, and other costs incurred to support the Company’s customers, including related telephony costs to support these teams, and investments in tools to effectively service the Company’s customers, as well as increased customer self-service capabilities. Customer support and operations expenses also include corporate communication costs and professional services fees.
Marketing
Marketing expenses consist primarily of advertising costs used to attract new customers. Marketing expenses also include personnel-related expenses associated with the Company’s marketing organization, including salaries, benefits, and stock-based compensation, promotions, costs for software subscription services dedicated for use by the Company’s marketing organization, and outside services contracted for marketing purposes.
Technology and Development
Technology and development expenses consist primarily of personnel-related expenses for employees involved in the research, design, development and maintenance of both new and existing products and services, including salaries, benefits and stock-based compensation. Technology and development expenses also include professional
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services fees and costs for software subscription services dedicated for use by the Company’s technology and development teams. Technology and development costs are generally expensed as incurred and do not include software development costs which qualify for capitalization as internal-use software. The amortization of Internal use-software costs which were capitalized in accordance with ASC 350-40, Intangibles - Goodwill and Other-Internal Use Software, are separately presented under the caption ‘Depreciation and Amortization’ in our Consolidated Statements of Operations.
General and Administrative
General and administrative expenses consist primarily of personnel-related expenses for the Company’s finance, legal, human resources, facilities, and administrative personnel, including salaries, benefits, and stock-based compensation. General and administrative expenses also include professional services fees, costs for software subscriptions, facilities costs, and other corporate expenses.
Capitalized Internal-Use Software Costs
The Company accounts for software development costs incurred in connection with its internal-use software in accordance with ASC 350-40, Intangibles - Goodwill and Other-Internal Use Software. Costs incurred in the preliminary stages of development are expensed as incurred. Once an app has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use.
Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The Company capitalized $2.2 million and $2.3 million for internal-use software costs during the years ended December 31, 2019 and 2020, respectively. Stock-based compensation costs included in capitalized software costs were $0.1 million for each of the years ended December 31, 2019 and 2020. The Company recorded amortization expense of $0.9 million and $1.6 million for the years ended December 31, 2019 and 2020, respectively. There has been no impairment of previously capitalized costs during the years ended December 31, 2019 and 2020.
The Company capitalized $1.0 million and $1.5 million for internal-use software costs during the six months ended June 30, 2020 and 2021 (unaudited). The Company capitalized $0.1 million of stock-based compensation costs to internal-use software during both the six months ended June 30, 2020 and 2021 (unaudited). The Company recorded amortization expense of $0.7 million and $1.2 million for the six months ended June 30, 2020 and 2021 (unaudited), respectively. There has been no impairment of previously capitalized costs during the six months ended June 30, 2020 and 2021 (unaudited).
Segment and Geographic Information
See Note 16 for information related to the Company’s segment reporting and geographic information.
Net Loss Per Share Attributable to Common Stockholders
Basic and diluted net loss per share attributable to common stockholders is computed using the two-class method required for participating securities. All series of the Company’s redeemable convertible preferred stock and early exercised stock options are considered to be participating securities because all holders are entitled to receive dividends on a pari passu basis in the event that a dividend is declared on the common stock.
Under the two-class method, basic net loss per share is computed by dividing net loss adjusted to include deemed dividends on redeemable convertible preferred stock by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common shares by the weighted-average number of common shares determined for the basic earnings per share plus
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the dilutive effect of stock options, restricted stock units (“RSUs”), warrants and redeemable convertible preferred stock. As the Company had losses for the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (unaudited), all potentially dilutive securities are anti-dilutive, and accordingly, basic net loss per share equaled diluted net loss per share.
Stock-Based Compensation
The Company accounts for stock-based compensation expense by calculating the estimated fair value of each employee and nonemployee award at the grant date or modification date by applying the Black-Scholes option pricing model (the “model”). The model utilizes the estimated value of the Company’s underlying common stock at the measurement date, the expected or contractual term of the option, the expected stock price volatility, risk-free interest rate, and expected dividend yield of the common stock. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are recognized in the period in which they occur.
The Company calculates the expected term based on the average period the options are expected to remain outstanding using the simplified method, generally calculated as the midpoint of the requisite service period and the contractual term of the award.
The Company bases its estimate of expected volatility on the historical volatility of comparable companies from a representative peer group selected based on industry, financial, and market capitalization data.
The Company’s expected dividend yield is zero as it has not declared nor paid any dividends during the years ended December 31, 2019 and 2020 or the six months ended June 30, 2020 and 2021 (unaudited) and does not currently expect to do so in the future. The risk-free interest rate used in the model is based on the implied yield currently available in the U.S. Treasury securities at maturity with an equivalent term.
In a tender offer when the deemed dividend amount was in excess of the APIC balance at the date of the transaction, APIC was first reduced to zero with the excess being reported as an increase to accumulated deficit as the Company does not have retained earnings.
The Company’s Equity Plan, as defined in Note 10, allows for early exercise of employee stock options whereby the option holder is allowed to exercise prior to vesting. The consideration received for an early exercise of an option is considered to be a deposit of the exercise price, and the related dollar amount is recorded as a liability and reflected in accrued expenses and other current liabilities in the consolidated balance sheets. This liability is reclassified to additional paid-in capital as the awards vest. Any unvested shares are subject to repurchase by the Company at their original exercise price.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that these assets are believed more likely than not to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations.
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Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. We recognize and measure uncertain tax positions in accordance with U.S. GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The Company’s policy is to recognize interest and penalties related to income taxes as a component of provision for income taxes.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases - Topic 842 (“ASC 842”), which has subsequently been clarified and amended by ASUs 2017-13, 2018-01, 2018-10, and 2018-11. The guidance requires the recognition of ROU assets and corresponding lease liabilities for operating leases, on the balance sheet. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amended leases standard gives entities options for transition and provides lessees with practical expedients. The transition option allows entities to not apply the new leases standard in the comparative periods they present in their financial statements in the year of adoption. The practical expedient provides lessees with an option to not separate non-lease components from the associated lease components when certain criteria are met and requires them to account for the combined component in accordance with the new revenue standard if the associated non-lease components are the predominant components. The new standard is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.
The Company early adopted this guidance on January 1, 2020 in accordance with ASC 842-10-65-1(b) as a private company and elected to apply the guidance to the comparative period, utilizing the retrospective transition method. In adopting ASC 842, the Company utilized certain practical expedients available under the standard. These practical expedients include not recording ROU assets or lease liabilities for leases with terms of 12 months or less and combining lease and non-lease components as a single lease component for its real estate leases. The Company recorded $5.4 million for the ROU assets and $7.1 million for the lease liabilities associated with its operating leases upon adoption. See Note 15 for further information.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the existing incurred loss impairment methodology that recognizes credit losses when a probable loss has been incurred with new methodology pursuant to which loss estimates are based upon lifetime expected credit losses. The amendments in this ASU require a financial asset that is measured at amortized cost to be presented at the net amount expected to be collected. The consolidated statement of operations would then reflect the measurement of credit losses for newly recognized financial assets as well as changes to the expected credit losses that have taken place during the reporting period. The change in allowance recognized as a result of adoption will occur through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the ASU is adopted. The new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year with early adoption permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40),Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. Under existing U.S. GAAP, there is diversity in practice in accounting for the costs of
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implementing cloud computing arrangements (CCA) that are service contracts. The amendments in ASU No. 2018-15 amend the definition of a hosting arrangement and require a customer in a hosting arrangement that is a service contract to capitalize certain costs as if the arrangement were an internal-use software project. The new standard is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021 with early adoption permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies ASC 740 to simplify the accounting for income taxes. The ASU’s amendments are based on changes that were suggested by stakeholders as part of the FASB’s simplification initiative (i.e., the Board’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users). The new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 with early adoption permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements.
In 2021, The FASB issued ASU 2021-04, Earnings per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB is issuing this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments affect entities when a freestanding equity-classified written call option (such as a warrant) is modified or exchanged and remains equity classified after the modification or exchange. In addition, the amendments impact the recognition and measurement of earnings per share for certain modification and exchange transactions. The new standard is effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements.
There are other new accounting pronouncements issued by the FASB that the Company has adopted or will adopt, as applicable. Management does not believe any of these accounting pronouncements have had, or will have, a material impact on the Company’s condensed consolidated financial statements or disclosures.
3.Revenue
The Company’s revenue is generated on transaction fees charged to customers and foreign exchange spreads between the foreign exchange rate offered to customers and the foreign exchange rate on the Company's currency purchases. Revenue is recognized when control of these services is transferred to the Company’s customers, which is the time the funds have been delivered to the intended recipient in an amount that reflects the consideration the Company expects to be entitled to in exchange for services provided. The Company accounts for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, which includes the following steps:
(1)identification of the contract with a customer;
(2)identification of the performance obligations in the contract;
(3)determination of the transaction price;
(4)allocation of the transaction price to the performance obligations in the contract; and
(5)recognition of revenue when, or as, the Company satisfies a performance obligation.
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Revenue is derived from each transaction and varies based on the funding method chosen by the customer, the size of the transaction, the currency to be ultimately disbursed, the rate at which the currency was purchased, and the countries to which the funds are transferred. The Company’s contract with customers can be terminated by the customer without a termination penalty up until the time the funds have been delivered to the intended recipient. Therefore, the Company’s contracts are defined at the transaction level and do not extend beyond the service already provided.
The Company’s service comprises a single performance obligation to complete transactions for the Company’s customers. Using compliance and risk assessment tools, the Company performs a transaction risk assessment on individual transactions to determine whether a transaction should be accepted. When the Company accepts a transaction and processes the designated payment method of the customer, the Company becomes obligated to its customer to complete the payment transaction.
The Company recognizes transaction revenue on a gross basis as it is the principal for fulfilling payment transactions. As the principal to the transaction, the Company controls the service of completing payments on its payment platform. The Company bears primary responsibility for the fulfillment of the payment service, is the merchant of record, contracts directly with its customers, controls the product specifications, and defines the value proposition of its services. The Company is also responsible for providing customer support. Further, the Company has full discretion over determining the fee charged to its customers, which is independent of the cost it incurs in instances where it may utilize payment processors or other financial institutions to perform services on its behalf. These fees paid to payment processors and other financial institutions are recognized as transaction expenses in the consolidated statements of operations. The Company does not have any deferred contract acquisition costs.
The deferred revenue balances from contracts with customers were as follows as of December 31, 2019 and 2020 (in thousands):
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Deferred revenue, beginning of period | $ | 96 | $ | 137 | |||||||
| Deferred revenue, end of period | 137 | 1,105 | |||||||||
| Change in deferred revenue during the period | 41 | 968 | |||||||||
The deferred revenue balances from contracts with customers were as follows as of June 30, 2020 and 2021 (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2020 | 2021 | ||||||||||
| (unaudited) | |||||||||||
| Deferred revenue, beginning of period | $ | 137 | $ | 1,105 | |||||||
| Deferred revenue, end of period | 274 | 1,126 | |||||||||
| Change in deferred revenue during the period | 137 | 21 | |||||||||
Revenue recognized during the years ended December 31, 2019 and 2020 include substantially all amounts included in deferred revenue at the beginning of each respective year. Revenue recognized during the six month periods ended June 30, 2020 and 2021 (unaudited) from amounts included in deferred revenue at the beginning of the period were $0.1 million and $0.3 million, respectively. Deferred revenue represents amounts received from customers for which the performance obligations are not yet fulfilled. Deferred revenue is included within accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance sheets.
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4.Property and Equipment
Property and equipment, net consisted of the following (in thousands):
| As of December 31, | As of June 30, | ||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Capitalized internal-use software | $ | 3,864 | $ | 6,170 | $ | 7,751 | |||||||||||
| Computer and office equipment | 2,425 | 3,422 | 3,872 | ||||||||||||||
| Furniture and fixtures | 1,088 | 1,390 | 1,420 | ||||||||||||||
| Leasehold improvements | 5,926 | 6,609 | 6,800 | ||||||||||||||
| 13,303 | 17,591 | 19,843 | |||||||||||||||
| Less: Accumulated depreciation and amortization | (3,950) | (7,916) | (10,446) | ||||||||||||||
| Property and equipment, net | $ | 9,353 | $ | 9,675 | $ | 9,397 | |||||||||||
Depreciation and amortization expense related to property and equipment was $2.7 million and $4.1 million for the years ended December 31, 2019 and 2020, respectively, and $1.9 million and $2.6 million for the six months ended June 30, 2020 and 2021 (unaudited), respectively.
5.Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities that are measured at fair value and indicates the fair value hierarchy of the valuation inputs used as of December 31, 2019 and 2020 (in thousands):
| Fair Value Measurement at December 31, 2019 | |||||||||||||||||||||||||||||
| Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Restricted cash | |||||||||||||||||||||||||||||
| Certificates of deposit | $ | 102 | $ | 102 | $ | — | $ | 102 | $ | — | |||||||||||||||||||
| Total assets | $ | 102 | $ | 102 | $ | — | $ | 102 | $ | — | |||||||||||||||||||
| Fair Value Measurement at December 31, 2020 | |||||||||||||||||||||||||||||
| Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Restricted cash | |||||||||||||||||||||||||||||
| Certificates of deposit | $ | 102 | $ | 102 | $ | — | $ | 102 | $ | — | |||||||||||||||||||
| Total assets | $ | 102 | $ | 102 | $ | — | $ | 102 | $ | — | |||||||||||||||||||
The carrying values of certain financial instruments, including disbursement prefunding, customer funds receivable, accounts payable, accrued expenses and other current liabilities, customer liabilities and borrowings approximate their respective fair values due to their relative short maturities and are excluded from the fair value tables above. If these financial instruments were measured at fair value in the consolidated financial statements, they would be classified as level 2.
There were no transfers between Level 1 and Level 2 during the years ended December 31, 2019 and 2020.
There were no financial assets and liabilities that are measured at fair value as of June 30, 2021 (unaudited). There were no transfers between Level 1 and Level 2 during the six months ended June 30, 2020 and 2021 (unaudited).
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6.Debt
Since 2013, the Company has had access to a variable rate credit facility that, after being modified from time to time, included a $5.0 million term loan and access to $45.0 million in revolving borrowings, net of the term loan amounts outstanding. Interest on the credit facility was based on the Prime Rate as published by the Wall Street Journal plus 1.75%. In June 2019, the Company refinanced into a new Credit Agreement that provided access to $85.0 million in revolving borrowing and repaid the remaining amounts outstanding on its term loan in the amount of $2.8 million. The Credit Agreement had a maturity date of June 12, 2022. Interest on the Revolving Credit Facility borrowings accrued at a floating rate per annum equal to (i) ABR defined in the Credit Agreement as the rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) 5.50% and (c) the Federal Funds Effective Rate in effect for such day plus 0.50% plus (ii) 1.0% (referred to as the Applicable Margin per the Credit Agreement). In addition, an unused revolving line facility fee accrued at a floating rate equal to 0.40% of the unused portion of the line, payable monthly. As of December 31, 2019, the Company had $45.0 million outstanding in Revolving Credit Facility borrowings under the Credit Agreement with an interest rate of 6.50%.
In November 2020, the Company modified the Credit Agreement. As a result, the Credit Agreement provided the Company with access up to $150.0 million in Revolving Credit Facility borrowings that mature on November 16, 2023.
The Company’s Revolving Credit Facility borrowings are subject to mandatory repayment within 20 business days in an amount necessary to reduce the borrowings, in the aggregate, to an amount less than the Company’s customer funds account maintained with the lender. Interest on the Revolving Credit Facility borrowings accrues at a floating rate per annum equal to (i) ABR defined in the Credit Agreement as the rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) 3.25% and (c) the Federal Funds Effective Rate in effect for such day plus 0.50% plus (ii) 1.0%. In addition, an unused revolving line facility fee accrues at a floating rate equal to 0.40% of the unused portion of the line, payable monthly. As of December 31, 2020 and June 30, 2021 (unaudited), the interest rate of Revolving Credit Facility borrowings was 4.25%.
The Company had outstanding borrowings under its Revolving Credit Facility of $80.0 million and zero, as of December 31, 2020 and June 30, 2021 (unaudited), respectively. The Company had unused borrowing capacity of $70.0 million and $150.0 million under the Revolving Credit Facility at December 31, 2020 and June 30, 2021 (unaudited), respectively.
The Revolving Credit Facility includes a letter of credit sub-facility. As of December 31, 2020 and June 30, 2021 (unaudited), the Company had $9.4 million and $16.8 million, respectively, in standby letters of credit outstanding.
The Credit Agreement contains customary conditions to borrowing, events of default and covenants, including covenants that restrict the Company’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness, pay dividends, incur encumbrances, make distributions to holders of its capital stock, make investments or engage in transactions with affiliates. Defined events of default include an acceleration clause in the event of a Material Adverse Effect (as defined) on the business or financial condition of the Company. Financial covenants include an adjusted quick ratio requirement that is measured on a monthly basis as well as trailing twelve month Consolidated Adjusted EBITDA, as defined in the Credit Agreement, measured on a quarterly basis. The Company was in compliance with all financial covenants as of December 31, 2019, December 31, 2020, and June 30, 2021 (unaudited). The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of the Company other than intellectual property.
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7.Net Loss Per Common Share
The following table summarizes the calculation of basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 (in thousands, except share and per share amounts):
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss | $ | (51,392) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Deemed dividend on redeemable convertible preferred stock | (12,134) | — | — | — | |||||||||||||||||||
| Net loss attributable to common stockholders | $ | (63,526) | $ | (32,564) | $ | (21,130) | $ | (9,218) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic and diluted | 21,290,784 | 21,459,062 | 20,840,834 | 23,216,865 | |||||||||||||||||||
| Net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic and diluted | $ | (2.98) | $ | (1.52) | $ | (1.01) | $ | (0.40) | |||||||||||||||
The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the periods presented because the impact of including them would have been anti-dilutive:
| As of December 31, | As of June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Redeemable convertible preferred stock | 117,788,521 | 127,082,605 | 117,788,521 | 127,410,631 | |||||||||||||||||||
| Common stock warrants | 256,250 | 256,250 | 256,250 | 256,250 | |||||||||||||||||||
| Stock options outstanding | 19,045,751 | 21,034,424 | 20,562,523 | 25,355,906 | |||||||||||||||||||
RSUs outstanding(1) | — | 437,369 | — | 617,696 | |||||||||||||||||||
| Shares subject to repurchase | 1,818,334 | 1,888,322 | 1,814,250 | 1,979,669 | |||||||||||||||||||
| Total | 138,908,856 | 150,698,970 | 140,421,544 | 155,620,152 | |||||||||||||||||||
_______________
(1)These RSUs were subject to a performance-based vesting condition as of December 31, 2020 and June 30, 2021 (unaudited). See Note 10 for details on these awards.
8.Common Stock
As of December 31, 2019 and 2020, the Company has authorized 168,000,000 and 190,000,000 shares of common stock with a par value of $0.0001 per share, respectively. As of June 30, 2021 (unaudited), the Company has authorized 190,000,000 shares of common stock with a par value of $0.0001 per share. Each holder of a share of common stock is entitled to one vote for each share held at all meetings of stockholders and is entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors, subject to the preferential rights of holders of all classes of stock outstanding. Through December 31, 2019 and 2020 and June 30, 2021 (unaudited), no dividends have been declared or paid by the Company.
F-23
Warrants
In connection with a previous Credit Agreement, the Company issued stock warrants to purchase shares of common stock with terms of ten years, exercisable at any time, and exercise prices ranging from $0.054 to $0.64 per share, subject to standard anti-dilution adjustments. The warrants were recorded as additional paid-in capital and capitalized as debt issuance costs on the consolidated balance sheets. There were 256,250 warrants outstanding as of December 31, 2019 and 2020 and June 30, 2021 (unaudited), respectively.
9.Redeemable Convertible Preferred Stock
The following tables summarize information regarding each series of redeemable convertible preferred stock outstanding as of December 31, 2019 and 2020 (in thousands, except share and per share amounts):
| As of December 31, 2019 | |||||||||||||||||||||||||||||
| Series | Shares Authorized | Shares Issued and Outstanding | Issuance Price Per Share | Carrying Amount | Aggregate Liquidation Preference | ||||||||||||||||||||||||
| Series Seed | 10,199,786 | 6,446,322 | $ | 0.27 | $ | 1,595 | $ | 1,741 | |||||||||||||||||||||
| Series Seed Prime | 8,780,816 | 8,643,665 | 0.30 | 2,506 | 2,593 | ||||||||||||||||||||||||
| Series A | 11,514,347 | 10,359,546 | 0.50 | 5,091 | 5,180 | ||||||||||||||||||||||||
| Series B | 14,196,476 | 14,196,476 | 0.88 | 12,374 | 12,500 | ||||||||||||||||||||||||
| Series C | 25,146,777 | 25,146,777 | 1.70 | 41,863 | 42,800 | ||||||||||||||||||||||||
| Series D | 30,331,802 | 30,331,802 | 3.79 | 109,674 | 115,000 | ||||||||||||||||||||||||
| Series E | 22,663,934 | 22,663,933 | $ | 5.96 | 129,770 | 135,001 | |||||||||||||||||||||||
| Total | 122,833,938 | 117,788,521 | $ | 302,873 | $ | 314,815 | |||||||||||||||||||||||
| As of December 31, 2020 | |||||||||||||||||||||||||||||
| Series | Shares Authorized | Shares Issued and Outstanding | Issuance Price Per Share | Carrying Amount | Aggregate Liquidation Preference | ||||||||||||||||||||||||
| Series Seed | 10,199,786 | 6,446,322 | $ | 0.27 | $ | 1,595 | $ | 1,741 | |||||||||||||||||||||
| Series Seed Prime | 8,780,816 | 8,643,665 | 0.30 | 2,506 | 2,593 | ||||||||||||||||||||||||
| Series A | 11,514,347 | 10,359,546 | 0.50 | 5,091 | 5,180 | ||||||||||||||||||||||||
| Series B | 14,196,476 | 14,196,476 | 0.88 | 12,374 | 12,500 | ||||||||||||||||||||||||
| Series C | 25,146,777 | 25,146,777 | 1.70 | 41,863 | 42,800 | ||||||||||||||||||||||||
| Series D | 30,331,802 | 30,331,802 | 3.79 | 109,674 | 115,000 | ||||||||||||||||||||||||
| Series E | 22,663,934 | 22,663,933 | 5.96 | 129,770 | 135,001 | ||||||||||||||||||||||||
| Series F | 9,840,797 | 9,294,084 | $ | 9.15 | 84,834 | 85,000 | |||||||||||||||||||||||
| Total | 132,674,735 | 127,082,605 | $ | 387,707 | $ | 399,815 | |||||||||||||||||||||||
F-24
The following tables summarize information regarding each series of redeemable convertible preferred stock outstanding as of June 30, 2021 (unaudited) (in thousands, except share and per share amounts):
| As of June 30, 2021 | |||||||||||||||||||||||||||||
| Series | Shares Authorized | Shares Issued and Outstanding | Issuance Price Per Share | Carrying Amount | Aggregate Liquidation Preference | ||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| Series Seed | 10,199,786 | 6,446,322 | $ | 0.27 | $ | 1,595 | $ | 1,741 | |||||||||||||||||||||
| Series Seed Prime | 8,780,816 | 8,643,665 | 0.30 | 2,506 | 2,593 | ||||||||||||||||||||||||
| Series A | 11,514,347 | 10,359,546 | 0.50 | 5,091 | 5,180 | ||||||||||||||||||||||||
| Series B | 14,196,476 | 14,196,476 | 0.88 | 12,374 | 12,500 | ||||||||||||||||||||||||
| Series C | 25,146,777 | 25,146,777 | 1.70 | 41,863 | 42,800 | ||||||||||||||||||||||||
| Series D | 30,331,802 | 30,331,802 | 3.79 | 109,674 | 115,000 | ||||||||||||||||||||||||
| Series E | 22,663,934 | 22,663,933 | 5.96 | 129,770 | 135,001 | ||||||||||||||||||||||||
| Series F | 9,840,797 | 9,622,110 | $ | 9.15 | 87,814 | 88,000 | |||||||||||||||||||||||
| Total | 132,674,735 | 127,410,631 | $ | 390,687 | $ | 402,815 | |||||||||||||||||||||||
During the year ended December 31, 2020, the Company issued 9,294,084 shares of Series F redeemable convertible preferred stock at $9.1456 per share for proceeds totaling $85.0 million, net of issuance costs. During the six months ended June 30, 2021 (unaudited), the Company issued 328,026 shares of Series F redeemable convertible stock at $9.1456 per share for proceeds totaling $3.0 million, net of issuance costs.
The terms of Series Seed, Seed Prime, A, B, C, D, E and F redeemable convertible preferred stock are summarized below:
Conversion
Each share of preferred stock is convertible at the option of the holder into such number of common stock at a rate equal to the original issue price of the applicable series of preferred stock divided by the conversion price for the applicable series of preferred stock in effect at the time of the conversion. The conversion price for each share of preferred stock is initially equal to the applicable original issue price, such that the initial conversion rate is 1-for-1. The conversion price is subject to standard anti-dilution adjustments and adjustments for issuance of stock at a price per share less than the conversion price in effect for each series (Series Seed $0.2729 per share, Seed Prime $0.2961 per share, Series A $0.4976 per share, Series B $0.8805 per share, Series C $1.7032 per share, Series D $3.7914 per share, Series E is $5.9566, Series F is $9.1456 per share). Each share of redeemable convertible preferred stock is automatically convertible into common stock based on the conversion rate at such time immediately upon the earlier of (i) closing of a firm commitment underwritten public offering which results in gross cash proceeds of at least $100.0 million and a per share price of $9.1456 (as adjusted for stock splits, stock dividends, combinations, or other similar recapitalization), or (ii) vote or written consent of the holders of the Series C, Series D, and Series E redeemable convertible preferred stock.
Liquidation Preference
In the event of a liquidation, dissolution, or winding up of the Company or a deemed liquidation of the Company, before any payment shall be made to common stockholders, redeemable convertible preferred stock-holders shall be paid, on a pari passu basis amount all classes of redeemable convertible preferred stock, the greater of: (i) the original issue price per share for the redeemable convertible preferred stock plus any dividends declared but unpaid thereon, or (ii) the amount per share as would have been payable had the shares of redeemable convertible been converted to common stock immediately prior to such event. A deemed liquidation event includes (i) a merger or consolidation, (ii) a sale of all or substantially all of the assets of the Company, or (iii) a change in controlling ownership of the Company unless the holders of at least a majority of the outstanding shares of
F-25
redeemable convertible preferred stock, voting together as a single class on as-converted basis, elect to not classify such an event a deemed liquidation event.
Since a deemed liquidation event would constitute a redemption event outside of the Company’s controls, redeemable convertible preferred stock has been presented within the mezzanine section on the consolidated balance sheets.
Redemption
The convertible preferred stock is not mandatorily redeemable at any future certain date.
Voting
The holders of the Series Seed, Seed Prime, A, B, C, D, E and F redeemable convertible preferred stock are entitled to vote, together with the holders of common stock, on all matters presented to stockholders for a vote. Each holder of the share of redeemable convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which each share of redeemable convertible preferred stock is convertible at the time of such vote.
Dividends
The holders of the Series Seed, Seed Prime, A, B, C, D, E and F preferred stock are entitled to receive, when and as declared by the Company’s board of directors and out of assets legally available, such dividends as may be declared from time to time by its board of directors. Any dividends shall be distributed among the holder of preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such preferred stock into common stock). To date, no dividends have been declared or paid by the Company.
Tender Offer
In October 2019, the Company facilitated and consummated a tender offer (the “2019 Tender Offer”) in which the Company repurchased shares of common stock and redeemable convertible preferred stock from certain of the Company’s current employees, former employees, founders and investors. In connection with the 2019 Tender Offer, the Company repurchased and retired an aggregate of 2,295,603 shares of Series Seed, Series Seed Prime and Series A redeemable convertible preferred stock for an aggregate purchase price of $13.0 million. The excess of the amount paid over the carrying value of Series Seed, Series Seed Prime and Series A redeemable convertible preferred stock, totaling $12.1 million, was recorded as a deemed dividend. Of the total recorded as a deemed dividend, $6.1 million decreased additional paid-in capital, with the remaining $6.0 million recorded as an increase in accumulated deficit.
In addition, the Company repurchased and retired 2,053,690 shares of common stock for an aggregate purchase price of $11.0 million. See Note 10 for details on this transaction. There were no such transactions during the year ended December 31, 2020 or the six months ended June 30, 2021 (unaudited).
10.Stock-Based Compensation
In 2011, the Company adopted the Remitly Equity Incentive Plan (the “Equity Plan”), as amended. As of June 30, 2021 (unaudited), 43,899,677 shares of Company common stock were reserved for issuance under the Equity Plan, which provides for the issuance of incentive stock options, nonqualified stock options, restricted common stock, and RSUs and stock appreciation rights to employees, directors, officers, and consultants of the Company, of which 1,934,742 remain available for issuance under the plan. The Equity Plan is administered by the Company’s board of directors, which determines the terms of the options granted, including exercise price, number of options granted, and vesting period of such options.
F-26
Stock Options
Stock options granted under the Equity Plan generally vest over four years from the vesting commencement date on a monthly basis with or without a one-year cliff or, for nonemployees, ratably on a monthly basis over a shorter period, depending upon anticipated duration of services. Other vesting terms are determined by the Company’s board of directors. All options granted under the Equity Plan are exercisable for up to ten years from the grant date, subject to vesting. In the event of termination of service, option will generally remain exercisable, to the extent vested, for three months following the termination of service.
As of December 31, 2019 and 2020, there are 20,543,116 and 21,678,322 shares authorized for issuance under the plan, of which 1,497,365 and 206,529 options remain available for issuance under the plan, respectively. During the years ended December 31, 2019 and 2020, activity and amounts related to awards to nonemployees under the Plan were not material.
As of June 30, 2021 (unaudited), there are 27,908,344 shares authorized for issuance under the plan, of which 1,934,742 options remain available for issuance under the plan, respectively. During the six months ended June 30, 2021 (unaudited), activity and amounts related to awards to nonemployees under the Plan were not material.
The following is a summary of the Company’s stock option activity during the years ended December 31, 2019 and 2020 and the six months ended June 30, 2021 (unaudited):
| Stock Options | |||||||||||||||||||||||
| (in thousands, except share and per share amounts) | Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (1) | |||||||||||||||||||
| Balances as of January 1, 2019 | 16,273,467 | $ | 1.21 | 8.57 | $ | 12,850 | |||||||||||||||||
| Granted | 6,447,837 | 2.39 | |||||||||||||||||||||
| Exercised | (1,884,271) | 0.61 | 2,967 | ||||||||||||||||||||
| Forfeited | (1,791,281) | 1.52 | |||||||||||||||||||||
| Balances as of December 31, 2019 | 19,045,752 | 1.62 | 8.30 | 16,885 | |||||||||||||||||||
| Granted | 4,783,172 | 2.70 | |||||||||||||||||||||
| Exercised | (1,864,794) | 1.28 | 2,370 | ||||||||||||||||||||
| Forfeited | (929,706) | 2.09 | |||||||||||||||||||||
| Balances as of December 31, 2020 | 21,034,424 | 1.88 | 7.82 | 64,604 | |||||||||||||||||||
| Granted (unaudited) | 7,179,253 | 6.41 | |||||||||||||||||||||
| Exercised (unaudited) | (2,069,978) | 1.85 | 9,543 | ||||||||||||||||||||
| Forfeited (unaudited) | (787,793) | 3.07 | |||||||||||||||||||||
| Balances as of June 30, 2021 (unaudited) | 25,355,906 | 3.13 | 8.00 | 165,369 | |||||||||||||||||||
| Vested and exercisable as of December 31, 2020 | 9,271,671 | $ | 1.37 | 6.81 | $ | 33,190 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2020 | 21,509,413 | $ | 1.88 | 7.82 | $ | 66,039 | |||||||||||||||||
| Vested and exercisable as of June 30, 2021 (unaudited) | 9,963,856 | $ | 1.54 | 6.60 | $ | 80,817 | |||||||||||||||||
| Vested and expected to vest as of June 30, 2021 (unaudited) | 25,822,242 | $ | 3.12 | 8.00 | $ | 168,627 | |||||||||||||||||
_________________
(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock.
F-27
The fair value of options granted during the years ended December 31, 2019 and 2020, and the six months ended June 30, 2020 and 2021 (unaudited) was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Risk-free interest rates | 1.51% to 2.47% | 0.30% to 1.47% | 0.34% to 1.47% | 0.32% to 1.19% | |||||||||||||||||||
| Expected term (in years) | 5.0 to 10.0 years | 5.0 to 6.6 years | 5.0 to 6.1 years | 3.5 to 6.8 years | |||||||||||||||||||
| Volatility | 53.8 % to 54.0 % | 37.3% to 54.0 % | 37.3% to 54.0% | 37.8% to 41.4 % | |||||||||||||||||||
| Dividend rate | — | % | — | % | — | % | — | % | |||||||||||||||
The weighted-average grant date fair value of options granted during the years ended December 31, 2019 and 2020, was $2.39 and $2.70, respectively. The aggregate grant-date fair value of options vested for years ended December 31, 2019 and 2020 was $3.8 million and $6.3 million, respectively.
The weighted-average grant date fair value of options granted during the six months ended June 30, 2020 and 2021 (unaudited), was $2.04 and $6.41, respectively. The aggregate grant-date fair value of options vested for the six months ended June 30, 2020 and 2021 (unaudited) was $2.5 million and $2.6 million, respectively.
Stock-Based Compensation Expense
Stock-based compensation expense during the years ended December 31, 2019 and 2020 and the six months ended June 30, 2020 and 2021 included in the consolidated statements of operations was as follows (in thousands):
| Years Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | |||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Customer support and operations | $ | 25 | $ | 22 | $ | 9 | $ | 37 | ||||||||||||||||||
| Marketing | 541 | 869 | 411 | 721 | ||||||||||||||||||||||
| Technology and development | 1,486 | 2,130 | 1,015 | 1,824 | ||||||||||||||||||||||
| General and administrative | 1,596 | 2,243 | 1,088 | 1,643 | ||||||||||||||||||||||
| Total | $ | 3,648 | $ | 5,264 | $ | 2,523 | $ | 4,225 | ||||||||||||||||||
In connection with the 2019 Tender Offer, as discussed in Note 9, the Company repurchased and retired 2,053,690 shares of the Company’s common stock for an aggregate purchase price of $11.0 million. The amounts paid in excess of the fair value of the common shares repurchased from the Company’s employees and founders, totaling $4.0 million were recorded as compensation expense for the year ended December 31, 2019, and are in addition to the amounts included as stock-based compensation expense in the above table. The $4.0 million of excess fair value was recorded in the following line items in the consolidated statements of operations: $0.2 million in marketing, $2.0 million in technology and development, and $1.8 million in general and administrative. The remaining $7.0 million was recorded as a decrease to par value of common stock and an increase in accumulated deficit, as the additional paid-in capital balance at the time of the transaction was zero. There were no such transactions during the year ended December 31, 2020 or the six months ended June 30, 2021 (unaudited).
As of December 31, 2020, the total unamortized compensation cost related to stock options granted were $13.3 million, which will be amortized over a weighted-average remaining requisite service period of 2.37 years.
As of June 30, 2021 (unaudited), the total unamortized compensation cost related to stock options granted were $26.1 million, which will be amortized over a weighted-average remaining requisite service period of 2.66 years.
F-28
Restricted Stock Units
RSUs granted under the Equity Plan have a service-based vesting condition which is generally satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter, and a performance-based vesting condition that is satisfied on the earlier of: (1) a change in control or (2) the effective date of an initial public offering of the Company’s securities.
The following is a summary of the Company’s RSU activity during the year ended December 31, 2020 and the six months ended June 30, 2021 (unaudited):
| Number of Shares | Weighted-Average Grant-Date Fair Value Per Share | ||||||||||
| Unvested at January 1, 2020 | — | $ | — | ||||||||
| Granted | 437,369 | 3.54 | |||||||||
| Vested | — | — | |||||||||
| Cancelled/forfeited | — | — | |||||||||
| Unvested at December 31, 2020 | 437,369 | $ | 3.54 | ||||||||
| Granted (unaudited) | 180,327 | 4.95 | |||||||||
| Unvested at June 30, 2021 (unaudited) | 617,696 | $ | 3.95 | ||||||||
No RSUs were granted during the year ended December 31, 2019 and the six months ended June 30, 2020 (unaudited).
As of December 31, 2020 and June 30, 2021 (unaudited), the Company had $1.5 million and $2.4 million of unrecognized stock-based compensation expense related to RSUs, respectively. As the RSUs vest upon the satisfaction of both the service-based and performance-based vesting conditions, no stock-based compensation will be recognized until the performance-based vesting condition is probable of being satisfied. At the time the performance-based vesting condition becomes probable, which is not until the performance-based vesting condition is satisfied, the Company will recognize cumulative stock-based compensation expense for the outstanding RSUs using the accelerated attribution method.
If the performance-based vesting condition had been satisfied on December 31, 2020, the Company would have recorded stock-based compensation expense of $0.1 million, and unrecognized stock-based compensation related to the RSUs as of December 31, 2020 would have been $1.4 million.
If the performance-based vesting condition had been satisfied on June 30, 2021 (unaudited), the Company would have recorded stock-based compensation expense of $0.7 million, and unrecognized stock-based compensation related to the RSUs as of June 30, 2021 (unaudited) would have been $1.7 million.
11.Related Party Arrangements
The Company entered into promissory note agreements in October 2018, with two executive employees in conjunction with their early exercise of stock options to purchase 1,800,000 shares of the Company’s common stock. The principal amount of the notes is $3.1 million, and interest accrues at 2.83% on the outstanding principal amount annually. The notes are secured by the shares that were exercised and are presented within additional paid in capital as contra-equity. Based on the non-recourse nature of these agreements, the agreements were accounted for as grants of options to purchase common stock. The fair value of the stock options, determined using the Black-Scholes option pricing model is being recognized over the requisite service period.
The associated shares are legally outstanding and included in shares of common stock outstanding in the consolidated financial statements. These shares of common stock were considered unvested as of December 31,
F-29
2019 and 2020 and June 30, 2021 (unaudited), respectively, because the underlying promissory notes had not been repaid.
12.Income Taxes
The components of loss before provision for income taxes were as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| United States | $ | (52,685) | $ | (35,542) | |||||||
| Foreign | 1,552 | 4,141 | |||||||||
| Loss before provision for income taxes | $ | (51,133) | $ | (31,401) | |||||||
The components of the provision for income taxes are as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Current tax benefit (expense) | |||||||||||
| Federal | $ | — | $ | 2 | |||||||
| State | (19) | (132) | |||||||||
| Foreign | (240) | (1,019) | |||||||||
| Total current tax benefit (expense) | (259) | (1,149) | |||||||||
| Deferred tax benefit (expense) | |||||||||||
| Federal | — | — | |||||||||
| State | — | — | |||||||||
| Foreign | — | (14) | |||||||||
| Total deferred tax benefit (expense) | — | (14) | |||||||||
| Provision for income taxes | $ | (259) | $ | (1,163) | |||||||
A reconciliation at the applicable federal statutory rate to the Company’s effective income tax rate was as follows:
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Federal income taxes at statutory rate | 21.00 % | 21.00 % | |||||||||
| State income tax, net of federal benefit | 3.09 % | 2.93 % | |||||||||
| Increase in valuation allowance | (25.27) % | (26.26) % | |||||||||
| Other | 0.67 % | (1.37) % | |||||||||
| Effective income tax rate | (0.51) % | (3.70) % | |||||||||
As of December 31, 2020, the Company has U.S. net operating loss (“NOL”) carryforwards of $189.4 million and state NOL carryforwards of $91.9 million. Such NOL carryforwards will begin to expire between 2032 and 2039. NOL carryforwards are subject to possible limitation should a change in ownership of the Company occur, as defined by Internal Revenue Code Section 382.
F-30
The tax effects of the temporary differences and carryforwards that give rise to deferred tax assets were as follows (in thousands):
| As of December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforwards | $ | 39,381 | $ | 45,531 | |||||||
| Accrued expenses | 527 | 1,328 | |||||||||
| Stock-based compensation | 967 | 1,535 | |||||||||
| Operating lease liabilities | 1,509 | 1,107 | |||||||||
| Other | 70 | 738 | |||||||||
| Gross deferred tax assets | 42,454 | 50,239 | |||||||||
| Deferred tax liabilities | |||||||||||
| Fixed assets and intangible assets | (351) | (223) | |||||||||
| Operating lease right-of-use assets | (1,149) | (825) | |||||||||
| Gross deferred tax liabilities | (1,500) | (1,048) | |||||||||
| Valuation allowance | (40,913) | (49,159) | |||||||||
| Net deferred tax assets | $ | 41 | $ | 32 | |||||||
The Company has established a full valuation allowance against the U.S. net deferred tax assets, as it believes that these deferred tax assets do not meet the more likely than not threshold.
The net change in the total valuation allowance was an increase of $12.9 million and $8.2 million for the years ended December 31, 2019 and 2020, respectively.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and internationally. As of December 31, 2019 and 2020, there is no accrued interest or penalties associated with income taxes recorded in the consolidated financial statements. The 2011 through 2020 tax years remain open for examination by taxing authorities.
The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon its evaluation of the facts, circumstances and information available at each period end. For those tax positions where the Company has determined there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized. The Company had no uncertain tax positions during the years ended December 31, 2019 and 2020.
The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are recorded as a component of income tax expense. In the years ended December 31, 2019 and 2020, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the United States on March 27, 2020. The CARES Act did not have a material impact on the Company’s provision for income taxes for the year ended December 31, 2020.
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For the Six Months Ended June 30, 2020 and 2021 (unaudited)
The Company computes its tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusting for discrete items arising in that quarter.
The Company’s effective tax rates on pre-tax income were (2.1%) and (9.8)% for the six months ended June 30, 2020 and 2021 (unaudited), respectively. The difference between the effective tax rate and the U.S. federal statutory rate of 21% in both periods was primarily the result of foreign income taxed at different rates and changes in the Company’s U.S. valuation allowance.
The Company maintains a full valuation allowance against the U.S. net deferred tax assets, as it believes that these deferred tax assets do not meet the more likely than not threshold.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and internationally. As of June 30, 2021, tax years 2011 through 2020 remain open for examination by taxing authorities.
The Company has applied ASC 740, Income Taxes, and has determined that it has no uncertain tax positions during the six months ended June 30, 2020 and 2021 (unaudited). The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are recorded as a component of income tax expense.
The CARES Act did not have a material impact on the Company’s provision for income taxes for the six months ended June 30, 2020 or 2021 (unaudited).
13.401(k) Defined Contribution Plan
The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all domestic employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company makes discretionary matching contributions that are funded in the following year. The Company matches 50% of the first 3% of compensation that a participant contributes to the 401(k) plan, up to a maximum of $1,000 per plan year. The Company contributed $0.1 million and $0.2 million to the 401(k) plan during the years ended December 31, 2019 and 2020, respectively. The Company may also make discretionary profit-sharing contributions. No profit-sharing contributions were made during the years ended December 31, 2019 and 2020.
The Company contributed $0.2 million to the 401(k) plan for each of the six months ended June 30, 2020 and 2021 (unaudited), respectively. No profit-sharing contributions were made during the six months ended June 30, 2020 and 2021 (unaudited).
14.Commitments and Contingencies
Guarantees and Indemnification
In the ordinary course of business to facilitate sales of its services, the Company has entered into agreements with, among others, suppliers, and partners that include guarantees or indemnity provisions. The Company also enters into indemnification agreements with its officers and directors, and the Company’s certificate of incorporation and bylaws include similar indemnification obligations to its officers and directors. To date, there have been no claims under any indemnification provisions, therefore no such amounts have been accrued as of December 31, 2019 and 2020 and June 30, 2020 and 2021 (unaudited).
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Litigation
From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, threatened claims, breach of contract claims, and other matters. The Company accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. Although the results of litigation and claims are inherently unpredictable, the Company believes that there was not at least a reasonable possibility that it had incurred a material loss with respect to such loss contingencies, as of December 31, 2019 and 2020 and June 30, 2020 and 2021 (unaudited).
15.Leases
The Company leases office space in all of its locations under non-cancelable operating leases with various expiration dates through 2024. Tenant improvement allowance received for the leases in place as of December 31, 2020 totaled $1.8 million.
The components of lease expense, lease term, and discount rate for operating leases are as follows:
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Operating lease expense (in thousands) | $ | 2,594 | $ | 3,202 | |||||||
| Weighted-average remaining lease term (in years) | 3.0 | 2.6 | |||||||||
| Weighted-average discount rate | 6.2 | % | 5.8 | % | |||||||
Supplemental cash flow information related to leases was as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Cash payments (receipts) included in the measurement of operating lease liabilities – operating cash flows | $ | 2,927 | $ | 3,315 | |||||||
The following table represents the maturity of lease liabilities as of December 31, 2020 (in thousands):
| Year Ending December 31, | |||||
| 2021 | $ | 3,278 | |||
| 2022 | 2,642 | ||||
| 2023 | 943 | ||||
| 2024 | 468 | ||||
| Total lease payments | 7,331 | ||||
| Less: Imputed interest | (364) | ||||
| Present value of operating lease liabilities | $ | 6,967 | |||
16.Segment and Geographical Information
The Company determines operating segments based on how its chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. The Company’s CODM is its Chief Executive Officer, who reviews the Company’s operating results on a consolidated basis. The Company operates as one segment. Based on the information provided to and reviewed by the Company’s CODM, the Company believes that the nature, amount, timing, and uncertainty of its revenue and how they are affected by economic factors are most appropriately depicted through its primary geographical locations. Revenues recorded by the Company are substantially all from the Company’s single performance obligation which are earned from similar services for which the nature of associated fees and the related revenue recognition models are substantially the same.
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The following table presents the Company’s revenue disaggregated by primary geographical location (in thousands):
| Years Ended December 31, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2019 | 2020 | 2020 | 2021 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| United States | $ | 105,356 | $ | 199,011 | $ | 85,824 | $ | 149,843 | |||||||||||||||
| Canada | 12,501 | 29,871 | 10,591 | 24,955 | |||||||||||||||||||
| Rest of world | 8,710 | 28,074 | 8,734 | 27,308 | |||||||||||||||||||
| Total revenue | $ | 126,567 | $ | 256,956 | $ | 105,149 | $ | 202,106 | |||||||||||||||
Revenue is attributed to the country in which the customer is located.
The following table summarizes the Company’s long-lived assets based on geography, which consist of property and equipment, net and operating lease right-of-use assets (in thousands):
| As of December 31, | As of June 30, | ||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||
| (unaudited) | |||||||||||||||||
| United States | $ | 9,919 | $ | 8,633 | $ | 8,072 | |||||||||||
| Philippines | 3,466 | 2,795 | 2,347 | ||||||||||||||
| Nicaragua | 714 | 3,049 | 2,861 | ||||||||||||||
| Rest of world | 1,712 | 803 | 635 | ||||||||||||||
| Total long-lived assets | $ | 15,811 | $ | 15,280 | $ | 13,915 | |||||||||||
Long-lived assets are attributed to the country in which the assets are located or owned.
17.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| As of December 31, | As of June 30, | ||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Trade settlement liability | $ | 271 | $ | 16,700 | $ | 11,009 | |||||||||||
| Accrued transaction expense | 3,590 | 6,399 | 9,964 | ||||||||||||||
| Accrued marketing expense | 3,051 | 4,883 | 7,117 | ||||||||||||||
| Reserve for transaction losses | 798 | 3,250 | 2,321 | ||||||||||||||
| Accrued salaries and benefits | 1,316 | 1,960 | 3,650 | ||||||||||||||
| Other accrued expenses | 4,709 | 6,550 | 13,869 | ||||||||||||||
| Total | $ | 13,735 | $ | 39,742 | $ | 47,930 | |||||||||||
18.Subsequent Events
The Company has evaluated subsequent events through April 1, 2021, the date on which these consolidated financial statements were available to be issued.
Increase of Authorized Common Shares and Equity Plan Option Pool
In February 2021, the Company’s board of directors approved to increase the number of authorized shares of common stock that can be issued upon the exercise of incentive stock options from 103,799,031 to 131,699,031 shares. In addition, the Company’s board of directors approved to increase the total number of shares of common stock reserved under the Equity Plan by 8,300,000 shares.
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19.Subsequent Events (unaudited)
In preparing the unaudited consolidated financial statements as of June 30, 2021 and for the six months ended June 30, 2020 and 2021, the Company has evaluated subsequent events through August 30, 2021 the date these unaudited interim consolidated financial statements were available for issuance.
Repayment of Promissory Note Agreements
On August 23, 2021, the promissory note agreements entered into in October 2018 with two executive employees, as described in Note 11, were repaid in full, including amounts owed for accrued interest. The total repayment was approximately $3.3 million.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses to be paid by the registrant, other than the estimated underwriting discounts and commissions, in connection with the sale of the shares of its common stock being registered hereby. All amounts shown are estimates except for the Securities and Exchange Commission (the “SEC”), registration fee, the Financial Industry Regulatory Authority (the “FINRA”) filing fee, and the listing fee.
| Amount Paid or to be Paid | |||||
| SEC registration fee | $ | 10,910.00 | |||
| FINRA filing fee | 15,500.00 | ||||
| Exchange listing fee | * | ||||
| Printing fees and expenses | * | ||||
| Legal fees and expenses | * | ||||
| Accounting fees and expenses | * | ||||
| Transfer agent and registrar fees and expenses | * | ||||
| Miscellaneous expenses | * | ||||
| Total | * | ||||
__________________
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the “DGCL”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended (the “Securities Act”).
As permitted by the DGCL, the registrant’s amended and restated certificate of incorporation that will be in effect following the effectiveness of this registration statement contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:
•any breach of the director’s duty of loyalty to the registrant or its stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•under Section 174 of the DGCL (regarding unlawful dividends and stock purchases); or
•any transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the registrant’s restated bylaws that will be in effect following the effectiveness of this registration statement provide that:
•the registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the DGCL, subject to very limited exceptions;
•the registrant may indemnify its other employees and agents as set forth in the DGCL;
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•the registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to very limited exceptions; and
•the rights conferred in the restated bylaws are not exclusive.
Prior to this offering, the registrant intends to enter into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the registrant’s amended and restated certificate of incorporation and restated bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving a director, executive officer, or employee of the registrant regarding which indemnification is sought. The indemnification provisions in the registrant’s amended and restated certificate of incorporation and restated bylaws and the indemnification agreements entered into or to be entered into between the registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the registrant’s directors and executive officers for liabilities arising under the Securities Act.
The registrant has directors’ and officers’ liability insurance for its directors and officers.
Certain of the registrant’s directors are also indemnified by their employers with regard to their service on the registrant’s board of directors.
In addition, the underwriting agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of the registrant and its officers and directors for certain liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
From July 31, 2018 and through July 31, 2021, the Registrant issued and sold the following securities:
•The Registrant granted stock options to employees, directors, and other service providers to purchase an aggregate of 22,310,009 shares of common stock under its 2011 Equity Incentive Plan, with per share exercise prices ranging from $1.70 to $9.65, and has issued 8,871,612 shares of common stock upon exercise of stock options under its 2011 Plan.
•Since July 31, 2018, the Registrant granted restricted stock units to employees representing an aggregate of 617,696 shares under our 2011 Plan.
•In May 2021, the Registrant issued 25,759 shares of common stock to a counterparty in connection with an intellectual property license acquisition in reliance on Rule 506(b) pursuant to a waiver, release and license agreement entered into by Remitly, Inc., a subsidiary of the Registrant.
•Between August 2020 and March 2021, the Registrant issued an aggregate of 9,622,110 shares of the Registrant’s Series F convertible preferred stock to accredited investors at a purchase price of $9.1456 per share for an aggregate purchase price of approximately $88.0 million. Registrant’s Series F convertible preferred stock are convertible into an equivalent number of shares of common stock.
•Between May 2019 and July 2019, the Registrant issued an aggregate of 22,663,933 shares of the Registrant’s Series E convertible preferred stock to accredited investors at a purchase price of $5.9566 per share for an aggregate purchase price of approximately $135.0 million. Registrant’s Series E convertible preferred stock are convertible into an equivalent number of shares of common stock.
Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not
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involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
| Description of Document | ||||||||
| 1.1* | Form of Underwriting Agreement | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3* | Form of Amended and Restated Certificate of Incorporation, to be effective immediately prior to consummation of this offering | |||||||
| 3.4* | Form of Restated Bylaws, to be effective immediately prior to consummation of this offering | |||||||
| 4.1* | Form of Common Stock certificate | |||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 5.1* | Opinion of Fenwick & West LLP | |||||||
| 10.1 | ||||||||
| 10.2† | ||||||||
| 10.3 | ||||||||
| 10.4* | 2021 Equity Incentive Plan, to be effective on the date immediately prior to the effective date of this registration statement, and forms of award agreements thereunder | |||||||
| 10.5* | 2021 Employee Stock Purchase Plan, to be effective on the date immediately prior to the effective date of this registration statement, and forms of subscription agreement thereunder | |||||||
| 10.6* | Form of Change in Control and Severance Agreement for executive officers | |||||||
| 10.7* | Amended and Restated Offer Letter, effective as of , by and between the Registrant and Matthew Oppenheimer | |||||||
| 10.8* | Amended and Restated Offer Letter, effective as of , by and between the Registrant and Joshua Hug | |||||||
| 10.9* | Amended and Restated Offer Letter, effective as of , by and between the Registrant and Susanna Morgan | |||||||
| 21.1 | ||||||||
| 23.1 | ||||||||
| 23.2* | Consent of Fenwick & West LLP (included in Exhibit 5.1) | |||||||
| 24.1 | ||||||||
_______________
* To be filed by amendment.
† Certain of the schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Item 601(a)(5). The registrant hereby undertakes to provide further information regarding such omitted materials to the Commission upon request.
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(b)Financial Statement Schedules.
Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2019 and 2020 are as follows:
| Years Ended December 31, | |||||||||||
| 2019 | 2020 | ||||||||||
| Changes in Valuation Allowance (in thousands) | |||||||||||
| Balance at the beginning of the period | $ | 27,994 | $ | 40,913 | |||||||
| Deferred tax assets assumed through business combinations | — | — | |||||||||
| Charged to income tax expense | 12,919 | 8,246 | |||||||||
| (Credited) charged to equity | — | — | |||||||||
| Foreign currency exchange | — | — | |||||||||
| Other adjustments | — | — | |||||||||
| Balance at the end of the period | $ | 40,913 | $ | 49,159 | |||||||
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters at the completion specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act 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 SEC 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.
The undersigned registrant hereby undertakes that:
(1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Seattle, Washington, on August 30, 2021.
| REMITLY GLOBAL, INC. | |||||
By: | /s/ Matthew Oppenheimer | ||||
Matthew Oppenheimer Chief Executive Officer | |||||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Matthew Oppenheimer and Susanna Morgan, as his or her true and lawful attorneys-in-fact, proxies, and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact, proxies, and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies, and agents, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
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| Signature | Title | Date | ||||||||||||
| /s/ Matthew Oppenheimer | Chief Executive Officer and Director (Principal Executive Officer) | August 30, 2021 | ||||||||||||
| Matthew Oppenheimer | ||||||||||||||
| /s/ Susanna Morgan | Chief Financial Officer (Principal Financial and Accounting Officer) | August 30, 2021 | ||||||||||||
| Susanna Morgan | ||||||||||||||
| /s/ William Bryant | Director | August 30, 2021 | ||||||||||||
| William Bryant | ||||||||||||||
| /s/ Bora Chung | Director | August 30, 2021 | ||||||||||||
| Bora Chung | ||||||||||||||
| /s/ Joshua Hug | Director | August 30, 2021 | ||||||||||||
| Joshua Hug | ||||||||||||||
| /s/ Laurent Le Moal | Director | August 30, 2021 | ||||||||||||
| Laurent Le Moal | ||||||||||||||
| /s/ Nigel Morris | Director | August 30, 2021 | ||||||||||||
| Nigel Morris | ||||||||||||||
| /s/ Phillip Riese | Director | August 30, 2021 | ||||||||||||
| Phillip Riese | ||||||||||||||
| /s/ Ron Shah | Director | August 30, 2021 | ||||||||||||
| Ron Shah | ||||||||||||||
| /s/ Margaret M. Smyth | Director | August 30, 2021 | ||||||||||||
| Margaret M. Smyth | ||||||||||||||
| /s/ Charles Stonecipher | Director | August 30, 2021 | ||||||||||||
| Charles Stonecipher | ||||||||||||||
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Exhibit 3.1
REMITLY GLOBAL, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Remitly Global, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the state of Delaware (the “General Corporation Law”), does hereby certify as follows.
1. The name of this corporation is Remitly Global, Inc. and that this corporation was originally incorporated pursuant to the General Corporation Law on October 3, 2018 under the name Remitly Global, Inc.
2. The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows.
RESOLVED, that the Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.
3. Exhibit A referred to above is attached hereto as Exhibit A and is hereby incorporated herein by this reference. This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. This Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 22nd day of July, 2020.
| By: | /s/ Matthew B. Oppenheimer | |||||||
| Matthew B. Oppenheimer, President | ||||||||
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Exhibit A
REMITLY GLOBAL, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME.
The name of this corporation is Remitly Global, Inc. (the “Corporation”).
ARTICLE II: REGISTERED OFFICE.
The address of the registered office of the Corporation in the state of Delaware is 3500 South Dupont Highway, City of Dover, County of Kent, Delaware 19901. The name of the registered agent of the corporation at that address is Incorporating Services, Ltd.
ARTICLE III: PURPOSE.
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the state of Delaware.
ARTICLE IV: AUTHORIZED SHARES.
The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) 190,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and (b) 132,674,735 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”). The Preferred Stock may be issued from time to time in one or more series, each of such series to consist of such number of shares and to have such terms, rights, powers and preferences, and the qualifications and limitations with respect thereto, as stated or expressed herein. As of the effective date of this Restated Certificate of Incorporation (this “Restated Certificate”), 10,199,786 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series Seed Preferred Stock,” 8,780,816 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series Seed Prime Preferred Stock,” 11,514,347 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock,” 14,196,476 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Preferred Stock,” 25,146,777 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series C Preferred Stock,” 30,331,802 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series D Preferred Stock,” 22,663,934 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series E Preferred Stock” and 9,840,797 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series F Preferred Stock.” The Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock shall hereinafter be collectively referred to as the “Senior Preferred Stock”. The following is a statement of the designations and the rights, powers and privileges, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.
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A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and privileges of the holders of the Preferred Stock set forth herein.
2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). Unless required by law, there shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Restated Certificate) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
B. PREFERRED STOCK
The following rights, powers and privileges, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to “Sections” in this Part B of this Article IV refer to sections of this Part B.
1. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
1.1 Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to the Corporation’s stockholders, on a pari passu basis, an amount per share equal to the greater of (a) the Original Issue Price (as defined below) for such share of Series Seed Preferred Stock, Series Seed Prime Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, as applicable, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of Preferred Stock been converted into Common Stock pursuant to Section 3 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution or winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they are entitled under this Section 1.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The “Original Issue Price” shall mean $0.2729 per share for the Series Seed Preferred Stock, $0.2961 per share for the Series Seed Prime Preferred Stock, $0.49764 per share for the Series A Preferred Stock, $0.8805 per share for the Series B Preferred Stock, $1.7032 per share
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for the Series C Preferred Stock, $3.7914 per share for the Series D Preferred Stock, $5.9566 per share for the Series E Preferred Stock and $9.1456 per share for the Series F Preferred Stock.
1.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Section 1.1, the remaining funds and assets available for distribution to the stockholders of the Corporation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares of Common Stock held by each such holder.
1.3 Deemed Liquidation Events.
1.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless (i) with respect to a transaction described in Sections 1.3.1(a) and (b) below, the holders of a majority of the outstanding shares of Senior Preferred Stock, voting together as a single class on an as-converted basis (the “Senior Preferred Majority”), and (ii) with respect to a transaction described in Section 1.3.1(c) below, the holders of at least eighty percent (80%) of the outstanding shares of Senior Preferred Stock, voting together as a single class on an as converted basis, elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event:
(a) a merger or consolidation in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation (excluding for this purpose any Acquiring Stockholder (as defined below)) continue to represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party; provided that, for the purpose of this Section 1.3.1, all shares of Common Stock issuable upon exercise of options outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined below) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, deemed to be converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged;
(b) the sale, lease, transfer or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or, if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the
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Corporation, except where such sale, lease, transfer or other disposition is to the Corporation or one or more wholly owned subsidiaries of the Corporation; or
(c) the closing of the sale, exchange, or transfer (whether by merger, consolidation or otherwise) by the Corporation or the Corporation’s stockholders, in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the Corporation’s securities), of the Corporation’s securities if, after such closing, such person or group of affiliated persons would hold 50% or more of the outstanding voting stock of the Corporation (or the surviving or acquiring entity), unless the primary purpose for the transaction is to raise equity financing for the Corporation and such financing is approved by the Board of Directors of the Corporation (the “Board”).
For purposes of this Section 1.3, an “Acquiring Stockholder” means a stockholder or an affiliate of a stockholder (or stockholders and/or their affiliates acting together) of the Corporation that (i) merges or otherwise combines with the Corporation in such combination transaction or (ii) owns or controls, directly or indirectly, a majority of another corporation or other entity that merges or otherwise combines with the Corporation in such combination transaction.
1.3.2 Effecting a Deemed Liquidation Event. The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 1.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 1.1 and 1.2.
1.3.3 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Section 1.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Section 1.1 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Section 1.1 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For purposes of this Section 1.3.3, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed Additional Consideration.
1.3.4 Amount Deemed Paid or Distributed. The funds and assets deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer or other disposition described in this Section 1.3 shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. If the amount deemed paid or distributed under this Subsection 1.3.4 is made in property other than in cash, the value of such distribution shall be the fair market value of such property, as determined in good faith by the
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Board; provided, however that the following shall apply. For securities not subject to investment letters or other similar restrictions on free marketability:
(a) if traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending three (3) days prior to the closing of such transaction;
(b) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the closing of such transaction; or
(c) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.
The method of valuation of securities subject to investment letters or other similar restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall take into account an appropriate discount (as determined in good faith by the Board) from the market value as determined pursuant to clause (a) above so as to reflect the approximate fair market value thereof, as determined in good faith by the Board.
2. Voting.
2.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation (the “Bylaws”).
2.2 Election of Directors.
2.2.1 For so long as at least 2,000,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series E Preferred Stock in shares of such stock), the holders of record of a majority of the then outstanding shares of Series E Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “Series E Director”).
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2.2.2 For so long as at least 2,000,000 shares of Series D Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series D Preferred Stock in shares of such stock), the holders of record of a majority of the then outstanding shares of Series D Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “Series D Director”).
2.2.3 For so long as at least 2,000,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series C Preferred Stock in shares of such stock), the holders of record of a majority of the then outstanding shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “Series C Director”).
2.2.4 For so long as at least 2,000,000 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series B Preferred Stock in shares of such stock), the holders of record of a majority of the then outstanding shares of Series B Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “Series B Director”).
2.2.5 For so long as at least 2,000,000 shares of Series Seed Preferred Stock, Series Seed Prime Preferred Stock and/or Series A Preferred Stock (collectively, the “Series Seed/A Preferred”) remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of the Series Seed/A Preferred in shares of such stock), the holders of record of a majority of the then outstanding shares of Series Seed/A Preferred, voting together as a single and separate class on an as-converted basis, shall be entitled to elect one director of the Corporation (the “Series Seed/A Preferred Director” and, collectively with the Series B Director, the Series C Director, the Series D Director and the Series E Director, the “Preferred Directors”).
2.2.6 The holders of record of a majority of the then outstanding shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two directors of the Corporation (the “Common Directors”).
2.2.7 The holders of record of a majority of the shares of Common Stock and of every other class or series of voting stock (including the Preferred Stock), voting together as a single class on an as-converted basis, shall be entitled to elect the remaining directors of the Corporation (the “Remaining Directors”).
2.2.8 Vacancies Not Caused by Removal. If there is any vacancy in the office of any director elected or to be elected by the holders of the outstanding shares of a specified class, classes or series of stock given the right to elect such director pursuant to the preceding Sections 2.2.1 through 2.2.7 above (the “Specified Stock”), that exists prior to the time on the date the first share of Series E Preferred Stock is issued (the “First Issuance Time”), such vacancy may be filled (either contingently or otherwise) by the holders of the Specified Stock or by a majority of the members of the Board then in office, although less than a quorum, or by a sole remaining member of the Board then in office, even if such directors or such sole remaining director were not elected by the holders of the Specified Stock that are entitled to elect a director or directors to office under the provisions of Section 2.2.1 and such electing director or directors
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shall specify at the time of such election the specific vacant directorship being filled. After the First Issuance Time, a director to hold office for the unexpired term of such directorship, unless the vacancy is due to the removal of a director, may be elected by either: (i) the affirmative vote of a majority of the remaining directors (if any) in office that were so elected by the holders of such Specified Stock by the affirmative vote of a majority of such directors or by the sole remaining director elected by the holders of such Specified Stock if there be but one or (ii) the required vote of holders of the shares of such Specified Stock specified in this Section 2.2 that are entitled to elect such director. Any director elected as provided in this Section 2.2 may be removed without cause by, and any vacancy in the office of any such removed director may be filled by, and only by, the affirmative vote of the holders of a majority of the then outstanding shares of the Specified Stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class, classes, or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.
2.3 Preferred Stock Protective Provisions. For so long as at least 2,000,000 shares of Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent or affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock, voting together as a single class on an as-converted basis (the “Requisite Holders”), given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a single class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) amend, repeal or waive any provision set forth in the Bylaws or this Restated Certificate, each as then in effect, in a manner that is material and adverse to any series of Preferred Stock (it being agreed that the creation, authorization or issuance of any additional series of Preferred Stock (or security convertible into any additional series of Preferred Stock) shall not be deemed to materially and adversely affect the Preferred Stock);
(b) increase or decrease the authorized number of shares of Preferred Stock (or any series thereof);
(c) redeem or repurchase any shares of Common Stock or Preferred Stock (other than pursuant to (i) employee or consultant agreements giving the Corporation the right to repurchase shares at the original cost thereof upon the termination of services or (ii) the exercise of a contractual right of first refusal);
(d) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock;
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(e) increase or decrease the authorized number of directors of the Corporation;
(f) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent, agree or commit to any of the foregoing (or any series of related transactions that would result in the foregoing) without conditioning such consent, agreement or commitment upon obtaining the approval required by this Section 2.3;
(g) effect a public offering of the capital stock of the Corporation pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), other than a Qualified IPO;
(h) incur any indebtedness in excess of $5,000,000, unless such indebtedness has been approved by the Board (including one of the Preferred Directors);
(i) hire or appoint a Chief Executive Officer of the Corporation (or functional equivalent) other than Matthew Oppenheimer; or
(j) permit any of its subsidiaries to do any of the foregoing.
2.4 Senior Preferred Stock Protective Provisions. For so long as at least 2,000,000 shares of Senior Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Senior Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent or affirmative vote of the holders of the Senior Preferred Majority, given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a single class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) amend, repeal or waive any provision set forth in the Bylaws or this Restated Certificate, each as then in effect, in a manner that is material and adverse to the Senior Preferred Stock or any series thereof (it being agreed that an increase in the authorized number of shares of Preferred Stock and the creation, authorization or issuance of any additional series of Preferred Stock (or security convertible into any additional series of Preferred Stock) shall not be deemed to materially and adversely affect the Senior Preferred Stock or any series thereof);
(b) increase or decrease the authorized number of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock;
(c) enter into, be a party to or modify any transaction with any director, executive officer or stockholder of the Corporation or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of any such person, unless such transaction is (i) related to salary or other
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compensation matters to be entered into in the ordinary course of business on arms-length terms and approved by the Board or the Compensation Committee of the Board, (ii) a bona fide equity financing of the Corporation approved by the Board or (iii) an amendment of or waiver to any agreement or arrangement between the Corporation and such persons that was entered into in connection with the sale of shares of Series D Preferred Stock by Remitly, Inc., a wholly-owned subsidiary of the Corporation (“Remitly”), or was contemplated to be entered into pursuant to the Series D Preferred Stock Purchase Agreement dated as of October 25, 2017, among Remitly and the other parties set forth therein; or
(d) permit any of its subsidiaries to do any of the foregoing.
2.5 Series E Protective Provisions. For so long as at least 2,000,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Series E Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or in this Restated Certificate) the written consent or affirmative vote of the holders of a majority of the outstanding shares of Series E Preferred Stock (which majority shall include Generation IM Sustainable Solutions Fund III, L.P., a Guernsey limited partnership (together with its affiliates, “Generation”) for so long as Generation holds not fewer than 250,000 shares of Series E Preferred Stock (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Series E Preferred Stock in shares of such stock)), voting as a separate class (the “Series E Majority”), given in writing or by vote at meeting, consenting or voting (as the case may be) together as a singled class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) amend, repeal or waive any provision set forth in the Bylaws or this Restated Certificate, each as then in effect, in a manner that would disproportionately and materially adversely affect the Series E Preferred Stock (it being agreed that the creation, authorization or issuance of any additional class or series of Preferred Stock (or security convertible into any such class or series of Preferred Stock) shall not be deemed to disproportionately and materially adversely affect the Series E Preferred Stock);
(b) create, authorize or issue shares of any additional class or series of capital stock, including any other security convertible into or exercisable for any equity security, if such creation, authorization or issuance would disproportionately and materially adversely affect the Series E Preferred Stock (it being agreed that the creation, authorization or issuance of any additional class or series of Preferred Stock (or any security convertible into such class or series of Preferred Stock) shall not be deemed to disproportionately and materially adversely affect the Series E Preferred Stock);
(c) create, authorize or issue any shares of Series Seed Preferred Stock, Series Seed Prime Preferred Stock or Series A Preferred Stock; or
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(d) increase or decrease the authorized number of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock.
2.6 Series F Protective Provisions. For so long as at least 2,000,000 shares of Series F Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Series F Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or in this Restated Certificate) the written consent or affirmative vote of the holders of a majority of the outstanding shares of Series F Preferred Stock, voting as a separate class (the “Series F Majority”), given in writing or by vote at meeting, consenting or voting (as the case may be) together as a singled class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) amend, repeal or waive any provision set forth in the Bylaws or this Restated Certificate, each as then in effect, in a manner that would disproportionately and materially adversely affect the Series F Preferred Stock (it being agreed that the creation, authorization or issuance of any additional class or series of Preferred Stock (or security convertible into any such class or series of Preferred Stock) shall not be deemed to disproportionately and materially adversely affect the Series F Preferred Stock);
(b) create, authorize or issue shares of any additional class or series of capital stock, including any other security convertible into or exercisable for any equity security, if such creation, authorization or issuance would disproportionately and materially adversely affect the Series F Preferred Stock (it being agreed that the creation, authorization or issuance of any additional class or series of Preferred Stock (or any security convertible into such class or series of Preferred Stock) shall not be deemed to disproportionately and materially adversely affect the Series F Preferred Stock);
(c) create, authorize or issue any shares of Series Seed Preferred Stock, Series Seed Prime Preferred Stock or Series A Preferred Stock; or
(d) increase or decrease the authorized number of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock.
3. Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
3.1 Right to Convert.
3.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of
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Preferred Stock by the Conversion Price (as defined below) for such series of Preferred Stock in effect at the time of conversion. The “Conversion Price” for each series of Preferred Stock shall initially mean the Original Issue Price for such series of Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
3.1.2 Termination of Conversion Rights. Subject to Section 3.3.1 in the case of a Contingency Event (as defined therein), in the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the first payment of any funds and assets distributable on such event to the holders of Preferred Stock.
3.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
3.3 Mechanics of Conversion.
3.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent (a “Contingency Event”). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice (or, if later, the date on which all Contingency Events have occurred) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such time. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of Preferred Stock, or to such holder’s nominees, a certificate or
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certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (b) pay in cash such amount as provided in Section 3.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
3.3.2 Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then-outstanding shares of the Preferred Stock, the Corporation shall use its best efforts to cause such corporate action to be taken as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary so that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
3.3.3 Effect of Conversion. All shares of Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 3.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued.
3.3.4 No Further Adjustment. Upon any conversion of shares of Preferred Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock shall be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.
3.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 3. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to
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the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
3.4 Mandatory Conversion. Upon either the earlier of (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, at a price per share of at least $9.1456 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to Preferred Stock) resulting in gross proceeds to the Corporation (before deduction of underwriters’ commissions and expenses) of at least $100,000,000 (a “Qualified IPO”); or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of the Senior Preferred Majority, which consent shall include the approval of (i) Generation for so long as Generation owns at least 5,000,000 shares of Series E Preferred Stock and/or Series F Preferred Stock (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Series E Preferred Stock or Series F Preferred Stock in shares of such stock) and (ii) PayU Fintech Investments B.V. (“Naspers”) for so long as Naspers or its affiliates own at least 10,000,000 shares of Series D Preferred Stock, Series E Preferred Stock and/or Series F Preferred Stock (as such number is adjusted for stock splits and combinations of shares and for dividends paid on any series of Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock in shares of such stock) (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), (A) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the applicable ratio described in Section 3.1.1 as the same may be adjusted from time to time in accordance with Section 3 and (B) such shares may not be reissued by the Corporation, including for the avoidance of doubt, (1) any filing of a registration statement under the Securities Act on a nationally-recognized exchange in the United States that results in shares of the Company’s Preferred Stock converting into Common Stock or (2) any other public offering of the Company’s securities that is not a Qualified IPO.
3.5 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Section 3.4. Unless otherwise provided in this Restated Certificate, such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender such holder’s certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 3. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. All rights with respect
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to the Preferred Stock converted pursuant to Section 3.4, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 3.5. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to such holder’s nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 3.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and the applicable series thereof) accordingly.
3.6 Adjustments to Conversion Price for Diluting Issuances.
3.6.1 Special Definitions. For purposes of this Article IV, the following definitions shall apply:
(a) “Option” shall mean any right, option or warrant to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities from the Corporation.
(b) “Original Issue Date” shall mean the date on which the first share of Series F Preferred Stock was issued.
(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities issued by the Corporation that are directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(d) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 3.6.2 below, deemed to be issued) by the Corporation after the Original Issue Date, other than the following shares of Common Stock and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively as to all such shares and shares deemed issued, “Exempted Securities”):
(i) shares of Common Stock issued or issuable upon conversion of the outstanding shares of any series of the Preferred Stock;
(ii) shares of Common Stock or Preferred Stock issuable upon exercise of any Options, or Convertible Securities to purchase any securities of the Corporation outstanding as of the Original Issue Date and any securities issuable upon the conversion thereof;
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(iii) shares of Common Stock or Preferred Stock issued in connection with any stock split or stock dividend or recapitalization;
(iv) shares of Common Stock (or Options or Convertible Securities therefor) granted or issued hereafter to employees, officers, directors, contractors, consultants or advisers to, the Corporation or any subsidiary of the Corporation pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by the Board;
(v) shares of Common Stock, Options or Convertible Securities issued to strategic partners, including banks, landlords, equipment lessors, advisors, lenders, or other financial institutions or providers of goods and services to the Corporation, in each case approved by the Board;
(vi) shares of Common Stock, Options or Convertible Securities issued pursuant to a bona fide acquisition of another entity by the Corporation by merger or consolidation with, purchase of assets of, or purchase of more than fifty percent of the outstanding equity securities of, the other entity, or issued pursuant to a licensing arrangement or joint venture agreement, in each case approved by the Board;
(vii) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions pursuant to a debt financing or equipment leasing transaction approved by the Board (including the approval of at least two of the Preferred Directors);
(viii) any other shares of Common Stock or Preferred Stock (and/or Options or Convertible Securities therefor) issued or issuable primarily for other than equity financing purposes and approved by the Board (including the approval of the Series E Director solely in the event that issuances pursuant to this Section 3.6.1(d)(viii) exceed an aggregate number of shares equal to one percent (1%) of the Corporation’s fully-diluted capitalization as of the date of such issuance);
(ix) shares of Common Stock issued or issuable by the Corporation to the public pursuant to a registration statement filed under the Securities Act; and
(x) shares of Common Stock, Options or Convertible Securities issued in a transaction for which the Corporation receives written notice from the holders of a majority of the then outstanding shares of a series of Preferred Stock agreeing that no adjustment shall be made to the Conversion Price of such series of Preferred Stock as a result of the issuance or deemed issuance.
3.6.2 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for
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the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability (including the passage of time) but without regard to any provision contained therein for a subsequent adjustment of such number including by way of anti-dilution adjustment) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 3.6.3, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Section 3.6.2(b) shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount which exceeds the lower of (1) the Conversion Price for such series of Preferred Stock in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (2) the Conversion Price for such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 3.6.3 (either because the consideration per share (determined pursuant to Section 3.6.4) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price of such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised after the Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of
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shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 3.6.2(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 3.6.3, the Conversion Price of such series of Preferred Stock shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Section 3.6.2(e) shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in Sections 3.6.2(b) and 3.6.2(c)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to such Conversion Price that would result under the terms of this Section 3.6.2 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
3.6.3 Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 3.6.2), without consideration or for a consideration per share less than the Conversion Price for a series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price for such series of Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-thousandth of a cent) determined in accordance with the following formula:
CP2 = CP1 * (A + B) ÷ (A + C).
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For purposes of the foregoing formula, the following definitions shall apply:
“CP2” shall mean the applicable Conversion Price in effect immediately after such issue or deemed issue of Additional Shares of Common Stock
“CP1” shall mean the applicable Conversion Price in effect immediately prior to such issue or deemed issue of Additional Shares of Common Stock;
“A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
“B” shall mean the number of shares of Common Stock that would have been issued or deemed issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
“C” shall mean the number of such Additional Shares of Common Stock actually issued or deemed issued in such transaction.
3.6.4 Determination of Consideration. For purposes of this Section 3.6, the consideration received by the Corporation for the issue or deemed issue of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property: Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and
(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.
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(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 3.6.2, relating to Options and Convertible Securities, shall be determined by dividing;
(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
3.6.5 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 3.6.2 and such issuance dates occur within a period of no more than 120 days after the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period that are a part of such transaction or series of related transactions).
3.7 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Section 3.7 shall become effective at the close of business on the date the subdivision or combination becomes effective.
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3.8 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price for such series of Preferred Stock in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, such Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this Section 3.8 as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of each such series of Preferred Stock had been converted into Common Stock on the date of such event.
3.9 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock), then and in each such event the holders of each series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of each such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
3.10 Adjustment for Reclassification, Exchange and Substitution. If, at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of a series of Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than by a stock split or combination, dividend, distribution, merger or consolidation covered by Sections 3.7, 3.8, 3.9 or 3.11 or by Section 1.3 regarding a Deemed Liquidation Event), then in any such event each holder of such series of Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other
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securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change.
3.11 Adjustment for Merger or Consolidation. Subject to the provisions of Section 1.3, if there shall occur any consolidation or merger involving the Corporation in which the Common Stock (but not a series of Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 3.8, 3.9 or 3.10), then, following any such consolidation or merger, provision shall be made that each share of a series of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock issuable upon conversion of one share of such series of Preferred Stock immediately prior to such consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 3 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in this Section 3 shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.
3.12 General Conversion Provisions.
3.12.1 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series of Preferred Stock pursuant to this Section 3, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of any series of Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.
3.12.2 Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without
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limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
3.12.3 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
3.12.4 No Further Adjustment after Conversion. Upon any conversion of shares of Preferred Stock into Common Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock shall be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.
4. Dividends. All dividends shall be declared pro rata on the Common Stock and the Preferred Stock on a pari passu basis according to the number of shares of Common Stock held by such holders. For this purpose, each holder of shares of Preferred Stock is to be treated as holding the greatest whole number of shares of Common Stock then issuable upon conversion of all shares of Preferred Stock held by such holder in accordance with Section 3.
5. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.
6. Waiver. Any of the rights, powers, privileges, and other terms of the Series Seed/A Preferred set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series Seed/A Preferred then outstanding (voting together as a single class on an as-converted to Common Stock basis). Any of the rights, powers, privileges, and other terms of the Series B Preferred Stock set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series B Preferred Stock then outstanding (voting as a separate class). Any of the rights, powers, privileges, and other terms of the Series C Preferred Stock set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series C Preferred Stock then outstanding (voting as a separate class). Any of the rights, powers, privileges, and other terms of
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the Series D Preferred Stock set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series D Preferred Stock then outstanding (voting as a separate class). Any of the rights, powers, privileges, and other terms of the Series E Preferred Stock set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series E Preferred Stock then outstanding (voting as a separate class). Any of the rights, powers, privileges, and other terms of the Series F Preferred Stock set forth herein may be waived on behalf of all holders of such series of the Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of the Series F Preferred Stock then outstanding (voting as a separate class). Except as otherwise set forth herein, any of the rights, powers, privileges, and other terms of the Senior Preferred Stock as a class set forth herein may be waived on behalf of all holders of the Preferred Stock as a class by the affirmative written consent or vote of the holders of a majority of the shares of the Senior Preferred Stock then outstanding (voting together on an as-converted basis as a separate class). Except as otherwise set forth herein, any of the rights, powers, privileges, and other terms of the Preferred Stock as a class set forth herein may be waived on behalf of all holders of the Preferred Stock as a class by the affirmative written consent or vote of the Requisite Holders.
7. Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least 20 days prior to the earlier of the record date or effective date for the event specified in such notice.
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8. Notices. Except as otherwise provided herein, any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law of the state of Delaware, and shall be deemed sent upon such mailing or electronic transmission.
ARTICLE V: PREEMPTIVE RIGHTS.
No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.
ARTICLE VI: BYLAW PROVISIONS.
A. AMENDMENT OF BYLAWS. Subject to any additional vote required by this Restated Certificate or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws.
B. NUMBER OF DIRECTORS. Subject to any additional vote required by this Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws.
C. BALLOT. Elections of directors need not be by written ballot unless the Bylaws shall so provide.
D. MEETINGS AND BOOKS. Meetings of stockholders may be held within or without the state of Delaware, as the Bylaws may provide. The books of the Corporation may be kept outside the state of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws.
ARTICLE VII: DIRECTOR LIABILITY.
A. LIMITATION. To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the state of Delaware is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article VII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
B. INDEMNIFICATION. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law of the
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state of Delaware permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law of the state of Delaware.
C. MODIFICATION. Any amendment, repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.
ARTICLE VIII: CORPORATE OPPORTUNITIES.
The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, or in being informed about, an Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any affiliate, partner, member, director, stockholder, employee, agent or other related person of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.
ARTICLE IX: FORUM.
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall, to the fully extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law, the Restated Certificate, or the Bylaws or as to which the General Corporation law confers jurisdiction on the Court of Chancery in the State of Delaware (iv) any action to interpret, apply, enforce or determine the validity of the Restated Certificate or the Bylaws or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity who has acquired or held, or who may acquire or hold, any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
* * * * *
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REMITLY GLOBAL, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Remitly Global, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the state of Delaware (the “General Corporation Law”), does hereby certify as follows.
1. The name of this corporation is Remitly Global, Inc. and that this corporation was originally incorporated pursuant to the General Corporation Law on October 3, 2018 under the name Remitly Global, Inc.
2. The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows.
RESOLVED, that the Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.
3. Exhibit A referred to above is attached hereto as Exhibit A and is hereby incorporated herein by this reference. This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. This Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 22nd day of July, 2020.
/s/ Matthew B. Oppenheimer_______
By: Matthew B. Oppenheimer, President
Exhibit 3.2
REMITLY GLOBAL, INC.
a Delaware Corporation
BYLAWS
As Adopted November 20, 2018
REMITLY GLOBAL, INC.
a Delaware Corporation
BYLAWS
As Adopted November 20, 2018
ARTICLE I: STOCKHOLDERS
Section 1.1: Annual Meetings. Unless members of the Board of Directors of the Corporation (the “Board”) are elected by written consent in lieu of an annual meeting, as permitted by Section 211 of the Delaware General Corporation Law (the “DGCL”) and these Bylaws, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board shall each year fix. The meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the holders of shares of the Corporation that are entitled to cast not less than ten percent (10%) of the total number of votes entitled to be cast by all stockholders at such meeting, or by a majority of the “Whole Board,” which shall mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Special meetings may not be called by any other person or persons. If a special meeting of stockholders is called by any person or persons other than by a majority of the members of the Board, then such person or persons shall request such meeting by delivering a written request to call such meeting to each member of the Board, and the Board shall then determine the time and date of such special meeting, which shall be held not more than one hundred twenty (120) days nor less than thirty-five (35) days after the written request to call such special meeting was delivered to each member of the Board. The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine.
Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any, of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), such notice shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. The chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any). Any meeting of stockholders may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such
adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone or reschedule any previously scheduled special or annual meeting of stockholders before it is to be held, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.
Section 1.5: Quorum. At each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, unless otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.
Section 1.6: Organization. Meetings of stockholders shall be presided over by such person as the Board may designate, or, in the absence of such a person, the Chairperson of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 1.11 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by written consent without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record.
1.8.1 Generally. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or to take corporate action by written consent without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, except as otherwise required by law, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting, nor, except as provided in Section 1.8.2 below, more than sixty (60) days prior to any other action. If no record date is fixed by the Board, then the record date shall be as provided by applicable law. To the fullest extent provided by law, a determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
1.8.2 Stockholder Request for Action by Written Consent. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice to the Secretary of the Corporation, request the Board to fix a record date for such consent. Such request shall include a brief description of the action proposed to be taken. Unless a record date has previously been fixed by the Board for the written consent pursuant to this Section 1.8, the Board shall, within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. Such record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board within ten (10) days after the date on which such a request is received, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation as required by law. If no record date has been fixed by the Board and prior action by the Board is required by applicable law, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the
whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting.
Section 1.10: Action by Written Consent of Stockholders.
1.10.1 Procedure. Unless otherwise provided by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed in the manner permitted by law by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the agent of the Corporation’s registered office in the State of Delaware shall be by hand or by certified or registered mail, return receipt requested. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the Corporation as provided in Section 1.10.2 below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner required by law, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner required by law.
1.10.2 Form of Consent A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxy holder, or a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (a) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (b) the date on which such stockholder or proxy holder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the Corporation or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all
purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
1.10.3 Notice of Consent. Prompt notice of the taking of corporate action by stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto in writing and, who, if the action had been taken at a meeting, would have been entitled to notice of the meeting, if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as required by law. If the action which is consented to is such as would have required the filing of a certificate under the DGCL if such action had been voted on by stockholders at a meeting thereof, then if the DGCL so requires, the certificate so filed shall state, in lieu of any statement required by the DGCL concerning any vote of stockholders, that written stockholder consent has been given in accordance with Section 228 of the DGCL.
Section 1.11: Inspectors of Elections.
1.11.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by the DGCL, the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.11 shall be optional, and at the discretion of the Board.
1.11.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.11.3 Inspector’s Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
1.11.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
1.11.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be
announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.11.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with any information provided pursuant to Section 211(a)(2)(B)(i) of the DGCL, or Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.11 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board shall consist of one or more members. The number of directors shall be fixed from time to time by resolution of a majority of the Whole Board or the stockholders of the Corporation holding at least a majority of the voting power of the Corporation’s outstanding stock then entitled to vote at an election of directors. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board shall initially consist of the person or persons elected by the incorporator or named in the Corporation’s initial Certificate of Incorporation. Each director shall hold office until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Subject to the rights of any holders of the Preferred Stock then outstanding: (a) any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors and (b) any vacancy occurring in the Board for any reason, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, may be filled by the stockholders, by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4: Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the President or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the Board a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7: Organization. Meetings of the Board shall be presided over by the Chairperson of the Board, or in such person’s absence by the President, or in such person’s absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8: Written Action by Directors. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively, in the minute books of the Corporation. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9: Powers. The Board may, except as otherwise required by law or the Certificate of Incorporation, exercise all such powers and manage and direct all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
ARTICLE III: COMMITTEES
Section 3.1: Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2: Committee Rules. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV: OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a Secretary and a Treasurer and may consist of such other officers, including a Chief Financial Officer, Chief Technology Officer and one or more Vice Presidents or other officers, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chairperson of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until such person’s successor is appointed or until such person’s earlier resignation, death or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board.
Section 4.2: Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) Subject to Article I, Section 1.6, to preside at all meetings of the stockholders;
(c) Subject to Article I, Section 1.2, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board has not designated any other officer to be the Chief Executive Officer, then the Chairperson of the Board shall be the Chief Executive Officer.
Section 4.3: Chairperson of the Board. The Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive Officer of the Corporation unless the Board shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.5: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer’s absence or disability.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive
Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all moneys and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8: Chief Technology Officer. The Chief Technology Officer shall have responsibility for the general research and development activities of the Corporation, for supervision of the Corporation’s research and development personnel, for new product development and product improvements, for overseeing the development and direction of the Corporation’s intellectual property development and such other responsibilities as may be given to the Chief Technology Officer by the Board, subject to: (a) the provisions of these Bylaws; (b) the direction of the Board; (c) the supervisory powers of the Chief Executive Officer of the Corporation; and (d) those supervisory powers that may be given by the Board to the Chairperson or Vice Chairperson of the Board.
Section 4.9: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.10: Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
Section 4.11: Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any Vice Presidents of the Corporation, then such Vice Presidents may be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
ARTICLE V: STOCK
Section 5.1: Certificates. The shares of capital stock of the Corporation shall be represented by certificates; provided, however, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the adoption of such resolution by the Board, every holder of stock that is a certificated security shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairperson or Vice-Chairperson of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. If any holder of uncertificated shares elects to receive a certificate, the Corporation (or the transfer agent or registrar, as the case may be) shall, to the extent permitted under applicable law and rules, regulations and listing requirements of any stock exchange or stock market on which the Corporation’s shares are listed or traded, cease to provide annual statements indicating such holder’s holdings of shares in the Corporation.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock, or uncertificated shares, in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and registration of stock certificates and uncertificated securities shall be governed by such other regulations as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a member of the Board or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor as a member of the board of directors, officer or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the
Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board. As used herein, the term the “Reincorporated Predecessor” means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger and (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses (including attorneys’ fees) incurred by such an Indemnitee in defending any such Proceeding as they are incurred in advance of its final disposition; provided, however, that (a) if the DGCL then so requires, the payment of such expenses incurred by such an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it should be determined ultimately by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise; and (b) the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim, in a Proceeding, alleging that such person has breached such person’s duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
Section 6.5: Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 above.
6.5.1 Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.
6.5.2 Effect of Determination. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3 Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6: Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII: NOTICES
Section 7.1: Notice.
7.1.1 Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 below) or by law, all notices required to be given pursuant to these Bylaws shall be in writing and may, (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such
notice by prepaid telegram, cablegram, overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively be delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of this Article VII by sending such notice by telegram, cablegram, facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via telegram, cablegram, facsimile, electronic mail or other form of electronic transmission, when dispatched.
7.1.2 Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
7.1.3 Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2: Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
ARTICLE VIII: INTERESTED DIRECTORS
Section 8.1: Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2: Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
ARTICLE IX: MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 9.2: Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 9.3: Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, diskettes, CDs, or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4: Reliance upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to
matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
ARTICLE X: AMENDMENT
Unless otherwise required by the Certificate of Incorporation, stockholders of the Corporation holding at least a majority of the voting power of the Corporation’s outstanding voting stock then entitled to vote at an election of directors shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Certificate of Incorporation, the Board shall also have the power to adopt, amend or repeal Bylaws of the Corporation.
________________________
CERTIFICATION OF BYLAWS
OF
REMITLY GLOBAL, INC.
a Delaware Corporation
I, Matt Oppenheimer, certify that I am Secretary of Remitly Global, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Bylaws of the Corporation in effect as of the date of this certificate.
Dated: November 20, 2018 | |||||
| /s/ Matt Oppenheimer | |||||
| Matt Oppenheimer, Secretary | |||||
Exhibit 4.2
REMITLY GLOBAL, INC.
SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT
This Seventh Amended and Restated Investors’ Rights Agreement (this “Agreement”) is made and entered into as of August 3, 2020 by and among Remitly Global, Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor,” each of the stockholders listed on Schedule B hereto, each of whom is referred to herein as a “Key Holder,” any Additional Purchaser (as defined in the Purchase Agreement) that becomes a party to this Agreement in accordance with Section 7.14 hereof and any holder of a Lender Warrant that becomes a party to this Agreement in accordance with Section 7.14 hereof.
RECITALS
WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of the Company’s Series Seed Preferred Stock and/or Series Seed Prime Preferred Stock and/or Series A Preferred Stock and/or Series B Preferred Stock and/or Series C Preferred Stock and/or Series D Preferred Stock and/or Series E Preferred Stock and possess registration rights, information rights, rights of first offer, and other rights pursuant to that certain Sixth Amended and Restated Investors’ Rights Agreement, dated as of May 31, 2019, by and among Remitly Global, Inc., the Company’s wholly-owned subsidiary (“Remitly”) and such Existing Investors; and
WHEREAS, the Company, certain of the Investors (the “New Investors”) have entered into that certain Series F Preferred Stock Purchase Agreement dated as of July 23, 2020, by and among the Company and such New Investors, as may be amended from time to time (the “Purchase Agreement”); and
WHEREAS, pursuant to Section 7.6 of the Prior Agreement, any terms of the Prior Agreement may be amended or waived by the written consent of the Company and (a) with respect to Sections 2 and 4 of the Prior Agreement and any other provisions of the Prior Agreement pertaining to such Sections 2 and 4, the holders of a majority of the Registrable Securities (as defined in the Prior Agreement) then outstanding and held by the Major Investors (as defined in the Prior Agreement) or (b) with respect to any other sections or provisions of the Prior Agreement, the holders of a majority of the Registrable Securities then outstanding, provided that certain sections or provisions of the Prior Agreement shall not be amended without the written consent of certain Existing Investors, as more fully described in Section 7.6 of the Prior Agreement (such requisite consents, majorities and stockholders, the “Requisite Signatories”); and
WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce the New Investors and certain Existing Investors to invest funds in the Company by purchasing shares of Series E Preferred Stock pursuant to the Purchase Agreement, the Company, the undersigned Existing Investors who constitute the Requisite Signatories and the undersigned Key Holders desire to amend and restate the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement in lieu of the rights granted to them in the Prior Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
“Adjusted Pro Rata Amount” means, with respect to a Non-Consenting Major Investor, such Non-Consenting Major Investor’s Pro Rata Amount multiplied by (a) the aggregate number of New Securities actually purchased by all Participating Major Investors divided by (b) such Participating Major Investors’ aggregate Pro Rata Amount.
“Affiliate” means, with respect to any specified Person, or any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such Person including without limitation any general partner, managing partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the terms “controlling,” “controlled by,” or “under common control with” shall mean the possession, directly or indirectly, of (a) the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise, or (b) the power to elect or appoint at least 50% of the directors, managers, general partners, or persons exercising similar authority with respect to such Person.
“Applicable ABAC Laws” means all laws and regulations applying to the Company, any Company Subsidiary and/or an Associated Person of either the Company or any Company Subsidiary prohibiting bribery and other related forms of corruption, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act and Part 3 of the UK Criminal Finances Act 2017.
“Applicable Money Laundering Laws” means all laws and regulations applying to the Company, any Company Subsidiary and/or any Associated Person of either the Company or any Company Subsidiary prohibiting money laundering, including any acts or attempts to conceal or disguise the identity of illegally obtained proceeds.
“Associated Person” means, in relation to a company or other entity, an individual or entity (including a director, officer, employee, consultant, agent or other representative) who or that has acted or performed services for or on behalf of that company or other entity but only with respect to actions or the performance of services for or on behalf of that company or other entity.
“Automatic Shelf Registration Statement” shall have the meaning given to that term in SEC Rule 405.
“BIS” means the Bureau of Industry and Security of the U.S. Department of Commerce.
“Budget” shall have the meaning given to that term in Section 2.1.1.
“business day” means a weekday on which banks are open for general banking business in Seattle, Washington.
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“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” means shares of the Company’s common stock.
“Competitor” means (a) any Person that, in the good faith determination of the Board, directly or indirectly competes with the Company, (b) any customer, distributor or supplier of the Company, if the Board should determine that the receipt of confidential information by such customer, distributor or supplier receiving would place the Company at a competitive disadvantage with respect to such customer, distributor or supplier, (c) any Person that is an operating company engaged directly or indirectly, in direct to consumer international digital remittances or any other line of business in which the Company operates, or (d) any Affiliate of any such Person described in clauses (a) or (c) of this sentence or of any customer, distributor or supplier described in clause (b) of this sentence; provided, however, that Naspers, Generation, nor any of their respective Affiliates that are not operating companies shall be deemed a “Competitor” hereunder for any purposes.
“Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, and any free-writing prospectus and any issuer information (as defined in Rule 433 of the Securities Act) filed or required to be filed pursuant to Rule 433(d) under the Securities Act or any other document incident to such registration prepared by or on behalf of the Company or used or referred to by the Company; (b) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (c) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
“Deemed Liquidation Event” has the meaning set forth for such term in the certificate of incorporation of the Company most recently filed with the Delaware Secretary of State that contains such a definition, whether or not the holders of outstanding shares of Preferred Stock elect otherwise by written notice sent to the Company as provided in such definition.
“Demand Notice” means notice sent by the Company to the Holders specifying that a demand registration has been requested as provided in Section 3.1.1.
“Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.
“Direct Listing” means the effective filing of a registration statement under the Securities Act on a nationally-recognized exchange in the United States that registers shares of existing capital stock of the Corporation for resale not pursuant to an underwritten offering.
“E.U.” means the European Union.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Registration” means (a) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to an equity incentive, stock option, stock purchase, or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
“Financial Services Laws and Rules” means all applicable laws and regulations related to banking, money services businesses, money transmission, electronic funds transfers, privacy and data security, and data breach remediation and notification.
“Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
“Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
“Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405 under the Securities Act.
“Fully Exercising Investor” shall have the meaning set forth in Section 4.2.
“GAAP” means generally accepted accounting principles in the United States.
“Generation” means Generation IM Sustainable Solutions Fund III, L.P., a Guernsey limited partnership, and its Affiliates.
“Government Official” means (i) an officer or employee of any national, regional, local or other component of government; (ii) a director, officer or employee of any entity in which a government or any component of a government possesses a majority or controlling interest; (iii) a candidate for public office; (iv) a political party or political party official; (v) an officer or employee of a public international organization (e.g., the European Commission or World Bank); and (vi) any individual who is acting in an official capacity for any government, component of a government, political party or public international organization, even if such individual is acting in that capacity temporarily and without compensation.
“Holder” means any holder of Registrable Securities who is a party to this Agreement.
“Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, in each case who is over the age of 18, including adoptive relationships, of a natural person referred to herein.
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“Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
“Investor Notice” shall have the meaning set forth in Section 4.2.
“IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.
“Key Holder Registrable Securities” means (a) the shares of Common Stock held by the Key Holders, and (b) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of such shares.
“Lender Registrable Securities” means (a) the Common Stock issuable or issued upon the exercise of any Lender Warrant and (b) the Common Stock issuable or issued upon conversion of the Preferred Stock issuable or issued pursuant to the exercise of any Lender Warrant; provided, however, that before the holder of any Lender Warrant shall be entitled to exercise any rights under this Agreement, such holder must either (i) become a party to this Agreement as a “Lender” or (ii) agree to be bound by the terms of this Agreement related to registration rights applicable to the Lender Registrable Securities in a separate written agreement between such holder and the Company (including, without limitation, in a Lender Warrant).
“Lender Warrant” means any warrant to purchase shares of capital stock of the Company issued to banks, equipment lessors or other financial institutions pursuant to a debt financing or equipment leasing transaction where the Company’s Board of Directors (the “Board”) has approved the grant to the holder thereof of “piggyback” registration rights.
“Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds (i) at least 820,000 shares of Registrable Securities issuable or issued upon conversion of shares of the Series Seed Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (ii) at least 844,000 shares of Registrable Securities issuable or issued upon conversion of shares of the Series Seed Prime Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (iii) 1,004,742 shares of Registrable Securities issuable or issued upon conversion of shares of the Series A Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (iv) 1,358,239 shares of Registrable Securities issuable or issued upon conversion of shares of the Series B Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (v) 1,761,390 shares of Series C Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (vi) 21,100,385 shares of Series D Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (vii) 1,678,810 shares of Series E Preferred Stock (as adjusted for any stock split, stock dividend, combination or other recapitalization or reclassification effected after the date hereof) and/or (viii) [1,000,000] shares of Series F
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Preferred Stock (as adjusted for any stock split, stock dividend, combination or other recapitalization or reclassification effected after the date hereof).
“Naspers” means PayU Fintech Investments B.V., a Netherlands private limited company, along with its affiliates.
“New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, Derivative Securities and any rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for (in each case, directly or indirectly) such equity securities; provided however, that New Securities shall exclude: (a) Exempted Securities (as defined in the Restated Certificate); (b) shares of Common Stock issued in the IPO; and (c) shares of Series E Preferred Stock issued to Investors pursuant to the Purchase Agreement at the Initial Closing and any Additional Closings (with each such term as defined in the Purchase Agreement).
“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the Treasury.
“Offer Notice” shall have the meaning set forth in Section 4.1.
“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
“Preferred Stock” means shares of the Company’s Series Seed Preferred Stock, Series Seed Prime Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.
“Pro Rata Amount” means, for each Major Investor, that portion of the New Securities identified in an Offer Notice which equals the proportion that the Common Stock issued and held by such Major Investor, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held by such Major Investor, bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and other Derivative Securities).
“Qualified IPO” has the meaning set forth in the Restated Certificate.
“Registrable Securities” means (a) the Common Stock issuable or issued upon conversion of shares of the Preferred Stock; (b) Common Stock, or Common Stock issuable upon the conversion and/or exercise of any other securities of the Company, held by the Investors as of the date hereof or acquired by Investors after the date hereof; (c) the Key Holder Registrable Securities, provided, however, that such Key Holder Registrable Securities shall not be deemed Registrable Securities and the Key Holders shall not be deemed Holders for the purposes of Sections 2.1, 2.2, 3.1, 3.10, 4 and 7.6; (d) the Lender Registrable Securities, provided, however, that such Lender Registrable Securities shall not be deemed Registrable Securities and the Lenders shall not be deemed Holders for the purposes of Sections 2.1, 2.2, 3.1, 3.10, 4 and 7.6; and (e) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (a) through (e) above;
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excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 7.1, and excluding for purposes of Section 4 any shares for which registration rights have terminated pursuant to Section 6.2 of this Agreement. Notwithstanding the foregoing, the Company shall in no event be obligated to register any Preferred Stock of the Company, and Holders of Registrable Securities will not be required to convert their Preferred Stock into Common Stock in order to exercise the registration rights granted hereunder, until immediately before the closing of the offering to which the registration relates.
“Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
“Restated Certificate” means the Company’s Amended and Restated Certificate of Incorporation (as may be amended from time to time).
“Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 3.12.2 hereof.
“Sanctions” means the following economic or financial sanctions, trade embargoes, export controls, and anti-boycott laws and regulations: (i) United Nations sanctions imposed pursuant to any United Nations Security Council Resolution; (ii) U.S. sanctions administered by OFAC, the U.S. Department of State, the U.S. Department of Commerce, or any other U.S. Government authority or department, U.S. export controls administered by BIS, U.S. Department of State, Nuclear Regulatory Commission or U.S. Department of Energy; and U.S. anti-boycott provisions administered by the U.S. Department of Commerce or U.S. Department of the Treasury; (iii) E.U. restrictive measures implemented pursuant to any E.U. Council or Commission Regulation or Decision adopted pursuant to a Common Position in furtherance of the E.U.’s Common Foreign and Security Policy; (iv) U.K. sanctions adopted by the Terrorist-Asset Freezing etc Act 2010 or other legislation and statutory instruments enacted pursuant to the United Nations Act 1946 or the European Communities Act 1972 or enacted by or pursuant to other laws; and (v) any other trade, economic or financial sanctions laws, regulations, embargoes, export controls or restrictive trade measures administered, enacted or enforced by any authority, government, or official institution as applicable to the Company, any Company subsidiary or any Associated Persons of either the Company or any Company subsidiary or to the Investors or any transaction in which the Company or any Company subsidiary is engaged.
“SEC” means the Securities and Exchange Commission.
“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
“SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.
“SEC Rule 405” means Rule 405 promulgated by the SEC under the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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“Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 3.6.
“Selling Holder Counsel” means one counsel for the selling Holders.
“Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock.
“Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock.
“Series C Preferred Stock” means shares of the Company’s Series C Preferred Stock.
“Series D Preferred Stock” means shares of the Company’s Series D Preferred Stock.
“Series E Preferred Stock” means shares of the Company’s Series E Preferred Stock.
“Series F Preferred Stock” means shares of the Company’s Series F Preferred Stock.
“Series Seed Preferred Stock” means shares of the Company’s Series Seed Preferred Stock.
“Series Seed Prime Preferred Stock” means shares of the Company’s Series Seed Prime Preferred Stock.
“Standoff Period” means the period commencing on the date of the final prospectus relating to an underwritten public offering of the Company’s Common Stock under the Securities Act and ending on the date specified by the Company and the managing underwriter (such period not to exceed 180 days or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports, and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)).
“U.K.” means the United Kingdom.
“U.S.” means the United States of America.
“Voting Agreement” means that certain Fifth Amended & Restated Voting Agreement dated of even date hereof by and among the Company and the Investors.
2. INFORMATION RIGHTS.
2.1 Delivery of Financial Statements.
2.1.1 Information to be Delivered. The Company shall deliver the following to each Major Investor, provided that the Board has reasonably determined that such Major Investor is not a Competitor of the Company:
(a) As soon as practicable, but in any event within 120 days after the end of each fiscal year of the Company, the Company shall deliver, (i) a balance sheet
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as of the end of such year, (ii) statements of income and of cash flows for such year for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all of which shall be audited and prepared in accordance with GAAP (except that such financial statements may (x) be subject to normal year-end audit adjustments and (y) not contain all notes thereto that may be required in accordance with GAAP).
(b) As soon as practicable, but in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company the Company shall deliver, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP).
(c) As soon as practicable, but in any event by the final day of the first quarter of each fiscal year the Company shall deliver, a budget and business plan for the next fiscal year, approved by the Board and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months (the “Budget”) and, promptly after prepared, any other budgets or revised budgets prepared by the Company.
(d) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall in no event be obligated to provide information (i) that the Company in good faith considers to be confidential or proprietary information (unless covered by an enforceable confidentiality provision or confidentiality agreement, in form reasonably acceptable to the Company) or a trade secret; or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
2.1.2 Consolidation. If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to Section 2.1.1 shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
2.1.3 Suspension or Termination. Notwithstanding anything else in this Section 2.1 to the contrary but subject to Section 6.1, the Company may cease providing the information set forth in this Section 2.1 during the period starting with the date 60 days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering or Direct Listing; provided that the Company’s covenants under this Section 2.1 shall be reinstated at such time as the Company is no longer actively employing its reasonable efforts to cause such registration statement to become effective.
2.2 Inspection. The Company shall permit each Major Investor, at such Major Investor’s expense, and on such Major Investor’s written request, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as
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may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to (a) any information that it in good faith considers to be confidential information (unless covered by an enforceable confidentiality provision or confidentiality agreement, in form reasonably acceptable to the Company), a trade secret or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel, or (b) any Major Investor that the Board has reasonably determined in good faith to be a Competitor.
2.3 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Section 2 or otherwise pursuant to this Agreement unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 2.3 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any existing Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business (and solely to monitor such Investor’s investment in the Company), but only if (x) such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information and (y) such existing Affiliate, partner, member, stockholder or wholly owned subsidiary of such Investor is not a Competitor; or (iii) as may otherwise be required by law if the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
3. REGISTRATION RIGHTS.
3.1 Demand Registration.
3.1.1 Form S-1 Demand. If at any time after the earlier of (a) five years after the date of this Agreement or (b) 180 days after the effective date of the registration statement for the IPO or a Direct Listing, the Company receives a request from Holders of at least forty percent (40%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to any Registrable Securities then outstanding (and the Registrable Securities subject to such request have an anticipated aggregate offering price, net of Selling Expenses, of at least $15,000,000), then the Company shall (i) within 10 days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) use commercially reasonable efforts to as soon as practicable, and in any event within 90 days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each
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such Holder to the Company within 20 days after the date the Demand Notice is given, and in each case, subject to the limitations of Section 3.1.3 and Section 3.3.
3.1.2 Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least forty percent (40%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $3,000,000, then the Company shall (a) within 10 days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (b) use commercially reasonable efforts to as soon as practicable, and in any event within 45 days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 3.1.3 and Section 3.3.
3.1.3 Delay. Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 3.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (a) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (c) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than 90 days after the request of the Initiating Holders is given; provided, however, that (i) the Company may not invoke this right more than once in any 12 month period and (ii) the Company shall not register any securities for its own account or that of any other stockholder during such 90 day period other than an Excluded Registration.
3.1.4 Limitations. The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 3.1.1: (a) during the period that is 60 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (b) after the Company has effected two registrations pursuant to Section 3.1.1; or (c) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 3.1.2. The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 3.1.2: (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided, that the Company is
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actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Section 3.1.2 within the 12 month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 3.1.4 until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one registration on Form S-1 or S-3, as applicable, pursuant to Section 3.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 3.1.4.
3.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash or for a Direct Listing (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within 20 days after such notice is given by the Company, the Company shall, subject to the provisions of Section 3.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 3.6.
3.3 Underwriting Requirements.
3.3.1 Inclusion. If, pursuant to Section 3.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 3.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company, subject only to the reasonable approval of the holders of a majority of Registrable Securities held by the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 3.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 3.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned or held by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities owned or held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded
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from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.
3.3.2 Underwriter Cutback. In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 3.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned or held by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (a) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, (b) the number of Registrable Securities included in the offering be reduced below 30% of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering or (c) notwithstanding clause (b) above, any Registrable Securities which are not Key Holder Registrable Securities be excluded from such underwriting unless all Key Holder Registrable Securities are first excluded from such offering. For purposes of the provision in this Section 3.3.2 concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned or held by all Persons included in such “selling Holder,” as defined in this sentence.
3.3.3 Registration Not Effected. For purposes of Section 3.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 3.3.1, fewer than 50% of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.
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3.4 Obligations of the Company. Whenever required under this Section 3 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective as promptly as practicable, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 120-day period shall be extended for up to 60 days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;
(b) prepare and file with the SEC such amendments and supplements to such registration statement, the prospectus and, if required, any Free Writing Prospectus used in connection with such registration statement as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus and any Free Writing Prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
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(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus or Free-Writing Prospectus forming a part of such registration statement has been filed;
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus or Free-Writing Prospectus;
(k) use its commercially reasonable efforts to obtain for the underwriters one or more “cold comfort” letters, dated the effective date of the related registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by “cold comfort” letters;
(l) use its commercially reasonable efforts to obtain for the underwriters on the date such securities are delivered to the underwriters for sale pursuant to such registration a legal opinion of the Company’s outside counsel with respect to the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal opinions of such nature;
(m) to the extent the Company is a well-known seasoned issuer (as defined in SEC Rule 405) at the time any request for registration is submitted to the Company in accordance with Section 3.1, if so requested, file an Automatic Shelf Registration Statement to effect such registration; and
(n) if at any time when the Company is required to re-evaluate its well-known seasoned issuer status for purposes of an outstanding Automatic Shelf Registration Statement used to effect a request for registration in accordance with Section 3.1.2 the Company determines that it is not a well-known seasoned issuer and (i) the registration statement is required to be kept effective in accordance with this Agreement and (ii) the registration rights of the applicable Holders have not terminated, use commercially reasonable efforts to promptly amend the registration statement on a form the Company is then eligible to use or file a new registration statement on such form, and keep such registration statement effective in accordance with the requirements otherwise applicable under this Agreement.
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3.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 3 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
3.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 3, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one Selling Holder Counsel, not to exceed $30,000, shall be borne and paid by the Company; provided, however, that (a) the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 3.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 3.1.1 or Section 3.1.2, as the case may be, and (b) if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company not known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 3.1.1 or Section 3.1.2. All Selling Expenses relating to Registrable Securities registered pursuant to this Section 3 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf. All expenses incurred by the Company in connection with a Direct Listing, including, without limitation, all registration, filing and qualification fees, printers’ and accounting fees, and fees and disbursements of counsel for the Company, shall be borne by the Company.
3.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 3.
3.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 3 or in connection with a Direct Listing:
3.8.1 Company Indemnification. To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or
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proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 3.8.1 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, conditioned, or delayed nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
3.8.2 Selling Holder Indemnification. To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that (a) the indemnity agreement contained in this Section 3.8.2 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld, conditioned or delayed, and (b) that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 3.8.2 and 3.8.4 exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
3.8.3 Procedures. Promptly after receipt by an indemnified party under this Section 3.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 3.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such
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indemnifying party of any liability to the indemnified party under this Section 3.8, solely to the extent that such failure prejudices the indemnifying party’s ability to defend such action.
3.8.4 Contribution. To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (a) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 3.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 3.8 provides for indemnification in such case, or (b) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 3.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that:
(i) in any such case, (A) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (B) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and
(ii) in no event shall a Holder’s liability pursuant to this Section 3.8.4, when combined with the amounts paid or payable by such Holder pursuant to Section 3.8.2, exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
3.8.5 Underwriting Agreement Controls. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
3.8.6 Survival. Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 3.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 3, and otherwise shall survive the termination of this Agreement.
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3.9 Reports under the Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) use commercially reasonable efforts to make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO or a Direct Listing (whichever occurs first);
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the registration statement filed by the Company for the IPO or a Direct Listing (whichever occurs first)), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
3.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration if such agreement (a) would allow such holder or prospective holder to include a portion of its securities in any “piggyback” registration if such inclusion could reduce the number of Registrable Securities that selling Holders could be entitled to include in such registration under Sections 3.2 and 3.3.2 hereof or (b) would allow such holder or prospective holder to initiate a demand for registration of any of its securities at a time earlier than the Holders of Registrable Securities can demand registration under Section 3.1 hereof. This Section 3.10 shall not apply with respect to the grant of “piggyback” registration rights to a holder of a Lender Warrant.
3.11 “Market Stand-off” Agreement. Each Holder hereby agrees that, during the Standoff Period, such Holder will not, without the prior written consent of the Company or the managing underwriter,
(a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to
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purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock, or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock, held immediately before the effective date of the registration statement for such offering; or
(b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise.
The foregoing provisions of this Section 3.11 shall not apply to a Direct Listing or to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all stockholders individually owning more than 2% of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) and all officers and directors are similarly bound. For purposes of this Section 3.11, the term “Company” shall include any wholly-owned subsidiary of the Company into which the Company merges or consolidates. In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the shares subject to this Section 3.11 and to impose stop transfer instructions with respect to such shares until the end of such period. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 3.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 3.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply to all Investors subject to such agreements pro rata based on the number of shares subject to such agreements.
3.12 Restrictions on Transfer.
3.12.1 Agreement Binding. The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
3.12.2 Legends. Each certificate or instrument representing (a) the Preferred Stock, (b) the Registrable Securities, and (c) any other securities issued in respect of the securities referenced in clauses (a) and (b), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the
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provisions of Section 3.12.3) be stamped or otherwise imprinted with a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, IF REASONABLY REQUESTED BY THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 3.12.
3.12.3 Procedure. The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 3. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (a) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (b) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (c) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (i) in any transaction in compliance with SEC Rule 144 or (ii) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 3.12. Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 3.12.2, except that such certificate shall not bear such restrictive
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legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. Until the three-year anniversary of the Initial Closing (as defined in the Purchase Agreement), no Holder shall transfer any Restricted Securities to any person or entity that is determined to be a Competitor of the Company, in the good faith judgment of the Board.
4. RIGHTS TO FUTURE STOCK ISSUANCES. Subject to the terms and conditions of this Section 4 and applicable securities laws, if the Company proposes to sell any New Securities, the Company shall offer to sell a portion of New Securities to each Major Investor as described in this Section 4. A Major Investor shall be entitled to apportion the right of first refusal hereby granted to it among itself and its Affiliates (provided none of such Affiliates is a Competitor) in such proportions as it deems appropriate. The right of first refusal in this Section 4 shall not be applicable with respect to any Major Investor, if at the time of such subsequent securities issuance, the Major Investor is not an “accredited investor,” as that term is then defined in Rule 501(a) under the Securities Act.
4.1 Company Notice. The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (a) its bona fide intention to sell such New Securities, (b) the number of such New Securities to be sold and (c) the price and terms, if any, upon which it proposes to sell such New Securities.
4.2 Investor Right. By written notice (the “Investor Notice”) to the Company within 20 days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to such Major Investor’s Pro Rata Amount. In addition, each Major Investor that elects to purchase or acquire all of its Pro Rata Amount (each, a “Fully Exercising Investor”) may, in the Investor Notice, elect to purchase or acquire, in addition to its Pro Rata Amount, a portion of the New Securities, if any, for which other Major Investors were entitled to subscribe but that are not subscribed for by such Major Investors. The amount of such overallotment that each Fully Exercising Investor shall be entitled to purchase is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. A Major Investor’s election may be conditioned on the consummation of the transaction described in the Offer Notice. The closing of any sale pursuant to this Section 4.2 shall occur on the earlier of 120 days after the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.3.
4.3 Sale of Securities. If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.2, the Company may, during the 90 day period following the expiration of the periods provided in Section 4.2, offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities
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within such period, or if such agreement is not consummated within 30 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Section 4.
4.4 Purchase of Securities. Notwithstanding anything to the contrary in this Agreement, if the right of first refusal in this Section 4 is waived in accordance with Section 7.6 with respect to an offering of New Securities, and any Major Investor actually purchases any New Securities in any such offering (a “Participating Major Investor”), then each Major Investor who did not consent to such waiver (a “Non-Consenting Major Investor”) shall be permitted to purchase its Adjusted Pro Rata Amount of New Securities at a price and on terms and conditions no worse than those available to the Participating Major Investor in such offering. The Company shall give notice to the Non-Consenting Major Investors within five days after the issuance of New Securities in such offering. Such notice shall set forth each such Non-Consenting Major Investor’s Adjusted Pro Rata Amount and shall describe the general type, price, and terms of the New Securities. Each Non-Consenting Major Investor shall have 10 days after the date the Company’s notice is given to elect, by giving notice to the Company, to purchase up to such Non-Consenting Major Investor’s Adjusted Pro Rata Amount of New Securities pursuant to the terms and conditions set forth in such notice. The closing of such sale shall occur within 20 days of the date such notice is given to the Non-Consenting Major Investors.
5. ADDITIONAL COVENANTS.
5.1 Insurance. The Company shall use commercially reasonable efforts to maintain from financially sound and reputable insurers (i) Directors and Officers liability insurance (“D&O Policy”) in an amount and on terms and conditions as determined by the Board but no less than $3,000,000 and (ii) term “key-person” insurance (“Key-Person Policy”) on each of Matthew Oppenheimer and Joshua Hug in an amount and on terms and conditions as determined by the Board but no less than $1,000,000, until such time as the Board determines that such insurance policies should be discontinued. The D&O Policy and Key-Person Policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval by the Board.
5.2 Employee Agreements. Unless otherwise approved by the Board, the Company will cause each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor (a “Consultant”)) with access to confidential information and/or trade secrets to enter into (i) a nondisclosure and proprietary rights assignment agreement substantially in the form approved by the Board and (ii) a one year non-solicitation agreement and (if permitted by applicable law), other than with respect to any Consultant, a one year non-competition agreement in a form approved by the Board. Each employee of the Company shall be employed on an “at will” basis.
5.3 Stock Option Matters. Except as expressly otherwise approved by the Comp Committee, all options issued to employees pursuant to the Company’s 2011 Equity Incentive Plan (the “Plan”) shall be granted with four-year vesting, with 25% of the options vesting on the first anniversary of the vesting start date and the remainder vesting in equal
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monthly installments thereafter until fully vested. Except with the approval of the Comp Committee (as defined below), no stock options or other equity awards granted under the Plan after the effective date of this Agreement shall contain more than one year of accelerated vesting in the event of (i) a Deemed Liquidation Event and (ii) the employee in question is terminated within twelve months thereafter.
5.4 Observer Rights.
5.4.1 Subject to Section 2.3, until the closing of the Company’s next bona fide equity financing, unless (i) following such closing QED Investors owns at least 5% of the total number of shares of outstanding capital stock of the Company (calculated on a fully diluted basis) or (ii) the terms and conditions of such financing specifically provide for the continuance of the rights set forth in this Section 5.4.1, the Company shall invite a representative of QED Investors to attend all meetings of the Board and any committees thereof, in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall execute a Non-Disclosure Agreement in a form reasonably acceptable to the Company; and provided, further, that the Company reserves the right to withhold any information and to exclude any such portion thereof if the Board determines in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege or to protect highly confidential proprietary information.
5.4.2 For so long as Generation owns any shares of Series E Preferred Stock and (a) Generation is entitled to designate the Series E Designee (as defined in the Voting Agreement) but elects not to designate such Series E Designee or designates an individual that is not employed by Generation or (b) Generation is no longer entitled to designate the Series E Designee, the Company shall invite a representative of Generation to attend all meetings of the Board and any committees thereof, in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall execute a Non-Disclosure Agreement in a form reasonably acceptable to the Company; and provided, further, that the Company reserves the right to withhold any information and to exclude any such portion thereof if the Board determines in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege or to protect highly confidential proprietary information.
5.5 Reimbursement for Costs. The Company shall reimburse each nonemployee director and observer for all reasonable and documented out-of-pocket expenses incurred in attending in-person meetings of the Board, in-person meetings of committees of the Board and on Company-approved business.
5.6 Compensation Committee. The Company will maintain a compensation committee of the Board (the “Comp Committee”), which shall be comprised at all times of at least two members of the Board, and subject to Section 5.7 below, including the Series C Director (as defined in the Restated Certificate), the Series D Director (as defined in the Restated Certificate) and the Series E Director (as defined in the Restated Certificate), and none of whom
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are then-currently employed by the Company. The Comp Committee shall exercise all of the authority of the Board as determined from time to time by the Board, with respect to the approval of the compensation (including salary, bonuses, equity awards and any other benefits) to be paid to the Company’s executive officers and any other senior executives employed by the Company, except with respect to regular compensation changes effected in the ordinary course of business.
5.7 Committee Membership. Each of the Series C Director, the Series D Director and Series E Director (collectively, the “Senior Directors”) shall be invited to serve as a member of any committee of the Board that may be formed from time to time, including but not limited to the Comp Committee; provided, however, that if the Board elects to form a committee of the Board for the direct or indirect purposes of evaluating, negotiating and/or approving any strategic transaction of the Company or its Affiliates (a “Strategic Committee”) and a majority of the disinterested members of the Board determines in good faith that a Senior Director has a conflict of interest with respect to matters to be discussed by the Strategic Committee, then in no event shall such Senior Director be invited to serve as a member of such Strategic Committee; provided, further, that no Senior Director shall be obligated to serve on any such committee on which such Senior Director does not agree to serve.
5.8 Standstill. Each holder of Series D Preferred Stock (each such holder, a “Series D Investor”) agrees, on behalf of itself and its Affiliates, that, unless approved by a majority of the disinterested members of the Board, neither such Series D Investor nor any of its Affiliates shall Acquire (as defined below) or make an offer to Acquire more than 10% of the then-outstanding shares of Preferred Stock (calculated on an as-converted basis) from a party other than the Company. Notwithstanding the foregoing, nothing in this Agreement shall prohibit any Series D Investor from (i) transferring any shares of Preferred Stock or the rights provided under this Agreement among such Series D Investor and its Affiliates, (ii) participating in future sales by the Company of its shares of capital stock, including, without limitation, exercising its rights under Section 4 of this Agreement, (iii) exercising its rights under that certain Fifth Amended and Restated Right of First Refusal and Co-Sale Agreement by and among the Company, the Investors and certain other stockholders of the Company, dated as of the date hereof, or (iv) Acquiring any shares of Common Stock that are currently outstanding or that are outstanding at such time. For purposes of this Section 5.8, (i) “Acquire” shall mean, directly or indirectly, (a) acquiring or holding any shares of capital stock of the Company by any means, including without limitation by purchase, assignment, conversion of convertible securities or operation of law, or as a result of any stock dividend, stock split, reorganization, reclassification, whether voluntary or involuntary, or other similar transaction, or (b) acquiring Voting Control of any shares of capital stock of the Company by any means, including without limitation by proxy, by voting agreement, by voting trust, by pledge or otherwise; and (ii) “Voting Control” shall mean, with respect to any shares of capital stock of the Company, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
5.9 Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the
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obligations of the Company with respect to indemnification of members of the Board as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Restated Certificate, or elsewhere, as the case may be.
5.10 Indemnification Matters. The Company hereby acknowledges that one (1) or more of the directors nominated to serve on the Board by the Investors (each a “Fund Director”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Fund Director are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Fund Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Fund Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Fund Director to the extent legally permitted and as required by the Company’s Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and such Fund Director), without regard to any rights such Fund Director may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Fund Director with respect to any claim for which such Fund Director has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Fund Director against the Company.
5.11 Compliance with Applicable ABAC Laws, Applicable Money Laundering Laws and Sanctions.
5.11.1 The Company shall take adequate measures to ensure that the Company, any Company subsidiaries, and Associated Persons of the Company shall not directly or indirectly make, offer, promise, give or authorize any payment or the giving of anything else of value to or for the benefit of any Government Official or individual employed by another entity in the private sector that would violate any of the Applicable ABAC Laws, or engage in any other conduct that would violate any of the Applicable ABAC Laws, Applicable Money Laundering Laws or Sanctions.
5.11.2 The Company and any Company subsidiaries shall not, and the Company shall take adequate measures to ensure that Associated Person of the Company or any Company subsidiary shall not use any funds received from an Investor directly or indirectly in violation of Sanctions or Applicable Money Laundering Laws.
5.11.3 If it has not already done so, the Company and the Company subsidiaries shall adopt and implement within forty five (45) days of executing this Agreement policies and procedures designed to prevent the Company, Company subsidiaries and Associated Persons of either the Company or any Company subsidiary from engaging in any activity, practice or conduct that would violate or could be penalized or restricted under any Applicable
26
ABAC Laws, Applicable Money Laundering Laws or Sanctions. Such policies and procedures shall be consistent with the guidance that has been provided by government authorities in Australia, Canada, United Kingdom and United States of America having authority to administer and prosecute violations of such laws and regulations.
5.11.4 The Company shall (and shall cause each of its subsidiaries to) keep and maintain books and records reflecting accurately and in reasonable detail transactions involving the Company, its subsidiaries and, if they have not already done so, implement financial controls giving reasonable assurance that payments will be made by or on behalf of the Company and its subsidiaries only in accordance with management instructions. The Company further covenants that it shall (and shall cause each of its subsidiaries to) maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with Applicable ABAC Laws, Applicable Money Laundering Laws and Sanctions.
5.11.5 Upon written request of a Major Investor, but not more frequently than once each year, the Company agrees to provide a written certification concerning its compliance with the covenants set forth in this Section 5.11.
5.11.6 The Company shall promptly notify the Company’s audit committee if the Company suspects or comes to believe that either the Company, any Company subsidiary or any Associated Person of the Company or any Company subsidiary has violated or is subject to penalties or restrictions under any of the Applicable ABAC Laws, Applicable Money Laundering Laws and/or Sanctions.
5.11.7 Notwithstanding anything else in this Agreement, the Company and its subsidiaries and their respective directors, officers and employees shall cooperate in good faith with a Major Investor if a Major Investor decides to seek to determine whether the Company, any Company subsidiary and/or any Associated Person of either the Company or any Company subsidiary has complied with the undertakings set forth in this Section 5.11. The cooperation required by the foregoing shall include permitting the Major Investor or the authorized representative(s) of the Major Investor upon reasonable prior notice to audit the books and records of the Company and its subsidiaries as well as review and make copies of correspondence and other documents, however sent or received, possessed by the Company or its subsidiaries pertaining to compliance with the undertakings set forth in this Section 5.11. If so requested by a Major Investor, the Company and its subsidiaries shall answer any questions put to them or requests made of them by a Major Investor as well as its or their authorized representative(s) pertaining to compliance with the undertakings set forth in this Section 5.11 and shall encourage their Associated Persons to do the same. The Company shall not be required to disclose any material or information that is subject to a non-disclosure order or non-disclosure request by a government authority. The parties agree that any actions carried out under this provision will be performed in a manner that does not materially disrupt, delay or interfere with the Company and/or any of its subsidiaries performance of its business and shall be carried out at the expense of the Major Investor.
5.11.8 The Company, Company subsidiaries and Associated Persons of either the Company or any Company subsidiary shall not violate or engage in conduct restricted
27
or penalized under any of the Applicable ABAC Laws, Applicable Money Laundering Laws or Sanctions and the Company shall indemnify and hold harmless each Major Investor from and against any and all direct liabilities, damages, costs and expenses (including reasonable legal expenses) directly caused by or directly attributable to any violation of Applicable ABAC Laws, Applicable Money Laundering Laws or Sanctions by the Company, any Company subsidiary or any Associated Person of either the Company or any Company subsidiary.
5.12 Financial Services Laws and Rules. The Company shall adopt and implement policies and procedures designed in accordance with generally accepted industry standards to ensure that the Company and its business shall at all times comply in all material respects with all applicable Financial Services Laws and Rules in all jurisdictions in which the Company and its subsidiaries do business.
5.13 Right to Conduct Activities. The Company hereby agrees and acknowledges that Generation (together with its Affiliates) is a professional investment organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, Generation (and its Affiliates) shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by Generation (or its Affiliates) in any competitor of the Company, or (ii) actions taken by any partner, officer, employee or other representative of Generation (or its Affiliates) to assist any such competitor of the Company, whether or not such action was taken as a member of the board of directors of such competitor of the Company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.
6. TERMINATION.
6.1 Generally. The covenants set forth in Section 2.1, Section 2.2, Section 4 and Section 5 (except for Section 5.9 and 5.11) shall terminate and be of no further force or effect upon the earliest to occur of: (a) immediately before the consummation of the IPO; (b) immediately prior to the effectiveness of the registration statement filed under the Securities Act relating to a Direct Listing in which all the outstanding shares of Preferred Stock have been converted into Common Stock in accordance with the terms of the Restated Certificate; (c) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act; or (d) upon a Deemed Liquidation Event.
6.2 Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 3.1 or Section 3.2 shall terminate upon the earliest to occur of: (a) when all of such Holder’s Registrable Securities could be sold without any restriction on volume or manner of sale in any three-month period under SEC Rule 144 or any successor; (b) upon a Deemed Liquidation Event; and (c) the third anniversary of the Qualified IPO or a Direct Listing in which all the outstanding shares of Preferred Stock have been converted into Common Stock in accordance with the terms of the Restated Certificate (whichever occurs first).
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7. GENERAL PROVISIONS.
7.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (a) is an Affiliate, partner, member, limited partner, retired or former partner, retired or former member, or stockholder of a Holder or such Holder’s Affiliate; (b) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; (c) after such transfer, holds at least 2% of the shares of Registrable Securities (or if the transferring Holder owns less than 2% of the Registrable Securities, then all Registrable Securities held by the transferring Holder); or (d) is a venture capital fund that is controlled by or under common control with one or more general partners or managing partners or managing members of, or shares the same management company with, the Holder; provided, however, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (ii) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 3.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (A) that is an Affiliate, limited partner, retired or former partner, member, retired or former member, or stockholder of a Holder or such Holder’s Affiliate; (B) who is a Holder’s Immediate Family Member; or (C) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
7.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws.
7.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by electronic signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
7.5 Notices. All notices, requests, and other communications given, made or delivered pursuant to this Agreement shall be in writing and shall be deemed effectively given, made or delivered upon the earlier of actual receipt or: (a) personal delivery to the party to be notified; (b) when sent, if sent by email or other form of electronic transmission during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (c) five days after having been sent by registered or certified mail,
29
return receipt requested, postage prepaid; or (d) one business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses or email addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such address or email address as subsequently modified by written notice given in accordance with this Section 7.5. If notice is given to the Company, it shall be sent to 1111 3rd Ave., Suite 2100, Seattle, WA 98101, marked “Attention: Chief Executive Officer”, [ ]; and a copy (which shall not constitute notice) shall also be sent to Fenwick & West LLP, 1191 2nd Avenue, 10th Floor, Seattle, Washington, 98101, Attn: William H. Bromfield, bbromfield@fenwick.com. If notice is given to Generation, a copy shall also be given to Generation Investment Management, 20 Air Street, London, W1B 5AN, Attn: Lila Preston; Lucia Rigo, [ ]; [ ], and to Morrison & Foerster, LLC, 425 Market Street, San Francisco, California 94105, Attn: Susan Mac Cormac, smaccormac@mofo.com. If notice is given to Naspers, a copy shall also be given to Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 220 W. 42nd Street, 17th Floor, New York, NY 10036, Attn: Steven Baglio, e-mail sbaglio@gunder.com.
7.6 Amendments and Waivers. This Agreement may only be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance, and either retroactively or prospectively) only by a written instrument executed by the Company and (a) with respect to Sections 2 and 4 and any other provision of this Agreement to the extent such provision pertains to Section 2 or 4, the holders of a majority of the Registrable Securities then outstanding and held by the Major Investors or (b) with respect to any other provision of this Agreement, the holders of at least a majority of the Registrable Securities then outstanding; provided that (i) the Company may in its sole discretion waive compliance with Section 3.12 (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 3.12 shall be deemed to be a waiver); (ii) any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party; (iii) the Company may, without the consent or approval of any other party hereto, cause additional persons to become party to this Agreement as Investors or Lenders pursuant to Section 7.14 hereto and amend Schedule A hereto accordingly; and (iv) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Major Investor, Investor or Key Holder without the written consent of such Major Investor, Investor or Key Holder, as the case may be, if such amendment, modification, termination or waiver would materially and adversely affect the rights or obligations of such Major Investor, Investor, or Key Holder, as the case may be, but not so affect the rights or obligations of all Major Investors, Investors and Key Holders, respectively, in the same fashion; provided, however, that (u) any amendment to Section 5.4.1 or this Section 7.6(u) shall require the additional written consent of QED Investors, for so long as it has the rights set forth in such Section, (v) any amendment to Section 5.8 or this Section 7.6(v) shall require the additional written consent of the holders of a majority of the shares of Series D Preferred Stock then held by the Series D Investors, (w) any amendment to Sections 5.5, 5.7 or 5.8 or this Section 7.6(w) shall require the additional written consent of Stripes, for so long as it has the rights set forth in such Sections, (x) any amendment to the definition of “Competitor”,
30
Sections 5.7 or 5.8 or this Section 7.6(x) shall require the additional written consent of Naspers, for so long as it has the rights set forth in such Sections, (y) any amendment to the definition of “Competitor”, Sections 5.4.2, 5.7, 5.13 or this Section 7.6(y) shall require the additional written consent of Generation, for so long as it has the rights set forth in such Sections, and (z) any amendment to or waiver of Section 4.4 or this Section 7.6(z) that adversely affects the rights or obligations of any Major Investor in a manner different from those of all other Major Investors (other than as a result of the differences in the amount of capital stock of the Company held by such Major Investors) shall require the additional written consent of such Major Investor. Further, this Agreement may not be amended, and no provision hereof may be waived, in each case, in any way which would adversely affect the rights of the Key Holders hereunder in a manner disproportionate to any adverse effect such amendment or waiver would have on the rights of the Investors hereunder, without also the written consent of the holders of a majority of the Registrable Securities held by the Key Holders; provided, however, that the grant to third parties of piggyback registration rights under Section 3.2 hereof shall not be deemed to be an adverse change to the piggyback registration rights of the Key Holders under this Agreement and shall not require the consent of the Key Holders. Any amendment, termination, or waiver effected in accordance with this Section 7.6 shall be binding on each party hereto and all of such party’s successors and permitted assigns, regardless of whether or not any such party, successor or assignee entered into or approved such amendment, termination, or waiver. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
7.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
7.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate, including, for the avoidance of doubt, determining qualification as a Major Investor hereunder.
7.9 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto), the Restated Certificate and the other Transaction Agreements (as defined in the Purchase Agreement) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled and replaced with this Agreement.
7.10 Third Parties. Other than as set forth in Section 3.11, nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.
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7.11 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
7.12 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal or state courts located in the Western District of Washington for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal or state courts located in the Western District of Washington, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that a party is not subject to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution based upon judgment or order of such court(s), that any suit, action or proceeding arising out of or based upon this Agreement commenced in the federal or state courts located in the Western District of Washington is brought in an inconvenient forum, that the venue of such suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Should any party commence a suit, action or other proceeding arising out of or based upon this Agreement in a forum other than the federal or state courts located in the Western District of Washington, or should any party otherwise seek to transfer or dismiss such suit, action or proceeding from such court(s), that party shall indemnify and reimburse the other party for all legal costs and expenses incurred in enforcing this provision.
7.13 Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.
7.14 Additional Investors and Lenders. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Series F Preferred Stock after the date hereof, any purchaser of such shares of Series F Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. In addition, notwithstanding anything to the contrary contained herein, if the Company issues any Lender Warrant, any recipient of a Lender Warrant may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed a “Lender” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor or Lender, so long as such additional Investor or Lender has agreed in writing to be bound by all of the obligations as an “Investor” or a “Lender” hereunder, as applicable.
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7.15 Amendment and Restatement of Prior Agreement. Effective and contingent upon the execution of this Agreement by the Company and Existing Investors representing the Requisite Signatories, the Prior Agreement shall be amended and restated to read in its entirety as set forth in this Agreement, and this Agreement shall constitute the entire agreement between the parties and shall supersede any prior understandings or agreements concerning the subject matter hereof.
7.16 Waiver of Right of First Offer under the Prior Agreement. The Company and Major Investors (as defined in the Prior Agreement) (and/or any of their permitted successors or assigns) holding Registrable Securities (as defined in the Prior Agreement) representing a majority of all the Registrable Securities (as defined in the Prior Agreement) held by the Major Investors (as defined in the Prior Agreement) hereby waive their purchase rights and related notice rights pursuant to Section 4 of the Prior Agreement with respect to the Company’s issuance and sale of the shares of Series F Preferred Stock pursuant to the Purchase Agreement and the shares of Common Stock issued upon conversion of the shares of Series F Preferred Stock.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
COMPANY: | ||||||||
| REMITLY GLOBAL, INC. | ||||||||
| By: | /s/ Matthew B. Oppenheimer | |||||||
| Name: | Matthew B. Oppenheimer | |||||||
| Title: | President | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| DN CAPITAL – GLOBAL VENTURE CAPITAL V, SCSP | ||||||||
| By its general partner | ||||||||
| DN Capital GVC V GP sarl | ||||||||
| By: | /s/ Steve Schlenker | |||||||
| Name: | Steve Schlenker | |||||||
| Title: | Class B Member | |||||||
| DN CAPITAL – GLOBAL VENTURE CAPITAL V, SCSP | ||||||||
| By its general partner: | ||||||||
| DN CAPITAL - GVC III GP LP | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| DN CAPITAL – GLOBAL VENTURE CAPITAL V, SCSP | ||||||||
| By its general partner | ||||||||
| DN Capital GVC V GP sarl | ||||||||
| By: | ||||||||
| Name: | Steve Schlenker | |||||||
| Title: | Class B Member | |||||||
| DN CAPITAL – GLOBAL VENTURE CAPITAL V, SCSP | ||||||||
| By its general partner: | ||||||||
| DN CAPITAL - GVC III GP LP | ||||||||
| By: | /s/ Shane Hollywood | |||||||
| Name: | Shane Hollywood | |||||||
| Title: | Director | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| GENERATION IM SUSTAINABLE SOLUTIONS FUND III, L.P., a Guernsey limited partnership | ||||||||
By: GENERATION IM SUSTAINABLE SOLUTIONS FUND III GP LIMITED, a Guernsey limited company whose registered office is at PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GYI 3QL | ||||||||
| By: | /s/ Annie Ewing | |||||||
| Name: | Annie Ewing | |||||||
| Title: | Director | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| OWL ROCK TECHNOLOGY FINANCE CORP. | ||||||||
| By: | /s/ Alexis Maged | |||||||
| Name: | Alexis Maged | |||||||
| Title: | Authorized Signatory | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| PAYU FINTECH INVESTMENTS B.V. | ||||||||
| By: | /s/ Franka Olbers | |||||||
| Name: | Franka Olbers | |||||||
| Title: | Director | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| PRINCEVILLE GLOBAL REMITTANCE INVESTMENTS LIMITED | ||||||||
| By: | /s/ Joaquin Rodriguez Torres | |||||||
| Name: | Joaquin Rodriguez Torres | |||||||
| Title: | Director | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| STRIPES III LP | ||||||||
| By: Stripes GP III, LLC, its general partner: | ||||||||
| By: | /s/ Wayne Marino | |||||||
| Name: | Wayne Marino | |||||||
| Title: | Chief Financial Officer | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| THRESHOLD VENTURES I, L.P. | ||||||||
| By: Threshold Ventures I General Partner, LLC | ||||||||
| Its: General Partner | ||||||||
| By: | /s/ Josh Stein | |||||||
| Name: | Josh Stein | |||||||
| Title: | Managing Member | |||||||
| THRESHOLD VENTURES I PARTNERS FUND, LLC | ||||||||
| By: | /s/ Josh Stein | |||||||
| Name: | Josh Stein | |||||||
| Title: | Managing Member | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
INVESTOR: | ||||||||
| TOP TIER VENTURE VELOCITY FUND 3 HOLDINGS | ||||||||
| By: Top Tier Venture Velocity Fund 3, L.P. | ||||||||
| Its: Authorized Partner | ||||||||
| By: Top Tier Venture Velocity 3 Management, LLC | ||||||||
| Its: General Partner | ||||||||
| By: Top Tier Capital Partners, LLC | ||||||||
| Its: Manager | ||||||||
| By: | /s/ Garth A. L. Timoll, Sr. | |||||||
| Name: | Garth A. L. Timoll, Sr. | |||||||
| Title: | Authorized Signatory | |||||||
| TOP TIER VENTURE VELOCITY FUND 3, LP | ||||||||
| By: Top Tier Venture Velocity 3 Management, LLC | ||||||||
| Its: General Partner | ||||||||
| By: Top Tier Capital Partners, LLC | ||||||||
| Its: Manager | ||||||||
| By: | /s/ Garth A. L. Timoll, Sr. | |||||||
| Name: | Garth A. L. Timoll, Sr. | |||||||
| Title: | Authorized Signatory | |||||||
| TOP TIER VENTURE CAPITAL IX HOLDINGS | ||||||||
| By: Top Tier Venture Capital IX, L.P. | ||||||||
| Its: Authorized Partner | ||||||||
| By: Top Tier Venture Capital IX Management, LLC | ||||||||
| Its: General Partner | ||||||||
| By: Top Tier Capital Partners, LLC | ||||||||
| Its: Manager | ||||||||
| By: | /s/ Garth A. L. Timoll, Sr. | |||||||
| Name: | Garth A. L. Timoll, Sr. | |||||||
| Title: | Authorized Signatory | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| TRILOGY EQUITY PARTNERS, LLC | ||||||||
| By: | /s/ Charles H. Stonecipher | |||||||
| Name: | Charles H. Stonecipher | |||||||
| Title: | Partner | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
INVESTOR: | ||||||||
| VISA INTERNATIONAL SERVICE ASSOCIATION | ||||||||
| By: | /s/ Vasant M. Prabhu | |||||||
| Name: | Vasant M. Prabhu | |||||||
| Title: | Vice Chairman and Chief Financial Officer | |||||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
KEY HOLDER: | |||||
| /s/ Matthew B. Oppenheimer | |||||
| Matthew B. Oppenheimer | |||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amended & Restated Investors’ Rights Agreement as of the date first written above.
KEY HOLDER: | |||||
| /s/ Joshua Hug | |||||
| Joshua Hug | |||||
[SIGNATURE PAGE TO REMITLY GLOBAL, INC. SEVENTH AMENDED & RESTATED INVESTORS’ RIGHTS AGREEMENT]
SCHEDULE A
List of Investors
[ ]
SCHEDULE B
List of Key Holders
[ ]
Exhibit 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE COMMON STOCK
Company: Remitly, Inc.
Number of Shares of Common Stock: 75,000
Warrant Price: $0.054 per share
Issue Date: June 26, 2013
Expiration Date: June 26, 2023 See also Section 5.1(b).
Credit Facility: This Warrant to Purchase Common Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement dated as of June 2013 between Silicon Valley Bank and the Company (the “Loan Agreement”).
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated common stock (the “Common Stock”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon,
the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
| X = Y(A-B)/A | ||||||||
| where: | ||||||||
| X = | the number of Shares to be issued to the Holder; | |||||||
| Y = | the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price); | |||||||
| A = | the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and | |||||||
| B = | the Warrant Price. | |||||||
1.3 Fair Market Value. If the Common Stock is then traded or quoted on nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of a Share shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Common Stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger,
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consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
(c) The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in a Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely
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under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Common Stock payable in securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Common Stock by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Common Stock are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 Intentionally Omitted.
2.4 Intentionally Omitted.
2.5 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.6 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Common Stock and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, class and number of Shares in effect upon the date of such adjustment.
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SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the exercise price of the most recently granted options to purchase Common Stock.
(b) All Shares which may be issued upon the exercise of this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of securities as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company at any time:
(a) declares any dividend or distribution upon the outstanding shares of the Company’s stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offers for subscription or sale pro rata to the holders of the outstanding shares any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effects any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Common Stock;
(d) effects an Acquisition or liquidates, dissolves or winds up; or
(e) effects its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Common Stock will be entitled thereto) or for determining rights to vote, if any,
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of Common Stock will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and
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(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its registration statement in connection therewith.
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently
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registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
4.6 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Stand-Off provisions in Section 2.2 of that certain Amended and Restated Investors’ Rights Agreement dated as of December 14, 2012 by and among the Company and the parties set forth on Exhibit A and Exhibit B attached thereto.
4.7 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
5.1 Term and Automatic Conversion Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends. The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE COMMON STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED JUNE ___, 2013, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part
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except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, or any shares or other securities issued upon any conversion of any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HC 215
Santa Clara, CA 95054
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Telephone: [Redacted]
Facsimile: [Redacted]
Email address: [Redacted]
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
REMITLY, INC.
Attn: Matthew Oppenheimer
1725 Westlake Ave. N, Suite 105
Seattle, WA 98109
Telephone: [Redacted]
Email: [Redacted]
5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Common Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
| “COMPANY” | ||||||||
| REMITLY, INC. | ||||||||
| By: | /s/ Matt Oppenheimer | |||||||
| Name: | Matt Oppenheimer | |||||||
| (Print) | ||||||||
| Title: | President | |||||||
| “HOLDER” | ||||||||
| SILICON VALLEY BANK | ||||||||
| By: | /s/ Minh Le | |||||||
| Name: | Minh Le | |||||||
| (Print) | ||||||||
| Title: | Managing Director | |||||||
[Signature Page to Warrant to Purchase Common Stock]
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right purchase __________ shares of the Common Stock of REMITLY, INC. (the “Company”) in accordance with the attached Warrant To Purchase Common Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[ ] Check in the amount of $_______ payable to the order of the Company enclosed herewith
[ ] Wire transfer of immediately available funds to the Company’s account
[ ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[ ] Other [Describe] ___________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
| Holder’s Name | ||||||||
| (Address) | ||||||||
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Common Stock as of the date hereof.
| HOLDER: | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
| (Date): | |||||||||||
Appendix 1
SCHEDULE 1
Company Capitalization Table
See attached
Schedule 1
Exhibit 4.4
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE COMMON STOCK
Company: Remitly, Inc.
Number of Shares of Common Stock: 25,000
Warrant Price: $0.17 per share
Issue Date: June 27, 2014
Expiration Date: June 27, 2024 See also Section 5.1(b).
Credit Facility: This Warrant to Purchase Common Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement dated as of June 26, 2013 between Silicon Valley Bank and the Company, as amended from time to time, including, without limitation, by that certain First Amendment to Loan and Security Agreement dated as of June 27, 2014 (collectively, the “Loan Agreement”).
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated common stock (the “Common Stock”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon,
the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
| X = Y(A-B)/A | ||||||||
| where: | ||||||||
| X = | the number of Shares to be issued to the Holder; | |||||||
| Y = | the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price); | |||||||
| A = | the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and | |||||||
| B = | the Warrant Price. | |||||||
1.3 Fair Market Value. If the Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of a Share shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Common Stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (1) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger,
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consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
(c) The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in a Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely
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under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Common Stock payable in securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Common Stock by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Common Stock are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 Intentionally Omitted.
2.4 Intentionally Omitted.
2.5 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.6 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Common Stock and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, class and number of Shares in effect upon the date of such adjustment.
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SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the exercise price of the most recently granted options to purchase Common Stock.
(b) All Shares which may be issued upon the exercise of this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of securities as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company at any time:
(a) declares any dividend or distribution upon the outstanding shares of the Company’s stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offers for subscription or sale pro rata to the holders of the outstanding shares any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effects any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Common Stock;
(d) effects an Acquisition or liquidates, dissolves or winds up; or
(e) effects its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Common Stock will be entitled thereto) or for determining rights to vote, if any,
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of
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Common Stock will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and
(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its registration statement in connection therewith.
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terns hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder arc being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific
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exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
4.6 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Stand-Off provisions in Section 2.2 of that certain Amended and Restated Investors’ Rights Agreement dated as of December 14, 2012 by and among the Company and the parties set forth on Exhibit A and Exhibit B attached thereto.
4.7 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
5.1 Term and Automatic Conversion Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends. The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE COMMON STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED JUNE __, 2014, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR. IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
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5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, or any shares or other securities issued upon any conversion of any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed, in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this
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Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HC 215
Santa Clara, CA 95054
Telephone: [Redacted]
Facsimile: [Redacted]
Email address: [Redacted]
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
REMITLY, INC.
Attn: Matthew Oppenheimer
1725 Westlake Ave. N, Suite 105
Seattle, WA 98109
Telephone: [Redacted]
Email: [Redacted]
5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Common Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
| “COMPANY” | ||||||||
| REMITLY, INC. | ||||||||
| By: | /s/ Matt Oppenheimer | |||||||
| Name: | ||||||||
| (Print) | ||||||||
| Title: | ||||||||
| “HOLDER” | ||||||||
| SILICON VALLEY BANK | ||||||||
| By: | /s/ David Sanders | |||||||
| Name: | David Sanders | |||||||
| (Print) | ||||||||
| Title: | VP | |||||||
[Signature Page to Warrant to Purchase Common Stock]
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right purchase __________ shares of the Common Stock of REMITLY, INC. (the “Company”) in accordance with the attached Warrant To Purchase Common Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[ ] Check in the amount of $_______ payable to the order of the Company enclosed herewith
[ ] Wire transfer of immediately available funds to the Company’s account
[ ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[ ] Other [Describe] ___________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
| Holder’s Name | ||||||||
| (Address) | ||||||||
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Common Stock as of the date hereof.
| HOLDER: | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
| (Date): | |||||||||||
Appendix 1
SCHEDULE 1
Company Capitalization Table
See attached
Schedule 1
Exhibit 4.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE COMMON STOCK
Company: Remitly, Inc.
Number of Shares of Common Stock: 78,125 (Subject to Section 1.7)
Warrant Price: $0.64 per share
Issue Date: August 8, 2016
Expiration Date: August 8, 2026 See also Section 5.1(b).
Credit Facility: This Warrant to Purchase Common Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement dated as of June 26, 2013 between Silicon Valley Bank and the Company, as amended from time to time, including, without limitation, by that certain First Amendment to Loan and Security Agreement dated as of June 27, 2014, that certain Second Amendment to Loan and Security Agreement dated as of July 10, 2015, that certain Forbearance to Loan and Security Agreement dated as of March 24, 2016, that certain Default Waiver and Third Amendment to Loan and Security Agreement dated as of July 5, 2016, and that certain Fourth Amendment to Loan and Security Agreement dated as of August 4, 2016 (collectively, the “Loan Agreement”).
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated common stock (the “Common Stock”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
| X = Y(A-B)/A | ||||||||
| where: | ||||||||
| X = | the number of Shares to be issued to the Holder; | |||||||
| Y = | the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price); | |||||||
| A = | the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and | |||||||
| B = | the Warrant Price. | |||||||
1.3 Fair Market Value. If the Company’s Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of a Share shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s Common Stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or
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consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
(c) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(d) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely
3
under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
1.7 Number of Shares. The Number of Shares for which this Warrant shall be exercisable shall be increased by (i) the Additional Warrant Coverage Amount divided by (ii) $0.64. For purposes hereof, the “Additional Warrant Coverage Amount” shall be equal to one percent (1.00%) of the aggregate principal amount of each Term Advance (as defined in the Loan Agreement) made by Silicon Valley Bank to the Company pursuant to the Loan Agreement. Such adjustment shall become effective on each date Silicon Valley Bank makes a Term Advance to the Company.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Common Stock payable in securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Common Stock by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Common Stock are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 Intentionally Omitted.
2.4 Intentionally Omitted.
2.5 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.6 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Common Stock and/or number of Shares, the Company, at the Company’s
4
expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of Company Common Stock or options to purchase shares of Company Common Stock were issued immediately prior to the Issue Date hereof.
(b) All Shares which may be issued upon the exercise of this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of securities as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Company’s stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Common Stock;
(d) effect an Acquisition or to liquidate, dissolve or wind up; or
(e) effect an its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders
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of outstanding shares of the Common Stock will be entitled thereto) or for determining rights to vote, if any,
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice); and
(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its registration statement in connection therewith.
Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
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4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
4.6 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Stand-Off provisions in Section 2.2 of that certain Amended and Restated Investors’ Rights Agreement dated as of December 14, 2012 by and among the Company and the parties set forth on Exhibit A and Exhibit B attached thereto.
4.7 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
5.1 Term and Automatic Conversion Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends. The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITTFS ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE COMMON STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED AUGUST __, 2016, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
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TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, or any shares or other securities issued upon any conversion of any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by
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the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HC 215
Santa Clara, CA 95054
Telephone: [Redacted]
Facsimile: [Redacted]
Email address: [Redacted]
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
REMITLY, INC.
Attn: Matthew Oppenheimer
1601 2nd Avenue, Suite 800
Seattle, WA 98101
Telephone: [Redacted]
Email: [Redacted]
With a copy (which shall not constitute notice) to:
Attn: Aaron M. Gregory, VP - LEGAL
(ADDRESS AS ABOVE)
Telephone: [Redacted]
Email: [Redacted]
5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorney’s Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
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5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Common Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
| “COMPANY” | ||||||||
| REMITLY, INC. | ||||||||
| By: | /s/ Matt Oppenheimer | |||||||
| Name: | Matthew Oppenheimer | |||||||
| Title: | President & CEO | |||||||
| “HOLDER” | ||||||||
| SILICON VALLEY BANK | ||||||||
| By: | /s/ Ryan Kirschling | |||||||
| Name: | Ryan Kirschling | |||||||
| (Print) | ||||||||
| Title: | Vice President | |||||||
[Signature Page to Warrant to Purchase Common Stock]
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right purchase __________ shares of the Common Stock of REMITLY, INC. (the “Company”) in accordance with the attached Warrant To Purchase Common Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[ ] Check in the amount of $_______ payable to the order of the Company enclosed herewith
[ ] Wire transfer of immediately available funds to the Company’s account
[ ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[ ] Other [Describe] ___________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
| Holder’s Name | ||||||||
| (Address) | ||||||||
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Common Stock as of the date hereof.
| HOLDER: | |||||||||||
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
| (Date): | |||||||||||
SCHEDULE 1
Company Capitalization Table
See attached
Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (the “Agreement”), dated as of [_______________], is made by and between Remitly Global Inc., a Delaware corporation (the “Company”), and [______________________], a director, officer, or key employee of the Company or one of the Company’s Subsidiaries or Affiliates (as those terms are defined below) or other service provider who satisfies the definition of Indemnifiable Person set forth below (“Indemnitee”).
RECITALS
A.The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no relationship to the compensation of such representatives;
B.The members of the Board of Directors of the Company (the “Board”) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities (as those terms are defined below) in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;
C.Section 145 of Delaware General Corporation Law (“Section 145”) empowers the Company to indemnify by agreement its officers, directors, employees, and agents, and persons who serve, at the request of the Company, as directors, officers, employees, or agents of other corporations, partnerships, joint ventures, trusts, or other enterprises. The Bylaws of the Company (the “Bylaws”) require indemnification of the directors and officers of the Company subject to specific terms and conditions. Indemnitee may also be entitled to indemnification pursuant to Section 145. The Bylaws and Section 145 expressly provide that the indemnification pursuant thereto is not exclusive and contemplate that contracts may be entered into between the Company and members of the Board, officers, and other persons with respect to indemnification.
D.This Agreement is a supplement to and in furtherance of the Bylaws and any resolutions adopted pursuant thereto, as well as any rights of Indemnitees under the Delaware General Corporation Law (the “DGCL”) or any directors and officers liability insurance policy or other applicable insurance policies, and this Agreement shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
E.The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about inappropriate claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.
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AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1.Definitions.
(a)Affiliate. For purposes of this Agreement, “Affiliate” of the Company means any corporation, partnership, limited liability company, joint venture, trust, or other enterprise or non-profit entity in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.
(b)Change in Control. For purposes of this Agreement, “Change in Control” means any event or circumstance where (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding capital stock, (ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(b)(i), 1(b)(iii) or 1(b)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 50% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.
(c)Expenses. For purposes of this Agreement, “Expenses” means all reasonable and reasonably documented direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, and other out-of-pocket costs) actually paid or incurred by Indemnitee in connection with the investigation, defense, or appeal of, or being a witness or otherwise involved in (i) a Proceeding (as defined below), or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, taxes (including ERISA or other benefit plan related excise taxes or penalties) or amounts paid in settlement of a Proceeding; (ii) any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent; or (iii) recovery under any directors and officers liability insurance policies or other applicable insurance policies maintained by the Company,
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regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(d)Indemnifiable Event. For purposes of this Agreement, “Indemnifiable Event” means any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or Affiliate as an Indemnifiable Person (as defined below), or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity.
(e)Indemnifiable Person. For the purposes of this Agreement, “Indemnifiable Person” means any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.
(f)Independent Counsel. For purposes of this Agreement, “Independent Counsel” means legal counsel (i) who has not performed services for the Company or Indemnitee in the five years preceding the time in question and who would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee, and (ii) is selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, delayed, or conditioned.
(g)Independent Director. For purposes of this Agreement, “Independent Director” means a member of the Board who is not a party to the Proceeding for which a claim for advancement or indemnification is made under this Agreement.
(h)Other Liabilities. For purposes of this Agreement, “Other Liabilities” means any and all liabilities of any type whatsoever, including, but not limited to, judgments, fines, penalties, taxes (including excise taxes or penalties related to ERISA or other benefit plans), and amounts paid in settlement, and all interest, taxes, assessments, and other charges paid or payable in connection with or in respect of any such judgments, fines, or penalties or amounts paid in settlement.
(i)Proceeding. For the purposes of this Agreement, “Proceeding” means any threatened, pending, or completed action, suit, claim, or other proceeding, whether civil, criminal, administrative, investigative, legislative, or any other type whatsoever, preliminary, informal, or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.
(j)Subsidiary. For purposes of this Agreement, “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.
2.Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company as an Indemnifiable Person, and any additional capacity or capacities in which Indemnitee may agree to serve, until such time as Indemnitee’s service in a particular capacity shall end according to the terms of an agreement, the Company’s Certificate of Incorporation (the “Certificate of Incorporation”) or Bylaws, governing law, or otherwise. Nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.
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3.Mandatory Indemnification.
(a)Agreement to Indemnify. In the event Indemnitee is a person who was or is a party to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) such Proceeding to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the DGCL permitted prior to the adoption of such amendment), provided that such indemnification is subject to the exclusions set forth in Section 9 below. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, vote of the Company’s stockholders or disinterested directors or applicable law.
(b)Company Obligations Primary. The Company hereby acknowledges that Indemnitee may have rights to advancement and/or indemnification for Expenses and Other Liabilities provided by a venture capital firm or other sponsoring organization (“Other Indemnitor”). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which advancement and/or indemnification is provided under this Agreement and that the Company will be obligated to make all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. To the extent not in contravention of any insurance policy purchased by the Company, Subsidiary or Affiliate, the Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to Indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to pay Indemnitee for such Expenses or Other Liabilities hereunder.
4.Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by this Agreement or the DGCL. In any review, process and/or Proceeding to determine the extent of indemnification to which Indemnitee is entitled, the Company shall bear the burden to establish, by clear and convincing evidence, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues, or matters that were not successfully resolved.
5.Liability Insurance. So long as Indemnitee shall continue to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (i) directors and officers liability insurance issued by one or more reputable insurers and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage at least comparable to and in the same amount as that provided to the Chairperson of the Board or the Chief Executive Officer of the Company, and (ii) any renewal, replacement or substitute directors and officers liability insurance policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as
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that being provided to the Chairperson of the Board or the Chief Executive Officer of the Company. The purchase, establishment, and maintenance of any such insurance or other arrangements shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement. In the event of a Change in Control subsequent to the date of this Agreement, or the Company’s becoming insolvent (including, but not limited to, being placed into receivership, an assignment for the benefit of creditors, or entering the federal bankruptcy process), the Company shall use reasonable efforts to maintain in force any and all insurance policies then maintained by the Company for the purpose of providing coverage to the Company’s officers or directors (including but not limited to directors and officers liability, fiduciary and employment practices insurance) for a fixed period of no less than six years thereafter. Such coverage shall be non-cancelable and shall be placed and serviced by the Company’s incumbent insurance broker or a broker selected by a majority of the non-management members of the Board.
6.Mandatory Advancement of Expenses. If requested by Indemnitee, the Company shall advance, to the fullest extent permitted by law, prior to the final disposition of the Proceeding, all Expenses incurred by Indemnitee in connection with (including in preparation for) a Proceeding not initiated by Indemnitee (and any Proceeding initiated by Indemnitee to the extent such Proceeding is initiated by Indemnitee in accordance with clauses (i)-(iii) of Section 9(a) of this Agreement) related to an Indemnifiable Event within (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. The right to advances under this Section shall in all events continue until final disposition of any Proceeding, including any appeal therefrom and/or a final adjudication not subject to further appeal. Indemnitee hereby undertakes to repay such amounts advanced if, and only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company and no additional form of undertaking with respect to such obligation to repay shall be required. For the avoidance of doubt, the undertaking given hereunder applies to any other instrument pursuant to which the Indemnitee may be required to give an undertaking in order to receive expense advances. Indemnitee’s undertaking to repay any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon. This section (Section 6) shall not apply to any request for advancement of Expenses made by Indemnitee for which such advancement of Expenses is excluded pursuant to Section 9 of this Agreement.
7.Notice and Other Indemnification Procedures.
(a)Notification. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, unless the Company is a named co-defendant with Indemnitee (or the Company is the recipient of such threat), Indemnitee shall, if Indemnitee believes the advancement of Expenses or the indemnification of Other Liabilities with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of and facts related to the Proceeding. However, a failure by Indemnitee to notify the Company promptly following Indemnitee’s receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure, provided, however, that the Company shall have the burden to prove the existence of such material prejudice by clear and convincing evidence.
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(b)Insurance Notice and Other Matters. If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above, the Company has director and officer liability insurance and/or any other type of insurance that might provide coverage to Indemnitee in effect, the Company shall give prompt notice of the commencement of such Proceeding on behalf of Indemnitee to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all commercially reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies. In addition, the Company will instruct the insurers and the Company’s insurance broker that they may communicate directly with Indemnitee regarding such Proceeding.
(c)Assumption of Defense. In the event the Company shall be obligated to advance Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld, delayed, or conditioned) of counsel designated by the Company, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (i) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have notified the Board in writing that Indemnitee or separate counsel for Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, (iii) the Company fails to employ counsel to assume the defense of such Proceeding, or (iv) after a Change in Control, the employment of counsel by Indemnitee has been approved by Independent Counsel, the Expenses related to work conducted by Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Indemnitee agrees that any such separate counsel retained by Indemnitee will be a member of any approved list of panel counsel under the Company’s applicable insurance policies should the applicable policies provide for a panel of approved counsel. Nothing herein shall prevent Indemnitee from employing counsel for any Proceeding at Indemnitee’s own expense.
(d)Settlement. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent; provided, however, that if a Change in Control has occurred subsequent to the date of this Agreement, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation, or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold, delay, or condition consent from any settlement of any Proceeding. The Company shall promptly notify Indemnitee upon the Company’s receipt of an offer to settle, or if the Company makes an offer to settle, any Proceeding, and provide Indemnitee with a reasonable amount of time to consider such settlement, in the case of any such settlement for which the consent of Indemnitee would be required hereunder. The Company shall not settle any part of any Proceeding to which Indemnitee is a party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of the settlement is to be funded from insurance proceeds paid from an insurance policy or policies providing coverage to Indemnitee unless approved by a majority of the Independent Directors, provided that this sentence shall cease to be of any force and
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effect if it has been determined in accordance with this Agreement that Indemnitee is not entitled to indemnification hereunder with respect to such Proceeding or if the Company’s obligations hereunder to Indemnitee with respect to such Proceeding have been fully discharged.
8.Determination of Right to Indemnification.
(a)Success on the Merits or Otherwise. To the extent that Indemnitee has been successful on the merits or otherwise in the defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses incurred in connection therewith.
(b)Indemnification in Other Situations. In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has met the applicable standard of conduct for indemnification to the fullest extent permitted by law.
(c)Determination of Entitlement to Indemnification. Indemnitee shall be entitled to select the manner in which the determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:
i. A majority of the Independent Directors, even though less than a quorum;
ii. A committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or
iii. Independent Counsel, who shall make such determination in a written opinion.
If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the manner in which the determination of whether Indemnitee has met the applicable standard of conduct shall be decided, then Indemnitee shall not select Independent Counsel as the manner for the determination to be made unless (i) there are no Independent Directors, or (ii) a majority of the Independent Directors (even though less than a quorum) approve of the selection of Independent Counsel, which approval may not be unreasonably withheld, delayed, or conditioned.
The party or parties selected in accordance with this Section 8(c) shall be referred to herein as the “Reviewing Party.” Notwithstanding the foregoing, following any Change in Control subsequent to the date of this Agreement, the Reviewing Party shall be Independent Counsel.
(d)Decision Timing. As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitee’s choice of the Reviewing Party pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.
(e)Delaware Court of Chancery. Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding,
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Indemnitee shall have the right to apply to the Delaware Court of Chancery, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.
(f)Expenses. The Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any process, hearing or Proceeding under this section (Section 8) involving Indemnitee and against all Expenses incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.
(g)Determination of “Good Faith”. For purposes of any determination of whether Indemnitee acted in “good faith” or acted in “bad faith,” Indemnitee shall be deemed to have acted in good faith or not acted in bad faith if, in taking or failing to take the action in question, Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports, or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants, and financial advisors) as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has or have been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate. In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, the Reviewing Party or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. The provisions of this section (Section 8(g)) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.
9.Exceptions. Any other provision herein to the contrary notwithstanding, Indemnitee’s rights to indemnification and/or advancement are subject to the following exceptions.
(a)Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (ii) where the Board has consented to the initiation of such Proceeding, or (iii) with respect to Proceedings brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board finds it to be appropriate.
(b)Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of (i) any suit in which judgment is rendered against Indemnitee by a court of competent jurisdiction in a final adjudication not subject to further appeal for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the
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provisions of Section 16(b) of the Exchange Act and amendments thereto or similar provisions of any federal, state or local statutory law, (ii) any reimbursement paid to the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act, including but not limited to any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act; or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including, but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act.
(c)Unlawful Indemnification. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law as determined by a court of competent jurisdiction in a final adjudication not subject to further appeal.
(d)Exception for Amounts Covered by Insurance and Other Sources. The Company shall not be obligated to advance or indemnify Indemnitee for Expenses or Other Liabilities of any type whatsoever, including, but not limited to judgments, fines, penalties, taxes (including excise taxes or penalties related to ERISA or other benefit plans), and amounts paid in settlement, to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitee’s behalf) by any directors and officers liability insurance or other type of insurance maintained by the Company; provided, however, that payment made to Indemnitee pursuant to an insurance policy purchased and maintained by Indemnitee at their own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.
10.Non-exclusivity. The provisions for advancement of Expenses and indemnification of Other Liabilities set forth in this Agreement shall not be deemed exclusive of any other rights that Indemnitee may have under any provision of law, the Certificate of Incorporation or the Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to acts or omissions in their official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person.
11.Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.
12.Entire Agreement; Supersession, Modification and Waiver. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior indemnification agreement between the Indemnitee and the Company, its Subsidiaries, or its Affiliates, provided, however, that this Agreement is a supplement to and in
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furtherance of Section 145, the Certificate of Incorporation, the Bylaws, any directors and officers liability insurance or other insurance policy providing coverage to Indemnitee maintained by the Company, and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder. If the Company and Indemnitee have previously entered into an indemnification agreement providing for the indemnification of Indemnitee by the Company, the entry into this Agreement by both parties hereto shall be deemed to amend and restate such prior agreement to read in its entirety as, and be superseded by, this Agreement. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.
13.Successors and Assigns; Survival of Rights. The terms of this Agreement shall bind, and shall inure to the benefit of, and be enforceable by the parties hereto and, as applicable, their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors, administrators, and personal and legal representatives (collectively, “Successors”). Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of Indemnitee’s Successors. In addition, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement and indemnify Indemnitee to the fullest extent permitted by law.
14.Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and a receipt is provided by the party to whom such communication is delivered, (ii) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) by personal service by a process server, (iv) by delivery to the recipient’s address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service, or (v) if via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. The address for notice to the Indemnitee shall be the Indemnitee’s most recent address on file with the Company. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Company’s Chief Legal & Trust Officer (or equivalent position).
15.No Presumptions. For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company or a Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company or a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under Section 8(e) of this Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or
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did not have any particular belief or is not entitled to indemnification under applicable law or otherwise. Additionally, any admission of liability by the Company in connection with any settlement by the Company with a regulatory agency shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise.
16.Subrogation and Contribution.
(a)Except as otherwise expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
(b)To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by or on behalf of Indemnitee, whether for Expenses or Other Liabilities, in connection with any Proceeding relating to an Indemnifiable Event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
17.Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.
18.Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Execution of a PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be admissible in any legal proceeding as if an original.
19.Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
20.Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.
21.Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement.
[Signature Page Follows]
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The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
| REMITLY GLOBAL, INC. | |||||
| By: | |||||
| Its: | |||||
| INDEMNITEE | |||||
| [INDEMNITEE’S NAME] | |||||
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Exhibit 10.2
SECOND AMENDMENT
TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this “Amendment”) dated and effective as of November 16, 2020 by and among REMITLY GLOBAL, INC., a Delaware corporation (“Holdings”), REMITLY, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities party hereto (the “Lenders”), and SILICON VALLEY BANK (“SVB”), as the Administrative Agent (SVB, in such capacity, the “Administrative Agent”), the Issuing Lender and the Swingline Lender.
W I T N E S S E T H:
WHEREAS, Holdings, the Borrower, the Administrative Agent, the Issuing Lender and the Swingline Lender are parties to that certain Credit Agreement dated as of June 12, 2019, as amended by First Amendment to Credit Agreement dated as of April 30, 2020 (as the same may be further amended, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”);
WHEREAS, Holdings, the Borrower, and the Administrative Agent are party to the Guarantee and Collateral Agreement (as defined in the Credit Agreement);
WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent agree to modify and amend certain terms and conditions of the Credit Agreement to, among other things, increase the amount of the Total Commitments to $150,000,000 and extend the Maturity Date, subject to the terms and conditions of this Amendment; and
WHEREAS, the parties to the Credit Agreement also have agreed to modify and amend certain terms and conditions of the Credit Agreement and the Guarantee and Collateral Agreement, subject to the terms and conditions of this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement or in the other Loan Documents referred to in the recitals hereto, as applicable.
2. Amendments to the Credit Agreement and Guarantee and Collateral Agreement.
(a) The Credit Agreement and Schedule 1.1A thereto is, effective as of the Second Amendment Effective Date, amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double underlined text) as reflected in the modifications identified in the document annexed hereto as Annex A.
(b) Schedules 4.13, 4.15 and 4.27 to the Credit Agreement are, effective as of the Second Amendment Effective Date, amended and restated in the form annexed hereto as Annex B-1.
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(c) The schedules the Guarantee and Collateral Agreement are, effective as of the Second Amendment Effective Date, amended and restated in the form annexed hereto as Annex B-2.
(d) Exhibit B to the Credit Agreement (Compliance Certificate) is, effective as of the Second Amendment Effective Date, amended and restated in the form annexed hereto as Annex C.
3. Conditions Precedent to Effectiveness. The effectiveness of this Amendment shall be subject to the prior or concurrent satisfaction of each of the following conditions precedent (the date on which such conditions are satisfied, the “Second Amendment Effective Date”):
(a) Loan Documents. The Administrative Agent shall have received each of the following:
(i) this Amendment, duly executed and delivered by the Administrative Agent, the Loan Parties and the Lenders;
(ii) a fully executed copy of the fee letter agreement dated as of the date hereof, between the Borrower and the Administrative Agent, and the payment of all fees specified thereunder;
(iii) if required by any Revolving Lender, the Administrative Agent shall have received a Revolving Loan Note (or amendment to any existing Revolving Loan Note) duly executed and delivered by the Borrower in favor of such Revolving Lender; and
(iv) an updated Collateral Information Certificate duly executed and delivered by the Loan Parties.
(b) Approvals. All Governmental Approvals and consents and approvals of, or notices to, any other Person (including the holders of any Capital Stock issued by any Loan Party) required in connection with the execution, delivery and performance of this Amendment, shall have been obtained and be in full force and effect.
(c) Secretary’s or Managing Member’s Certificates; Certified Operating Documents; Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Loan Party, dated the Second Amendment and executed by a Responsible Officer of such Loan Party, substantially in the form of Exhibit C to the Credit Agreement, with appropriate insertions and attachments, including (A) the Operating Documents of such Loan Party certified, in the case of formation documents, as of a recent date by the secretary of state or similar official of the relevant jurisdiction of organization of such Loan Party, (B) the relevant board resolutions or written consents of such Loan Party adopted by such Loan Party for the purposes of authorizing such Loan Party to enter into and perform this Amendment and the Loan Documents amended hereby to which it is party and (C) the names, titles, incumbency and signature specimens of those representatives of such Loan Party who have been authorized by such resolutions
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and/or written consents to execute Loan Documents on behalf of such Loan Party, (ii) a long form good standing certificate for each Loan Party from its respective jurisdiction of organization, and (iii) a certificate of foreign qualification from each jurisdiction where the failure of any Loan Party to be qualified could reasonably be expected to have a Material Adverse Effect.
(d) Responsible Officer’s Certificates. The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower, dated as of the Second Amendment Effective Date and in substantially the same form delivered on the Closing Date certifying that the conditions specified in Section 3(e), (f) and (g) below have been satisfied.
(e) No Material Adverse Effect. There shall not have occurred since December 31, 2017 any event or condition that has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(f) No Default. No Default or Event of Default shall have occurred and be continuing on the Second Amendment Effective Date.
(g) Representations and Warranties. Each of the representations and warranties set forth in this Amendment, the Credit Agreement, as amended by this Amendment, and after giving effect hereto, and the other Loan Documents to which it is a party (i) that is qualified by materiality shall be true and correct, and (ii) that is not qualified by materiality, shall be true and correct in all material respects, in each case, on and as of such date as if made on and as of such date, except to the extent any such representation and warranty expressly relates to an earlier date, in which case such representation and warranty shall have been true and correct in all material respects (or all respects, as applicable) as of such earlier date.
(h) Lien Searches. The Administrative Agent shall have received the results of recent Lien, judgment and litigation searches reasonably required by the Administrative Agent, and such searches shall reveal no Liens on any of the assets of the Loan Parties except for Liens permitted by Section 7.3 of the Credit Agreement.
(i) Opinion. The Administrative Agent shall have received the executed legal opinion of Fenwick & West LLP, counsel to the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent.
(j) Solvency Certificate. The Administrative Agent shall have received a solvency certificate from the chief financial officer or treasurer of Holdings, in form and substance reasonably satisfactory to the Administrative Agent.
For purposes of determining compliance with the conditions specified in this Section 3, each Lender that has executed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent (or made available) by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender,
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unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Second Amendment Effective Date specifying such Lender’s objection thereto and either such objection shall not have been withdrawn by notice to the Administrative Agent to that effect on or prior to the Second Amendment Effective Date or, if any extension of credit on the Second Amendment Effective Date has been requested, such Lender shall not have made available to the Administrative Agent on or prior to the Second Amendment Effective Date such Lender’s Revolving Percentage of such requested extension of credit.
4. Representations and Warranties. Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders as follows:
(a) This Amendment is, and each other Loan Document to which it is or will be a party, when executed and delivered by each Loan Party that is a party thereto, will be the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.
(b) The representations and warranties set forth in this Amendment, the Credit Agreement, as amended by this Amendment and after giving effect hereto, and the other Loan Documents to which it is a party (i) that is qualified by materiality shall be true and correct, and (ii) that is not qualified by materiality, shall be true and correct in all material respects, in each case, on and as of such date as if made on and as of such date, except to the extent any such representation and warranty expressly relates to an earlier date, in which case such representation and warranty shall have been true and correct in all material respects (or all respects, as applicable) as of such earlier date.
(c) The execution and delivery by each Loan Party of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, (i) have been duly authorized by all necessary organizational action on the part of such Loan Party and (ii) will not (A) violate any provisions of the certificate of incorporation or formation or organization or by-laws or limited liability company agreement or limited partnership agreement of such Loan Party or (B) constitute a violation by such Loan Party of any material Applicable Law.
(d) No Default or Event of Default has occurred and is continuing as of the Second Amendment Effective Date.
5. Payment of Costs and Fees. The Borrower shall pay to the Administrative Agent all reasonable and documented out-of-pocket costs, expenses, and fees and charges of every kind in connection with the preparation, negotiation, execution and delivery of this Amendment and
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any documents and instruments relating hereto (which costs include, without limitation, the reasonable fees and expenses of any attorneys retained by the Administrative Agent).
6. Choice of Law, etc.. This Amendment and the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws (and not the conflict of law rules) of the State of New York. The provisions of Section 10.2 (Notices), Section 10.5 (Expenses; Indemnity; Damage Waiver), Section 10.11 (Severability) and Section 10.14 (Submission to Jurisdiction; Waivers) of the Credit Agreement are incorporated herein by reference mutatis mutandis with the same force and effect as if expressly written herein
7. Counterpart Execution. This Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart.Delivery of an executed counterpart of this Amendment by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Amendment.
8. Effect on Loan Documents.
(a) The Credit Agreement, as amended hereby, and the Guarantee and Collateral Agreement, as amended hereby, and each of the other Loan Documents shall be and remain in full force and effect in accordance with their respective terms and hereby are ratified and confirmed in all respects. Each Loan Party hereby further ratifies and reaffirms the validity and enforceability of all of the Liens heretofore granted, pursuant to and in connection with the Guarantee and Collateral Agreement or any other Loan Document to the Administrative Agent on behalf and for the benefit of the Secured Parties, as collateral security for the obligations under the Loan Documents in accordance with their respective terms, and acknowledges that all of such Liens, and all collateral heretofore pledged as security for such obligations, continues to be and remain collateral for such obligations from and after the date hereof. Each Loan Party hereby further ratifies and reaffirms the validity and enforceability of the appointment of the Administrative Agent as attorney-in-fact under each applicable Loan Document. The execution, delivery, and performance of this Amendment shall not operate, except as expressly set forth herein, as a modification or waiver of any right, power, or remedy of the Administrative Agent or any Lender under the Credit Agreement, the Guarantee and Collateral Agreement or any other Loan Document. The amendments, consents, modifications and other agreements herein are limited to the specifics hereof (including facts or occurrences on which the same are based), shall not apply with respect to any facts or occurrences other than those on which the same are based, shall not excuse any non-compliance with the Loan Documents, and shall not operate as a consent or waiver to any matter under the Loan Documents. Except for the amendments to the Credit Agreement and the Guarantee and Collateral Agreement expressly set forth herein, the Credit Agreement, the Guarantee and Collateral Agreement and other Loan Documents shall remain unchanged and in full force and effect. To the
5
extent any terms or provisions of this Amendment conflict with those of the Credit Agreement or other Loan Documents, the terms and provisions of this Amendment shall control.
(b) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement or the Guarantee and Collateral Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement and the Guarantee and Collateral Agreement as modified or amended hereby.
(c) This Amendment is a Loan Document.
9. Entire Agreement. This Amendment, and terms and provisions hereof, the Credit Agreement and the other Loan Documents constitute the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior or contemporaneous amendments or understandings with respect to the subject matter hereof, whether express or implied, oral or written.
10. Release of Claims.
(a) Each Loan Party hereby absolutely and unconditionally releases and forever discharges the Administrative Agent, each Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents, attorneys and employees of any of the foregoing (each, a “Releasee” and collectively, the “Releasees”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise (each, a “Claim” and collectively, the “Claims”), which such Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown, except for the duties and obligations set forth in this Amendment. Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense to any Claim and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release. Each Loan Party agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered will affect in any manner the final, absolute and unconditional nature of the release set forth above. In connection with the releases set forth above, each Loan Party expressly and completely waives and relinquishes any and all rights and benefits that it has or may ever have pursuant to Section 1542 of the Civil Code of the State of California, or any other similar provision of law or principle of equity in any
6
jurisdiction pertaining to the matters released herein. Section 1542 provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
(b) Each Loan Party hereby absolutely, unconditionally and irrevocably covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by any Loan Party pursuant to Section 10(a) above. If any Loan Party violates the foregoing covenant, the Loan Parties, for themselves and their successors and assigns, and their present and former members, managers, shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents, legal representatives and other representatives, agree to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result of such violation.
11. New Lender and Settlement.
(a) As of the Second Amendment Effective Date, the parties hereto hereby agree and acknowledge that, by executing this Amendment, HSBC Ventures USA Inc. and JPMorgan Chase Bank, N.A. (each, a “New Lender”) shall become a Lender under the Credit Agreement and the other Loan Documents with a Commitment as set forth on Schedule 1.1(A) to the Credit Agreement (as amended by this Amendment). Each New Lender (i) represents and warrants that (A) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (B) it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and shall have the obligations and rights of a Lender thereunder with a Commitment as set forth on Schedule 1.1(A) to the Credit Agreement (as amended hereby), (C) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.1 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment and become a Lender under the Credit Agreement, and (D) it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment and become a Lender under the Credit Agreement; and (ii) agrees that (A) it will, independently and without reliance on any of the Administrative
7
Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents and (B) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
(b) On the Second Amendment Effective Date, each New Lender agrees to pay to the Administrative Agent (which may take the form of such Lender overfunding any Revolving Loans requested on the Second Amendment Effective Date or such other procedure reasonably determined by the Administrative Agent), for the account of the Revolving Lenders, the amount necessary to ensure that the outstanding principal amount of the Revolving Loans and participations hereunder in Letters of Credit and participations hereunder in Swingline Loans of each Revolving Lender shall equal each Revolving Lender’s respective Revolving Percentages and L/C Percentages.
12. Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
[Signature pages follow]
8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
| HOLDINGS: | ||||||||
| REMITLY GLOBAL, INC. | ||||||||
| By: | /s/ Matthew Oppenheimer | |||||||
| Name: | Matthew Oppenheimer | |||||||
| Title: | Chief Executive Officer | |||||||
| BORROWER: | ||||||||
| REMITLY, INC. | ||||||||
| By: | /s/ Matthew Oppenheimer | |||||||
| Name: | Matthew Oppenheimer | |||||||
| Title: | President and Treasurer | |||||||
Second Amendment to Credit Agreement
| ADMINISTRATIVE AGENT: | |||||||||||
| SILICON VALLEY BANK | |||||||||||
| By: | /s/ Will Deevy | ||||||||||
| Name: | Will Deevy | ||||||||||
| Title: | Director | ||||||||||
| LENDERS: | |||||||||||
| SILICON VALLEY BANK | |||||||||||
| as Issuing Lender, Swingline Lender, and as a Lender | |||||||||||
| By: | /s/ Will Deevy | ||||||||||
| Name: | Will Deevy | ||||||||||
| Title: | Director | ||||||||||
Second Amendment to Credit Agreement
| BARCLAYS BANK PLC | ||||||||
| By: | /s/ Martin Corrigan | |||||||
| Name: | Martin Corrigan | |||||||
| Title: | Vice President | |||||||
Second Amendment to Credit Agreement
| HSBC VENTURES USA INC. | ||||||||
| By: | /s/ Prasant Chunduru | |||||||
| Name: | PRASANT CHUNDURU | |||||||
| Title: | SVP, Head of Venture Debt | |||||||
Second Amendment to Credit Agreement
| GOLDMAN SACHS LENDING PARTNERS LLC | ||||||||
| By: | /s/ Ryan Durkin | |||||||
| Name: | Ryan Durkin | |||||||
| Title: | Authorized Signatory | |||||||
Second Amendment to Credit Agreement
| JP MORGAN CHASE BANK, N.A. | ||||||||
| By: | /s/ Matthew Cheung | |||||||
| Name: | MATTHEW CHEUNG | |||||||
| Title: | VICE PRESIDENT | |||||||
Second Amendment to Credit Agreement
| WESTERN ALLIANCE BANK | ||||||||
| By: | /s/ Thomas Reimer | |||||||
| Name: | THOMAS REIMER | |||||||
| Title: | SR. DIRECTOR | |||||||
Second Amendment to Credit Agreement
Annex A: Conformed Credit Agreement
[See Attached]
CONFORMED COPY: REFLECTS CHANGES THROUGH FIRST AMENDMENSECOND AMENDMENT
SENIOR SECURED CREDIT FACILITIES
CREDIT AGREEMENT
dated as of June 12, 2019,
among
REMITLY GLOBAL, INC.,
as a Guarantor,
REMITLY, INC.,
as the Borrower,
THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO,
and
SILICON VALLEY BANK,
as Administrative Agent, Issuing Lender and Swingline Lender
SILICON VALLEY BANK,
as Sole Lead Arranger
Table of Contents
| Page | |||||||||||
| SECTION 1 DEFINITIONS | 1 | ||||||||||
| 1.1 | Defined Terms | 1 | |||||||||
| 1.2 | Other Definitional Provisions. | 29 | |||||||||
| 1.3 | Rounding | 30 | |||||||||
| SECTION 2 AMOUNT AND TERMS OF COMMITMENTS | 30 | ||||||||||
| 2.1 | [Reserved] | 30 | |||||||||
| 2.2 | [Reserved] | 30 | |||||||||
| 2.3 | [Reserved] | 30 | |||||||||
| 2.4 | Commitments. | 30 | |||||||||
| 2.5 | Procedure for Revolving Loan Borrowing | 31 | |||||||||
| 2.6 | Swingline Commitment | 31 | |||||||||
| 2.7 | Procedure for Swingline Borrowing; Refunding of Swingline Loans. | 31 | |||||||||
| 2.8 | [Reserved] | 33 | |||||||||
| 2.9 | Fees. | 33 | |||||||||
| 2.1 | Termination or Reduction of Commitments. | 33 | |||||||||
| 2.11 | Optional Loan Prepayments | 34 | |||||||||
| 2.12 | Mandatory Prepayments. | 34 | |||||||||
| 2.13 | [Reserved]. | 34 | |||||||||
| 2.14 | [Reserved] | 34 | |||||||||
| 2.15 | Interest Rates and Payment Dates. | 34 | |||||||||
| 2.16 | Computation of Interest and Fees. | 35 | |||||||||
| 2.17 | [Reserved] | 35 | |||||||||
| 2.18 | Pro Rata Treatment and Payments. | 35 | |||||||||
| 2.19 | Illegality; Applicable Law. | 38 | |||||||||
| 2.2 | Taxes. | 39 | |||||||||
| 2.21 | [Reserved] | 43 | |||||||||
| 2.22 | Change of Lending Office | 43 | |||||||||
| 2.23 | Substitution of Lenders | 43 | |||||||||
| 2.24 | Defaulting Lenders. | 44 | |||||||||
| 2.25 | Joint and Several Liability of the Borrowers. | 46 | |||||||||
| 2.26 | Notes | 49 | |||||||||
| 2.27 | Incremental Revolving Loans. | 49 | |||||||||
| SECTION 3 LETTERS OF CREDIT | 52 | ||||||||||
3.1 | L/C Commitment. | 52 | |||||||||
3.2 | Procedure for Issuance of Letters of Credit | 54 | |||||||||
3.3 | Fees and Other Charges. | 54 | |||||||||
3.4 | L/C Participations; Existing Letters of Credit. | 55 | |||||||||
3.5 | Reimbursement. | 55 | |||||||||
3.6 | Obligations Absolute | 56 | |||||||||
-i-
Table of Contents
(continued)
| Page | |||||||||||
3.7 | Letter of Credit Payments | 57 | |||||||||
3.8 | Applications | 57 | |||||||||
3.9 | Interim Interest | 57 | |||||||||
3.10 | Cash Collateral. | 57 | |||||||||
3.11 | Additional Issuing Lenders | 58 | |||||||||
3.12 | Resignation of the Issuing Lender | 58 | |||||||||
| 3.13 | Applicability of UCP and ISP | 59 | |||||||||
| SECTION 4 REPRESENTATIONS AND WARRANTIES | 59 | ||||||||||
4.1 | Financial Condition. | 59 | |||||||||
4.2 | No Change | 60 | |||||||||
| 4.3 | Existence; Compliance with Law | 60 | |||||||||
| 4.4 | Power, Authorization; Enforceable Obligations | 60 | |||||||||
| 4.5 | No Legal Bar | 60 | |||||||||
4.6 | Litigation | 61 | |||||||||
4.7 | No Default | 61 | |||||||||
| 4.8 | Ownership of Property; Liens; Investments | 61 | |||||||||
| 4.9 | Intellectual Property | 61 | |||||||||
| 4.10 | Taxes | 61 | |||||||||
| 4.11 | Federal Regulations | 61 | |||||||||
4.12 | Labor Matters | 62 | |||||||||
| 4.13 | ERISA | 62 | |||||||||
4.14 | Investment Company Act; Other Regulations | 63 | |||||||||
| 4.15 | Subsidiaries | 63 | |||||||||
| 4.16 | Use of Proceeds | 63 | |||||||||
4.17 | Environmental Matters | 64 | |||||||||
| 4.18 | Accuracy of Information, etc. | 64 | |||||||||
| 4.19 | Security Documents. | 65 | |||||||||
4.20 | Solvency; Voidable Transaction | 65 | |||||||||
4.21 | Regulation H | 65 | |||||||||
4.22 | Designated Senior Indebtedness | 66 | |||||||||
4.23 | [Reserved] | 66 | |||||||||
4.24 | Insurance | 66 | |||||||||
| 4.25 | No Casualty | 66 | |||||||||
4.26 | [Reserved]. | 66 | |||||||||
4.27 | Capitalization | 66 | |||||||||
| 4.28 | OFAC | 66 | |||||||||
| 4.29 | Anti-Corruption Laws; AML Laws; Sanctions | 66 | |||||||||
| 4.30 | Holding Company | 66 | |||||||||
| SECTION 5 CONDITIONS PRECEDENT | 67 | ||||||||||
5.1 | Conditions to Closing Date | 67 | |||||||||
| 5.2 | Conditions to Each Extension of Credit | 70 | |||||||||
-ii-
Table of Contents
(continued)
| Page | |||||||||||
| 5.3 | Post-Closing Conditions Subsequent | 70 | |||||||||
| SECTION 6 AFFIRMATIVE COVENANTS | 71 | ||||||||||
6.1 | Financial Statements | 71 | |||||||||
| 6.2 | Certificates; Reports; Other Information | 72 | |||||||||
6.3 | [Reserved]. | 73 | |||||||||
| 6.4 | Payment of Obligations | 73 | |||||||||
| 6.5 | Maintenance of Existence; Compliance | 73 | |||||||||
6.6 | Maintenance of Property; Insurance | 74 | |||||||||
6.7 | Inspection of Property; Books and Records; Discussions | 74 | |||||||||
6.8 | Notices. | 74 | |||||||||
| 6.9 | Environmental Laws. | 75 | |||||||||
| 6.10 | Banking Relationship; Cash Management | 75 | |||||||||
| 6.11 | Audits | 76 | |||||||||
| 6.12 | Additional Collateral, Etc. | 76 | |||||||||
| 6.13 | Use of Proceeds | 78 | |||||||||
| 6.14 | Designated Senior Indebtedness | 78 | |||||||||
| 6.15 | Anti-Corruption Laws | 79 | |||||||||
| 6.16 | Further Assurances | 79 | |||||||||
| 6.17 | Required Capital Raise | 79 | |||||||||
| SECTION 7 NEGATIVE COVENANTS | 79 | ||||||||||
7.1 | Financial Condition Covenants. | 79 | |||||||||
7.2 | Indebtedness | 79 | |||||||||
7.3 | Liens | 81 | |||||||||
7.4 | Fundamental Changes | 84 | |||||||||
7.5 | Disposition of Property | 84 | |||||||||
7.6 | Restricted Payments | 85 | |||||||||
7.7 | [Reserved] | 87 | |||||||||
7.8 | Investments | 87 | |||||||||
7.9 | ERISA | 89 | |||||||||
7.10 | Optional Payments and Modifications of Certain Preferred Stock and Debt Instruments | 89 | |||||||||
7.11 | Transactions with Affiliates | 90 | |||||||||
7.12 | Sale Leaseback Transactions | 90 | |||||||||
7.13 | Swap Agreements | 90 | |||||||||
7.14 | Accounting Changes | 90 | |||||||||
7.15 | Negative Pledge Clauses | 90 | |||||||||
7.16 | Clauses Restricting Subsidiary Distributions | 91 | |||||||||
7.17 | Lines of Business | 91 | |||||||||
7.18 | Designation of other Indebtedness | 91 | |||||||||
7.19 | Amendments to Organizational Agreements and Material Contracts | 91 | |||||||||
7.20 | Use of Proceeds | 91 | |||||||||
-iii-
Table of Contents
(continued)
| Page | |||||||||||
7.21 | Subordinated Debt. | 92 | |||||||||
7.22 | Anti-Terrorism Laws | 92 | |||||||||
| SECTION 8 EVENTS OF DEFAULT | 92 | ||||||||||
8.1 | Events of Default | 92 | |||||||||
8.2 | Remedies Upon Event of Default | 95 | |||||||||
8.3 | Application of Funds | 96 | |||||||||
| SECTION 9 THE ADMINISTRATIVE AGENT | 97 | ||||||||||
9.1 | Appointment and Authority. | 95 | |||||||||
9.2 | Delegation of Duties | 98 | |||||||||
9.3 | Exculpatory Provisions | 98 | |||||||||
9.4 | Reliance by Administrative Agent | 99 | |||||||||
9.5 | Notice of Default | 100 | |||||||||
9.6 | Non-Reliance on Administrative Agent and Other Lenders | 100 | |||||||||
9.7 | Indemnification | 100 | |||||||||
9.8 | Agent in Its Individual Capacity | 101 | |||||||||
9.9 | Successor Administrative Agent. | 101 | |||||||||
9.10 | Collateral and Guaranty Matters | 102 | |||||||||
9.11 | Administrative Agent May File Proofs of Claim | 103 | |||||||||
9.12 | No Other Duties, etc. | 104 | |||||||||
9.13 | Cash Management Bank and Qualified Counterparty Reports | 104 | |||||||||
9.14 | Survival | 104 | |||||||||
| SECTION 10 MISCELLANEOUS | 104 | ||||||||||
10.1 | Amendments and Waivers. | 104 | |||||||||
10.2 | Notices | 106 | |||||||||
10.3 | No Waiver; Cumulative Remedies | 108 | |||||||||
10.4 | Survival of Representations and Warranties | 108 | |||||||||
10.5 | Expenses; Indemnity; Damage Waiver. | 108 | |||||||||
10.6 | Successors and Assigns; Participations and Assignments. | 110 | |||||||||
10.7 | Adjustments; Set-off. | 114 | |||||||||
10.8 | Payments Set Aside | 115 | |||||||||
10.9 | Interest Rate Limitation | 115 | |||||||||
10.10 | Counterparts; Electronic Execution of Assignments. | 115 | |||||||||
10.11 | Severability | 116 | |||||||||
10.12 | Integration | 116 | |||||||||
10.13 | GOVERNING LAW | 116 | |||||||||
10.14 | Submission to Jurisdiction; Waivers. | 116 | |||||||||
10.15 | Acknowledgements | 117 | |||||||||
10.16 | Releases of Guarantees and Liens. | 118 | |||||||||
10.17 | Treatment of Certain Information; Confidentiality | 118 | |||||||||
-iv-
Table of Contents
(continued)
| Page | |||||||||||
10.18 | Automatic Debits | 120 | |||||||||
10.19 | Judgment Currency | 120 | |||||||||
10.20 | Patriot Act; Other Regulations | 120 | |||||||||
10.21 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 120 | |||||||||
-v-
Table of Contents
(continued)
| SCHEDULES | |||||
| Schedule 1.1A: | Commitments | ||||
| Schedule 1.1B: | Existing Letters of Credit | ||||
| Schedule 4.5: | Requirements of Law | ||||
| Schedule 4.13: | ERISA Plans | ||||
| Schedule 4.15: | Subsidiaries | ||||
| Schedule 4.17: | Environmental Matters | ||||
| Schedule 4.19(a): | Financing Statements and Other Filings | ||||
| Schedule 4.27: | Capitalization | ||||
| Schedule 7.2(d): | Existing Indebtedness | ||||
| Schedule 7.3(f): | Existing Liens | ||||
EXHIBITS | |||||
Exhibit A: | Form of Guarantee and Collateral Agreement | ||||
Exhibit B: | Form of Compliance Certificate | ||||
Exhibit C: | Form of Secretary’s/Managing Member’s Certificate | ||||
Exhibit D: | Form of Solvency Certificate | ||||
Exhibit E: | Form of Assignment and Assumption | ||||
Exhibits F-1 – F-4: | Forms of U.S. Tax Compliance Certificate | ||||
Exhibit G: | Form of Advance Support/Reconciliation Worksheet | ||||
Exhibit H-1: | Form of Revolving Loan Note | ||||
Exhibit H-2: | Form of Swingline Loan Note | ||||
Exhibit I: | [Reserved] | ||||
Exhibit J: | [Reserved] | ||||
Exhibit K: | Form of Notice of Borrowing | ||||
-vi-
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this “Agreement”), dated as of June 12, 2019, is entered into by and among REMITLY GLOBAL, INC., a Delaware corporation (“Holdings”), REMITLY, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time party to this Agreement (each a “Lender” and, collectively, the “Lenders”), SILICON VALLEY BANK (“SVB”), as the Issuing Lender and the Swingline Lender, and SVB, as administrative agent and collateral agent for the Lenders (in such capacities, together with any successors and assigns in such capacities, the “Administrative Agent”).
RECITALS:
WHEREAS, the Borrower desires to obtain financing to refinance the Existing Credit Facility (as hereinafter defined), for working capital financing and letter of credit facilities;
WHEREAS, the Lenders have agreed to extend a revolving facility to the Borrower, upon the terms and conditions specified in this Agreement, in an aggregate principal amount not to exceed $85,000,000 (which shall be increased to $150,000,000 on the Second Amendment Effective Date), including a letter of credit sub-facility of the revolving loan facility in the aggregate availability amount of $10,000,000 (as a sublimit of the revolving loan facility which shall be increased to $30,000,000 on the Second Amendment Effective Date), and a swingline sub-facility in the aggregate availability amount of $85,000,000100,000,000 (as a sublimit of the revolving loan facility);
WHEREAS, the Borrower has agreed to secure all of its Obligations by granting to the Administrative Agent, for the benefit of the Secured Parties, a first priority lien (subject to Liens permitted by the Loan Documents) on substantially all of its assets; and
WHEREAS, each of the Guarantors has agreed to guarantee the Obligations of the Borrower and to secure its respective Obligations in respect of such guarantee by granting to the Administrative Agent, for the benefit of the Secured Parties, a first priority lien (subject to Liens permitted by the Loan Documents) on substantially all of its assets.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement (including the recitals hereof), the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.
“ABR”: for any day, a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) 5.503.25% and (c) the Federal Funds Effective Rate in effect for such day plus 0.50%. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of the change in such rates.
“Accounts”: all “accounts” (as defined in Article 9 of the UCC) of a Person, including, without limitation, accounts, accounts receivable, monies due or to become due and obligations in any form (whether arising in connection with contracts, contract rights, instruments, general intangibles, or chattel paper), in each case whether arising out of goods sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in existence, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind,
1
now or hereafter in existence, given by any Person with respect to any of the foregoing. Unless otherwise stated, the term “Account,” when used herein, shall mean an Account of the Borrower.
“Adjusted Quick Ratio”: as of any date of determination, the ratio of Quick Assets to Current Liabilities.
“Administrative Agent”: SVB, as the administrative agent under this Agreement and the other Loan Documents, together with any of its successors in such capacity.
“Advance Support/Reconciliation Worksheet”: a worksheet in the form of Exhibit G hereto, reflecting, among other things, the Group Members’ customer funds maintained at partner banks, funds available, net funding needed per corridor and the amount of funds received per corridor, certified by a Responsible Officer and otherwise reasonably acceptable to the Administrative Agent.
“Affected Financial Institution”: (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Lender”: as defined in Section 2.23.
“Affiliate”: with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided that, neither the Administrative Agent nor the Lenders shall be deemed Affiliates of the Loan Parties as a result of the exercise of their rights and remedies under the Loan Documents.
“Agent Parties”: as defined in Section 10.2(d)(ii).
“Aggregate Exposure”: with respect to any Lender at any time, an amount equal to such Lender’s Commitment (including, without duplication, L/C Commitments) then in effect or, if the Commitments have been terminated, the amount of such Lender’s Revolving Extensions of Credit then outstanding.
“Aggregate Exposure Percentage”: with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.
“Agreement”: as defined in the preamble hereto.
“Agreement Currency”: as defined in Section 10.19.
“AML Laws”: all Applicable Law relating to anti-money laundering.
“Anti-Corruption Laws”: all Applicable Laws from time to time concerning or relating to bribery or corruption, including without limitation the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, or other similar legislation in other jurisdictions.
“Applicable Law”: as to any Person, the Operating Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority (including, for the avoidance of doubt, the Basel Committee on Banking Supervision and any successor thereto or similar authority or successor thereto), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Applicable Margin”: 1.0%.
“Application”: an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit.
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“Approved Fund”: any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender, or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Assignment and Assumption”: an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.6), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.
“Available Commitment”: at any time, an amount equal to (a) the Total Commitments in effect at such time, minus (b) the aggregate undrawn amount of all outstanding Letters of Credit at such time, minus (c) the aggregate amount of all L/C Disbursements that have not yet been reimbursed or converted into Loans at such time, minus (d) the aggregate principal balance of any Loans outstanding at such time.
“Bail-In Action”: the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EE4AAffected Financial Institution.
“Bail-In Legislation”:(a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other Insolvency Proceedings).
“Bankruptcy Code”: Title 11 of the United States Code entitled “Bankruptcy.”
“Benefitted Lender”: as defined in Section 10.7(a).
“Blocked Person”: as defined in Section 7 .22.
“Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).
“Borrower”: as defined in the preamble hereto.
“Borrowing Date”: any Business Day specified by the Borrower in a Notice of Borrowing as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
“Business”: as defined in Section 4.17(b).
“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in the State of California or the State of New York are authorized or required by law to close.
“Capital Lease Obligations”: as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP .
“Capital Stock”: with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase
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or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Cash Collateralize”: to pledge and deposit with or deliver to (a) with respect to Obligations in respect of Letters of Credit, the Administrative Agent, for the benefit of the Issuing Lender and one or more of the Lenders, as applicable, as collateral for L/C Exposure or obligations of the Lenders to fund participations in respect thereof, cash or deposit account balances or, if the Administrative Agent and the Issuing Lender shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and such Issuing Lender; (b) with respect to Obligations arising under any Cash Management Agreement in connection with Cash Management Services, the applicable Cash Management Bank, for its own or any of its applicable Affiliate's benefit, as provider of such Cash Management Services, cash or deposit account balances or, if the Administrative Agent and the applicable Cash Management Bank shall agree in their sole reasonable discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and such Cash Management Bank or (c) with respect to Obligations in respect of any Specified Swap Agreements, the applicable Qualified Counterparty, as Collateral for such Obligations, cash or deposit account balances or, if such Qualified Counterparty shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to such Qualified Counterparty. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $250,000,000; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) money market mutual or similar funds that invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; or (h) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment
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Company Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.
“Cash Management Agreement”: as defined in the definition of “Cash Management Services.”
“Cash Management Bank”: any Person that, at the time it enters into a Cash Management Agreement, is a Lender or an Affiliate of a Lender, in its capacity as a party to such Cash Management Agreement.
“Cash Management Services”: cash management and other services provided to one or more of the Loan Parties by a Cash Management Bank which may include treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system), merchant services, direct deposit of payroll, business credit card (including so-called "purchase cards", "procurement cards" or "p-cards"), credit card processing services, debit cards, stored value cards, and check cashing services identified in such Cash Management Bank’s various cash management services or other similar agreements (each, a “Cash Management Agreement”).
“Casualty Event”: any damage to or any destruction of, or any condemnation or other taking by any Governmental Authority of any property of the Loan Parties.
“Certificated Securities”: as defined in Section 4.19(a).
“Change of Control”: (a) at any time, any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall become, or obtain rights (whether by means orof warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 50% or more of the ordinary voting power for the election of directors of Holdings (determined on a fully diluted basis); (b) during any period of twenty-four (24) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (disregarding individuals who cease to serve due to death or disability) (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; (c) at any time, Holdings shall cease to own and control, of record and beneficially, directly or indirectly, 100% of each class of outstanding Capital Stock of the Borrower and each other Guarantor free and clear of all Liens; or (d) a "change of control" or any comparable term under and as defined in any agreement governing any other Indebtedness of the Group Members in an aggregate principal amount in excess of $5,000,000 that is not waived and causes such Indebtedness to become due, become payable or be terminated prior to its stated maturity (or permits the holders thereof to cause such Indebtedness to become due, become payable or be terminated prior to its stated maturity).
“Closing Date”: the date on which all of the conditions precedent set forth in Section 5.1 are satisfied or waived by the Administrative Agent and, as applicable, the Lenders or the Required Lenders.
“Code”: the Internal Revenue Code of 1986, as amended from time to time.
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“Collateral”: all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. For the avoidance of doubt, no Excluded Asset (as such term is defined in the Guarantee and Collateral Agreement) shall constitute “Collateral.”
“Collateral Information Certificate”: the Collateral Information Certificate to be executed and delivered by Holdings, the Borrower and each other Loan Party pursuant to Section 5.1, as updated on the Second Amendment Effective Date.
“Collateral-Related Expenses”: all costs and expenses of the Administrative Agent paid or incurred in connection with any sale, collection or other realization on the Collateral, including reasonable compensation to the Administrative Agent and its agents and counsel, and reimbursement for all other costs, expenses and liabilities and advances made or incurred by the Administrative Agent in connection therewith (including as described in Section 6.6 of the Guarantee and Collateral Agreement), and all amounts for which the Administrative Agent is entitled to indemnification under the Security Documents and all advances made by the Administrative Agent under the Security Documents for the account of any Loan Party.
“Commitment”: as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and to participate in Swingline Loans and Letters of Credit in an aggregate principal amount not to exceed the amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 1. lA or in the Assignment and Assumption pursuant or joinder agreement to which such Lender becomes a party hereto, as the amount of any such obligation may be (a) changed from time to time pursuant to the terms hereof (including in connection with assignments permitted hereunder and including pursuant to Section 2.10 and Section 2.27), or (b) limited by restrictions on availability set forth herein (including in Section 2.4).
“Commitment Fee Rate”: 0.40% per annum.
“Commitment Period”: the period from and including the Closing Date to the Maturity Date.
“Commodity Exchange Act”: the Commodity Exchange Act (7 U.S.C. Section 1 et seq.), as amended from time to time, and any successor statute.
“Communications”: as defined in Section 10.2(d)(ii).
“Compliance Certificate”: a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B.
“Connection Income Taxes”: Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated Adjusted EBITDA”: with respect to Holdings and its consolidated Subsidiaries for any period,
(a) Consolidated Net Income, plus
(b) sum, without duplication, of the amounts for such period but solely to the extent deducted in calculating Consolidated Net Income for such period of:
(i) Consolidated Interest Expense. plus
(ii) provisions for Taxes based on income, plus
(iii) total depreciation expense, plus
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(iv) total amortization expense, plus
(v) noncash stock based compensation expense, plus
(vi) noncash exchange, transaction or performance losses relating to any foreign currency hedging transactions or currency fluctuations, plus
(vii) costs, fees and expenses (1) in connection with the execution and delivery of this Agreement and the other Loan Documents or (2) paid by any Group Member after the Closing Date in connection with its obligations under the Loan Documents which are incurred not later than six (6) months after the Closing Date in an aggregate amount not to exceed $500,000, plus
(viii) one-time costs, fees, and expenses in connection with Permitted Acquisitions or other transactions that if closed, would have constituted a Permitted Acquisition in an aggregate amount not to exceed $500,000 for any period, plus
(ix) noncash purchase accounting adjustments (including, but not limited to deferred revenue write down) and any adjustments as required or permitted by the application of FASB 141 (requiring the use of purchase method of accounting for acquisitions and consolidations), FASB 142 (relating to changes in accounting for the amortization of good will and certain other intangibles) and FASB 144 (relating to the write downs of long-lived assets), in each case, in connection with Permitted Acquisitions, plus
(x) noncash charges for goodwill and other intangible write-offs and write-downs in connection with Permitted Acquisitions or otherwise, plus
(xi) other noncash items reducing Consolidated Net Income (excluding any such non cash item to the extent that it represents an accrual or reserve for potential cash items in any future period or amortization of a prepaid cash item that was paid in a prior period) approved by the Administrative Agent in writing as an ‘add-back’ to Consolidated Adjusted EBITDA, minus
(c) the sum , without duplication of the amounts for such period of
(i) noncash items increasing Consolidated Net Income for such period (excluding any such noncash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period), plus
(ii) interest income; plus
(iii) capitalized software development costs;
provided that Consolidated Adjusted EBITDA for any period shall be determined on a Pro Forma Basis to give effect to any Permitted Acquisitions or any Disposition of any business or assets consummated during such period, in each case as if such transaction occurred on the first day of such period and in accordance with Regulation S-X promulgated by the SEC; provided further, for purposes of calculating compliance with Section 7.1(b), the Consolidated Adjusted EBITDA attributable to assets or stock acquired in connection with any Permitted Acquisition shall be included in such calculation commencing on the date such Permitted Acquisition is consummated and thereafter for the applicable testing period and not as if such Permitted Acquisition occurred on the first day of such period.
“Consolidated Interest Expense”: for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of Holdings and its consolidated Subsidiaries for such period
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with respect to all outstanding Indebtedness of such Persons (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP).
“Consolidated Net Income”: for any period, the consolidated net income (or loss) of Holdings and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from the calculation of “Consolidated Net Income” (a) the income (or deficit) of any such Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or one of its Subsidiaries, (b) the income (or deficit) of any such Person (other than a Subsidiary of Holdings) in which Holdings or one of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by Holdings or such Subsidiary in the form of dividends or similar distributions, and (c) the undistributed earnings of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Applicable Law applicable to such Subsidiary.
“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Control”: the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Control Agreement”: any account control agreement in form and substance reasonably satisfactory to the Administrative Agent entered into among the depository institution at which a Loan Party maintains a Deposit Account or the securities intermediary at which a Loan Party maintains a Securities Account, such Loan Party, and the Administrative Agent pursuant to which the Administrative Agent obtains control (within the meaning of the UCC or any other applicable law) over such Deposit Account or Securities Account. Excluded Accounts (as defined in the Guarantee and Collateral Agreement) will not be required to be subject to a Control Agreement.
“Current Liabilities”: the result of (without duplication):
(a) the aggregate amount of the Obligations, plus
(b) the aggregate value of liabilities that should, under GAAP, be classified as liabilities on Holdings' consolidated balance sheet, including all Indebtedness, and not otherwise reflected in Quick Assets, that matures within one (1) year (but excluding non-cash deferred rent, non-cash lease incentive liabilities and non-cash foreign exchange adjustments to the extent otherwise included as Current Liabilities on Holdings’ balance sheet and excluding subordinated indebtedness and excluding the aggregate amount outstanding under the Borrower's post-funding linesany Post Funding Line of ereditCredit), minus
(c) the aggregate obligations and liabilities with respect to customer funds, minus
(d) the aggregate amount of outstanding Loans and the amount of L/C Exposure, minus
(e) the aggregate amount of spot trades in transit re-classed to accrued liabilities.
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“Debtor Relief Laws”: the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.
“Default”: any of the events specified in Section 8.1, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“Default Rate”: as defined in Section 2.15(c).
“Defaulting Lender”: subject to Section 2.24(b), any Lender that (a) has failed to (i) fund all or any portion of its Revolving Loans within two (2) Business Days of the date such Revolving Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s reasonable determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender, the Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two (2) Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, the Issuing Lender or the Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Revolving Loan hereunder and states that such position is based on such Lender’s reasonable determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) become the subject of a Bail-In Action, or (iii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.24(b)) upon delivery of written notice of such determination to the Borrower, the Issuing Lender, the Swingline Lender and each Lender.
“Deferred Payment Obligations”: as defined in Section 7.2(k).
“Deposit Account”: any “deposit account” as defined in the UCC with such additions to such term as may hereafter be made.
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“Deposit Account Control Agreement”: any Control Agreement entered into by the Administrative Agent, a Loan Party and a financial institution holding a Deposit Account of such Loan Party pursuant to which the Administrative Agent is granted “control” (for purposes of the UCC) over such Deposit Account.
“Designated Jurisdiction”: any country, region or territory which itself is the subject of any Sanction.
“Determination Date”: as defined in the definition of “Pro Forma Basis”.
“Discharge of Obligations”: subject to Section 10.8, the satisfaction of the Obligations (including all such Obligations relating to Cash Management Services) by the payment in full, in cash (or, as applicable, Cash Collateralization in accordance with the terms hereof) of the principal of and interest on or other liabilities relating to each Loan and any previously provided Cash Management Services, all fees and all other expenses or amounts payable under any Loan Document (other than inchoate indemnification obligations and any other obligations which pursuant to the terms of any Loan Document specifically survive repayment of the Loans for which no claim has been made), and other Obligations under or in respect of Specified Swap Agreements and Cash Management Services, to the extent (a) no default or termination event shall have occurred and be continuing thereunder, (b) any such Obligations in respect of Specified Swap Agreements have, if required by any applicable Qualified Counterparties, been Cash Collateralized, (c) no Letter of Credit shall be outstanding (or, as applicable, each outstanding and undrawn Letter of Credit has been Cash Collateralized in accordance with the terms hereof), (d) no Obligations in respect of any Cash Management Services are outstanding (or, as applicable, all such outstanding Obligations in respect of Cash Management Services have been Cash Collateralized in accordance with the terms hereof), and (e) the aggregate Commitments of the Lenders have been terminated.
“Disposition”: with respect to any property (including, without limitation, Capital Stock of Holdings or any of its Subsidiaries), any sale, lease, Sale Leaseback Transaction, assignment, conveyance, transfer, encumbrance or other disposition thereof and any issuance of Capital Stock of Holdings or any of its Subsidiaries. The terms “Dispose” and “Disposed of” shall have correlative meanings.
“Disqualified Stock”: any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the date on which the Loans mature. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that Holdings and its Subsidiaries may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.
“Division”: in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including as contemplated under Section 18-217 of the Delaware Limited Liability Company Act, or any analogous action taken pursuant to any other applicable Requirements of Law.
“Dollars” and “$”: dollars in lawful currency of the United States.
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“Domestic Subsidiary”: any Subsidiary of Holdings organized under the laws of any jurisdiction within the United States.
“EEA Financial Institution”: (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a Subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country”: any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority”: any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Election Period”: as defined in Section 2.27(c).
“Eligible Assignee”: any Person that meets the requirements to be an assignee under Section 10.6(b)(ii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.6(b)(iii)).
“Environmental Laws”: any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Applicable Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
“Environmental Liability”: any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) a violation of an Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Materials of Environmental Concern, (c) exposure to any Materials of Environmental Concern, (d) the release or threatened release of any Materials of Environmental Concern into the environment, or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“ERISA”: the Employee Retirement Income Security Act of 1974, as amended, including (unless the context otherwise requires) any rules or regulations promulgated thereunder.
“ERISA Affiliate”: each business or entity which is, or within the last six years was, a member of a “controlled group of corporations,” under “common control” or an “affiliated service group” with any Loan Party within the meaning of Section 414(b), (c), (m) or (n) of the Code, required to be aggregated with any Loan Party under Section 414(0) of the Code, or is, or within the last six years was, under “common control” with any Loan Party, within the meaning of Section 4001(a)(14) of ERISA.
“ERISA Event”: any of (a) a reportable event as defined in Section 4043 of ERISA with respect to a Pension Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; (b) the applicability of the requirements of Section 4043(b) of ERISA with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, to any Pension Plan where an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with
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respect to such plan within the following 30 days; (c) a withdrawal by any Loan Party or any ERISA Affiliate thereof from a Pension Plan or the termination of any Pension Plan resulting in liability under Sections 4063 or 4064 of ERISA; (d) the withdrawal of any Loan Party or any ERISA Affiliate thereof in a complete or partial withdrawal (within the meaning of Section 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by any Loan Party or any ERISA Affiliate thereof of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA; (e) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (f) the imposition of liability on any Loan Party or any ERISA Affiliate thereof pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the failure by any Loan Party or any ERISA Affiliate thereof to make any required contribution to a Pension Plan, or the failure to meet the minimum funding standard of Section 412 of the Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure to make by its due date a required installment under Section 430 of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (h) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered to critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; (i) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (j) the imposition of any liability under Title I or Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate thereof; (k) an application for a funding waiver under Section 303 of ERISA or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Pension Plan; (1) the occurrence of a non-exempt prohibited transaction under Sections 406 or 407 of ERISA for which any Loan Party or any Subsidiary thereof may be directly or indirectly liable; (m) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary or disqualified person for which any Loan Party or any ERISA Affiliate thereof may be directly or indirectly liable; (n) the occurrence of an act or omission which could give rise to the imposition on any Loan Party or any ERISA Affiliate thereof of fines, penalties, taxes or related charges under Chapter 43 of the Code or under Sections 409, 502(c), (i) or (1) or 4071 of ERISA; (o) the assertion of a material claim (other than routine claims for benefits) against any Plan or the assets thereof, or against any Loan Party or any Subsidiary thereof in connection with any such Plan; (p) receipt from the IRS of notice of the failure of any Qualified Plan to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Qualified Plan to fail to qualify for exemption from taxation under Section 501(a) of the Code; (q) the imposition of any lien (or the fulfillment of the conditions for the imposition of any lien) on any of the rights, properties or assets of any Loan Party or any ERISA Affiliate thereof, in either case pursuant to Title I or IV of ERISA, including Section 302(f) or 303(k) of ERISA or to Section 401(a)(29) or 430(k) of the Code; (r) noncompliance with any requirement of Section 409A or 457 of the Code; (s) a violation of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Health Insurance Portability and Accountability Act of 1996 (HIPPA) and the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (ACA); or (t) the establishment or amendment by an Loan Party or any Subsidiary thereof of any “welfare plan” as such term is defined in Section 3(1) of ERISA, that provides post-employment welfare benefits in a manner that would increase the liability of any Loan Party.
“ERISA Funding Rules”: the rules regarding minimum required contributions (including any installment payment thereof) to Pension Plans, as set forth in Section 412 of the Code and Section 302 of ERISA, with respect to Plan years ending prior to the effective date of the Pension Protection Act of
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2006, and thereafter, as set forth in Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303,304 and 305 of ERISA.
“EU Bail-In Legislation Schedule”: the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Event of Default”: any of the events specified in Section 8.1; provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“Exchange Act”: the Securities Exchange Act of 1934, as amended from time to time and any successor statute.
“Excluded Assets”: as defined in the Guarantee and Collateral Agreement.
“Excluded Subsidiary”: any Subsidiary that is (a) not a Domestic Subsidiary of the Borrower or another Loan Party if becoming a Guarantor would reasonably be expected to result in material adverse tax consequences (including after giving effect to a change in Requirements of Law after the Closing Date), (b) a Foreign Subsidiary Holding Company if becoming a Guarantor hereunder would reasonably be expected to result in material adverse tax consequences (including after giving effect to a change in Requirements of Law after the Closing Date), or (c) an Immaterial Subsidiary.
“Excluded Swap Obligations”: with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee Obligation of such Guarantor with respect to, or the grant by such Guarantor of a Lien to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time such Guarantee Obligation of such Guarantor, or the grant by such Guarantor of such Lien, becomes effective with respect to such Swap Obligation. If such a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee Obligation or Lien is or becomes excluded in accordance with the first sentence of this definition.
“Excluded Taxes”: any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.23) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.20, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.20(f) and (d) any U.S. federal withholding Taxes imposed under FATCA.
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“Existing Lender”: SVB.
“Existing Credit Facility”: the credit facility evidenced by that certain Loan and Security Agreement dated June 2013 between SVB and the Borrower (as amended, restated, supplemented or otherwise modified).
“Facility”: each of (a) the L/C Facility (which is a sub-facility of the Revolving Facility), and (b) the Revolving Facility.
“FASB ASC”: the Accounting Standards certification of the Financial Accounting Standards Board.
“FATCA”: Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471 (b)( 1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate”: for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by SVB from three federal funds brokers of recognized standing selected by it.
“Fee Letter”: the fee letter agreement dated as of March 29, 2019, between the Borrower and the Administrative Agent.
“Foreclosed Borrowers”: as defined in Section 2.25.
“Foreign Lender”: (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.
“Foreign Subsidiary”: any Subsidiary of Holdings that is not a Domestic Subsidiary.
“Foreign Subsidiary Holding Company”: any direct or indirect Domestic Subsidiary of Holdings, substantially all of the assets of which consist of the Capital Stock of one or more controlled foreign corporations (within the meaning of Section 957 of the Code) or other Foreign Subsidiary Holding Companies.
“Fronting Exposure”: at any time there is a Defaulting Lender, as applicable, (a) with respect to the Issuing Lender, such Defaulting Lender’s L/C Percentage of the outstanding L/C Exposure other than L/C Exposure as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swingline Lender, such Defaulting Lender’s Revolving Percentage of outstanding Swingline Loans made by the Swingline Lender other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders.
“Fund”: any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.
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“Funding Office”: the office of the Administrative Agent specified in Section 10.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.
“GAAP”: generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 4.1(b). In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC, or the adoption of IFRS.
“Governmental Approval”: any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority”: the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank), and any group or body charged with setting accounting or regulatory capital rules or standards (including the Financial Standards Board, the Bank for International Settlements, the Basel Committee on Banking Supervision and any successor or similar authority to any of the foregoing).
“Group Members”: the collective reference to Holdings and its Subsidiaries.
“Guarantee and Collateral Agreement”: the Guarantee and Collateral Agreement to be executed and delivered by the Loan Parties, substantially in the form of Exhibit A.
“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect
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thereof; provided that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’ maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
“Guarantors”: a collective reference to Holdings and each Subsidiary of Holdings which has become a Guarantor pursuant to the requirements of Section 6.12 hereof and the Guarantee and Collateral Agreement. Notwithstanding the foregoing or any contrary provision herein or in any other Loan Document, no Excluded Subsidiary shall be required to become a Guarantor.
“Holdings”: as defined in the preamble hereto.
“IFRS”: international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements delivered under or referred to herein.
“Immaterial Subsidiary”: at any date of determination, any Subsidiary of any Loan Party designated as such by such Loan Party in writing and which as of such date (a) holds assets representing 15% or less of Holdings’ consolidated total assets as of the last day of the most recent fiscal quarter for which financial statements have been delivered after the Closing Date pursuant to Section 6.1(b) (determined in accordance with GAAP), (b) which has generated less than 15% of Holdings’ consolidated total revenues determined in accordance with GAAP for the four fiscal quarter period ending on the last day of the most recent fiscal quarter for which financial statements have been delivered after the Closing Date pursuant to Section 6.1(b); provided that all Subsidiaries that are individually “Immaterial Subsidiaries” shall not have aggregate consolidated total assets that would represent 25% or more of Holdings’ consolidated total assets as of the last day of the most recent fiscal quarter for which financial statements have been delivered after the Closing Date pursuant to Section 6.1(b) or have generated 25% or more of Holdings’ consolidated total revenues for such four fiscal quarter period, in each case determined in accordance with GAAP, and (c) which owns no material Intellectual Property. If at any time Remitly Canada, Inc. becomes a Guarantor, the 25% threshold above shall be automatically reduced to 20%.
“Increase Effective Date”: as defined in Section 2.27(d).
“Incremental Commitment”: as defined in Section 2,27(b).
“Incurred”: as defined in the definition of “Pro Forma Basis”.
“Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than (i) current trade payables incurred in the ordinary course of such Person’s business, (ii) accruals for payroll, health, disability or other employment benefits and related indemnification obligations, and deferred compensation arrangements, in each case, accrued in the ordinary course of business and (iii) any purchase price adjustments or earn-out incurred in connection with a Permitted Acquisition unless such amount is either not paid when due or the amount payable in respect thereof is reasonably quantifiable and not being contested in good faith), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising
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under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property) (excluding current trade payables incurred in the ordinary course of business), (e) all Capital Lease Obligations and all Synthetic Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Capital Stock in such Person or any other Person (including, without limitation, Disqualified Stock), or any warrant, right or option to acquire such Capital Stock, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) the net obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
“Indemnified Taxes”: (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any Obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
“Indemnitee”: as defined in Section 10.5(b).
“Insolvency Proceeding”: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of any Person’s creditors generally or any substantial portion of such Person’s creditors, in each case undertaken under U.S. Federal, state or foreign law, including any Debtor Relief Law.
“Intellectual Property”: the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
“Interest Payment Date”: the first Business Day of each calendar month to occur while such Loan is outstanding and the final maturity date of such Loan.
“Interest Rate Agreement”: any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is (a) for the purpose of hedging the interest rate exposure associated with Holdings’and its Subsidiaries’ operations and (b) not for speculative purposes.
“Investments”: as defined in Section 7.8.
“IRS”: the Internal Revenue Service, or any successor thereto.
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“ISP”: with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
“Issuing Lender”: as the context may require, (a) SVB or any Affiliate thereof, in its capacity as issuer of any Letter of Credit (including, without limitation, each Existing Letter of Credit), and (b) any other Lender that may become an Issuing Lender pursuant to Section 3.11 or 3.12, with respect to Letters of Credit issued by such Lender. The Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Lender or other financial institutions, in which case the term “Issuing Lender” shall include any such Affiliate or other financial institution with respect to Letters of Credit issued by such Affiliate or other financial institution. For the avoidance of doubt, no Lender or Affiliate thereof shall become an Issuing Lender unless it shall so agree.
“Issuing Lender Fees”: as defined in Section 3.3(a).
“Judgment Currency”: as defined in Section 10.19.
“L/C Advance”: each L/C Lender’s funding of its participation in any L/C Disbursement in accordance with its L/C Percentage of the L/C Commitment.
“L/C Commitment”: as to any L/C Lender, the obligation of such L/C Lender, if any, to purchase an undivided interest in the Issuing Lenders’ obligations and rights under and in respect of each Letter of Credit (including to make payments with respect to draws made under any Letter of Credit pursuant to Section 3.5(b)) in an aggregate principal amount not to exceed the amount set forth under the heading “L/C Commitment” opposite such L/C Lender’s name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such L/C Lender becomes a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The L/C Commitment is a sublimit of the Commitment and the aggregate amount of the L/C Commitments shall not exceed the amount of the Total L/C Commitments at any time.
“L/C Disbursements”: a payment or disbursement made by the Issuing Lender pursuant to a Letter of Credit.
“L/C Exposure”: at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time, and (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed or converted into Loans at such time. The L/C Exposure of any L/C Lender at any time shall equal its L/C Percentage of the aggregate L/C Exposure at such time.
“L/C Facility”: the L/C Commitments and the extensions of credit made thereunder.
“L/C Fee Payment Date”: as defined in Section 3.3(a).
“LC Lender”: a Lender with an L/C Commitment.
“L/C Percentage”: as to any L/C Lender at any time, the percentage of the Total L/C Commitments represented by such L/C Lender’s L/C Commitment, as such percentage may be adjusted as provided in Section 2.24.
“L/C-Related Documents”: collectively, each Letter of Credit (including any Existing Letter of Credit), all applications for any Letter of Credit (and applications for the amendment of any Letter of Credit) submitted by the Borrower to the Issuing Lender and any other document, agreement and instrument relating to any Letter of Credit, including any of the Issuing Lender’s standard form documents for letter of credit issuances.
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“Lenders”: as defined in the preamble hereto; provided that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include the L/C Lenders, the Revolving Lenders, each Issuing Lender and the Swingline Lender.
“Letter of Credit”: as defined in Section 3.l(a) and including each Existing Letter of Credit.
“Letter of Credit Availability Period”: the period from and including the Closing Date to but excluding the Letter of Credit Maturity Date.
“Letter of Credit Fees”: as defined in Section 3.3(a).
“Letter of Credit Fronting Fees”: as defined in Section 3.3(a).
“Letter of Credit Maturity Date”: the date occurring 15 days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
“Lien”: any mortgage, deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
“Liquidity” at any time, the result of (a) the aggregate amount of unrestricted cash and Cash Equivalents of the Group Members, minus (b) customer funds held by a Group Member, minus (c) the Group Member’s customer funds in transit, minus (d) the Total Revolving Extensions of Credit.
“Loan”: any Revolving Loan or Swingline Loan.
“Loan Documents” this Agreement, each Security Document, each Note, the Fee Letter, each Assignment and Assumption, each Compliance Certificate, each Notice of Borrowing, each Advance Support/Reconciliation Worksheet, the Solvency Certificate, the Collateral Information Certificate, each L/C-Related Document, and any agreement creating or perfecting rights in cash collateral pursuant to the provisions of Section 3.10, or otherwise, and any amendment, waiver, supplement or other modification to any of the foregoing.
“Loan Parties”: each Group Member that is a party to a Loan Document, as a Borrower or a Guarantor.
“Material Adverse Effect”: (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties, liabilities (actual or contingent), or financial condition of the Group Members, taken as a whole; (b) a material impairment of the rights and remedies, taken as a whole, of the Administrative Agent and the other Secured Parties under any Loan Document, or of the ability of the Loan Parties, taken as a whole, to perform their obligations under the Loan Documents; or (c) material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any material Loan Document to which it is a party , including a material impairment in the perfection or priority of the Administrative Agent’s Lien in any material Collateral or in the value of any material Collateral.
“Materials of Environmental Concern”: any substance, material or waste that is defined, regulated, governed or otherwise characterized under any Environmental Law as hazardous or toxic or as a pollutant or contaminant (or by words of similar meaning and regulatory effect), any petroleum or petroleum products, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, molds or fungus, and radioactivity, radiofrequency radiation at levels known to be hazardous to human health and safety.
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“Maturity Date”: the earlier of June 12November 16, 20222023 and the date that a Change of Control occurs.
“Minority Lender”: as defined in Section 10.l(b).
“Moody’s”: Moody’s Investors Service, Inc.
“Mortgaged Properties”: the real properties as to which, pursuant to Section 6.12(b) or otherwise, the Administrative Agent, for the benefit of the Secured Parties, shall be granted a Lien pursuant to the Mortgages, if any.
“Mortgages”: each of the mortgages, deeds of trust, deeds to secure debt or such equivalent documents hereafter entered into and executed and delivered by one or more of the Loan Parties to the Administrative Agent, in each case, as such documents may be amended, amended and restated, supplemented or otherwise modified, renewed or replaced from time to time and in form and substance reasonably acceptable to the Administrative Agent.
“Multiemployer Plan”: a “multiemployer plan” (within the meaning of Section 3(37) of ERISA) to which any Loan Party or any ERISA Affiliate thereof makes, is making, or is obligated or has ever been obligated to make, contributions.
“Non-Consenting Lender”: any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Affected Lenders in accordance with the terms of Section 10.1 and (b) has been approved by the Required Lenders.
“Non-Defaulting Lender”: at any time, each Lender that is not a Defaulting Lender at such time.
“Note”: a Revolving Loan Note or a Swingline Loan Note.
“Notice of Borrowing”: a notice substantially in the form of Exhibit K.
“Obligations”: (a) the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding) the Loans and all other obligations and liabilities (including any fees or expenses that accrue after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding) of the Loan Parties to the Administrative Agent, the Issuing Lender, any other Lender, any applicable Cash Management Bank, and any Qualified Counterparty party to a Specified Swap Agreement, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement,any other Loan Document, the Letters of Credit, any Cash Management Agreement, any Specified Swap Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, payment obligations, fees, indemnities, costs, expenses (including all reasonable and documented out-of-pocket fees, charges and disbursements of counsel to the Administrative Agent, the Issuing Lender, any other Lender, any applicable Cash Management Bank , and any Qualified Counterparty party to a Specified Swap Agreement that are required to be paid by any Loan Party pursuant any Loan Document, Cash Management Agreement, Specified Swap Agreement or otherwise), and (b) any obligations of any other Group Member arising in connection with any Cash Managements Agreement. For the avoidance of doubt, the Obligations shall not include (i) any obligations arising under any warrants or other equity
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instruments issued by any Loan Party to any Lender, or (ii) solely with respect to any Guarantor that is not a Qualified ECP Guarantor, any Excluded Swap Obligations of such Guarantor.
“OFAC”: the Office of Foreign Assets Control of the United States Department of the Treasury and any successor thereto.
“Operating Documents”: for any Person as of any date, such Person’s constitutional documents, formation documents and/or certificate of incorporation (or equivalent thereof), and, (a) if such Person is a corporation, its bylaws or memorandum and articles of association (or equivalent thereof) in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Other Connection Taxes”: with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes”: all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.23).
“Participant”: as defined in Section 10.6(d).
“Participant Register”: as defined in Section 10.6(d).
“Patriot Act”: the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Title III of Pub. L. 107-56, signed into law October 26, 2001.
“Payoff Letter”: a letter, in form and substance satisfactory to the Administrative Agent, dated as of a date on or prior to the Closing Date and executed by each of the Existing Lender and the Borrower to the effect that upon receipt by the Existing Lender of the “payoff amount” (however designated) referenced therein, (a) the obligations of the Group Members under the Existing Credit Facility shall be satisfied in full, (b) the Liens held by the Existing Lender shall terminate without any further action, and (c) the Borrower and the Administrative Agent (and their respective counsel and such counsels’ agents) shall be entitled to file UCC-3 termination statements and any other releases reasonably necessary to further evidence the termination of such Liens.
“PBGC”: the Pension Benefit Guaranty Corporation, or any successor thereto.
“Pension Plan”: an employee benefit plan (as defined in Section 3(3) of ERISA) other than a Multiemployer Plan (a) that is or was at any time maintained or sponsored by any Loan Party or any ERISA Affiliate thereof or to which any Loan Party or any ERISA Affiliate thereof has ever made, or was obligated to make, contributions, and (b) that is or was subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA.
“Permitted Acquisition”: as defined in Section 7 .8(n).
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“Person”: any natural Person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan”: (a) an employee benefit plan (as defined in Section 3(3) of ERISA) other than a Multiemployer Plan which is or was at any time maintained or sponsored by any Loan Party or any Subsidiary thereof or to which any Loan Party or any Subsidiary thereof has ever made, or was obligated to make, contributions, (b) a Pension Plan, or (c) a Qualified Plan.
“Platform”: is any of Debt Domain, DebtX, Intralinks, Syndtrak or a substantially similar electronic transmission system.
“Post Funding Line of Credit”: any Indebtedness evidenced by a written agreement between one or more Group Members and any bank, financial institution or other Person under which such bank, financial institution or other Person may from time to time provide credit to such Group Members in connection with the post-funding trade payables of such Group Members, where such Indebtedness {a) provides for the payment of interest. (b) has a term of greater than forty-five (45) days and (c) represents amounts not in excess of those which such Group Members would otherwise have been obligated to pay to its post-funding counterparty in respect of the applicable post-funding trade payables. For the avoidance of doubt, nothing in this definition or Agreement shall be interpreted to cause any current post-funding trade payable to be treated as Indebtedness hereunder.
“Preferred Stock”: the preferred Capital Stock of Holdings.
“Prime Rate”: the rate of interest per annum from time to time published in the money rates section of the Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of the Wall Street Journal, becomes unavailable for any reason as determined by the Administrative Agent, the "Prime Rate" shall mean the rate of interest per annum announced by the Administrative Agent as its prime rate in effect at its principal office (such Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors).
“Pro Forma Basis”: with respect to any calculation or determination for any period, in making such calculation or determination on the specified date of determination (the “Determination Date”):
(a) pro forma effect will be given to any Indebtedness incurred by the Borrower or any of its Subsidiaries (including by assumption of then outstanding Indebtedness or by a Person becoming a Subsidiary (“Incurred”) after the beginning of the applicable period and on or before the Determination Date to the extent the Indebtedness is outstanding or is to be Incurred on the Determination Date, as if such Indebtedness had been Incurred on the first day of such period;
(b) pro forma calculations of interest on Indebtedness bearing a floating interest rate will be made as if the rate in effect on the Determination Date (taking into account any Swap Agreement applicable to the Indebtedness) had been the applicable rate for the entire reference period; and
(c) pro forma effect will be given to: (A) the acquisition or disposition of companies, divisions or lines of businesses by Holdings and its Subsidiaries, including any acquisition or disposition of a company, division or line of business since the beginning of the reference period by a Person that became a Subsidiary after the beginning of the applicable period; and (B) the discontinuation of any discontinued operations; in each case of clauses (A) and (B), that have occurred since the beginning of the applicable period and before the Determination Date as if such events had occurred, and, in the case of any disposition, the proceeds thereof applied, on the first day of such period. To the extent that pro forma effect is to be given to an acquisition or disposition of a company, division or line of business, the pro
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forma calculation will be calculated in good faith by a responsible financial or accounting officer of Holdings in accordance with Regulation S-X under the Securities Act based upon the most recent four full fiscal quarters for which the relevant financial information is available.
“Pro Forma Financial Statements”: balance sheets, income statements and cash flow statements prepared by Holdings and its consolidated Subsidiaries that give effect (as if such events had occurred on such date) to (i) the Loans to be made on the Closing Date and the use of proceeds thereof, (ii) the Letters of Credit (including any Existing Letters of Credit) issued or outstanding as of the Closing Date, and (iii) the payment of fees and expenses in connection with the foregoing, in each case prepared for (y) the most recently ended fiscal quarter as if such transactions had occurred on such date and (z) on a monthly basis for each fiscal month through 2020 and on a quarterly basis thereafter through the Maturity Date, in each case demonstrating pro forma compliance with the covenants set forth in Section 7.1.
“Projections”: as defined in Section 6.2(c).
“Properties”: as defined in Section 4.17(a).
“Qualified Counterparty”: with respect to any Specified Swap Agreement, any counterparty thereto that is a Lender or an Affiliate of a Lender or, at the time such Specified Swap Agreement was entered into or as of the Closing Date, was the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender (regardless of whether such counterparty subsequently ceases to be the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender).
“Qualified ECP Guarantor”: in respect of any Swap Obligation, (a) each Guarantor that has total assets exceeding $10,000,000 at the time the relevant Guarantee Obligation of such Guarantor provided in respect of, or the Lien granted by such Guarantor to secure, such Swap Obligation (or guaranty thereof) becomes effective with respect to such Swap Obligation, and (b) any other Guarantor that (i) constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder, or (ii) can cause another Person (including, for the avoidance of doubt, any other Guarantor not then constituting a “Qualified ECP Guarantor”) to qualify as an “eligible contract participant” at such time by entering into a “keepwell, support, or other agreement” as contemplated by Section la(18)(A)(v)(II) of the Commodity Exchange Act.
“Qualified Plan”: an employee benefit plan (as defined in Section 3(3) of ERISA) other than a Multiemployer Plan (a) that is or was at any time maintained or sponsored by any Loan Party or any ERISA Affiliate thereof or to which any Loan Party or any ERISA Affiliate thereof has ever made, or was ever obligated to make, contributions, and (b) that is intended to be tax-qualified under Section 401(a) of the Code.
“Quick Assets”: the result of (without duplication):
(a) the aggregate value of the unrestricted cash and disbursement prefunding of the Group Members, plus
(b) the aggregate value of the Group Members’ customer funds in transit and Accounts, plus
(c) the aggregate value of Cash Equivalents of the Group Members, minus
(d) the aggregate value of customer funds held by the Group Members, minus
(e) the aggregate amount of all Loans and L/C Exposure, minus
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(f) the aggregate amount of spot trades in transit re-classed to accrued liabilities of the Group Members, minus
(g) the aggregate amount outstanding under the Group Members’ post funding linesany Post Funding Line of creditCredit.
“Recipient”: the (a) Administrative Agent, (b) any Lender or (c) the Issuing Lender, as applicable.
“Recovery Event”: any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Group Member.
“Refunded Swingline Loans”: as defined in Section 2.7(b).
“Register”: as defined in Section 10.6(c).
“Regulation T”: Regulation T of the Board as in effect from time to time.
“Regulation U”: Regulation U of the Board as in effect from time to time.
“Regulation X”: Regulation X of the Board as in effect from time to time.
“Related Parties”: with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“Replacement Lender”: as defined in Section 2.23.
“Required Capital Raise”: as defined in Section 6.17.
“Required Lenders”: at any time, (a) if only one Lender holds the outstanding Commitments, such Lender; and (b) if more than one Lender holds the outstanding Commitments, then at least two Lenders who hold more than (i) 50% of the Total Commitments (including, without duplication, the L/C Commitments) then in effect or, (ii) if the Commitments of all Lenders have been terminated, 50% of the Total Revolving Extensions of Credit then outstanding: provided that for the purposes of this clause (b), the Commitments of, and the portion of the Revolving Loans and participations in L/C Exposure and Swingline Loans held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided further that a Lender and its Affiliates shall be deemed one Lender.
“Resolution Authority”: an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer”: with respect to any Loan Party, the chief executive officer, president, vice president, chief financial officer, treasurer, controller or comptroller of such Loan Party, but in any event, with respect to financial matters, the chief financial officer, treasurer, controller or comptroller of Holdings.
“Restricted Payments”: as defined in Section 7 .6.
“Revolving Extensions of Credit”: as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans held by such Lender then outstanding, plus (b) such Lender’s L/C Percentage of the aggregate undrawn amount of all outstanding Letters of Credit (including each Existing Letter of Credit) at such time, plus (c) such Lender’s L/C Percentage of the
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aggregate amount of all L/C Disbursements that have not yet been reimbursed or converted into Revolving Loans at such time. plus (d) such Lender’s Revolving Percentage of the aggregate principal amount of Swingline Loans then outstanding.
“Revolving Facility”: the Commitments and the extensions of credit made thereunder.
“Revolving Lender”: each Lender that has a Commitment or that holds Revolving Loans.
“Revolving Loan Conversion”: as defined in Section 3.5(b).
“Revolving Loan Note”: a promissory note in the form of Exhibit H-1, as it may be amended, supplemented or otherwise modified from time to time.
“Revolving Loans”: as defined in Section 2.4(a).
“Revolving Percentage”: as to any Revolving Lender at any time, the percentage which such Lender’s Commitment then constitutes of the Total Commitments or, at any time after the Commitments of all Lenders shall have expired or terminated, the percentage which the aggregate principal amount of such Lender’s Revolving Loans then outstanding constitutes of the aggregate principal amount of all Revolving Loans then outstanding; provided that in the event that the Revolving Loans are paid in full prior to the reduction to zero of the Total Commitments, the Revolving Percentages at such time shall be determined based on the Revolving Percentages most recently in effect prior to such reduction to zero of the Total Commitments.
“S&P”: Standard & Poor’s Ratings Services.
“Sale Leaseback Transaction”: any arrangement with any Person or Persons, whereby in contemporaneous or substantially contemporaneous transactions a Loan Party sells substantially all of its right, title and interest in any property and, in connection therewith, acquires, leases or licenses back the right to use all or a material portion of such property.
“Sanctioned Person”: at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, or by the United Nations Security Council, Her Majesty’s Treasury of the United Kingdom, the European Union or any European Union member state, (b) any Person operating, organized or resident in a Designated Jurisdiction or (c) to the knowledge of Holdings, the Borrower or any of their respective Subsidiaries, any Person owned or controlled, directly or indirectly, by any such Person or Persons described in the foregoing clauses (a) or (b).
“Sanction(s)”: any international economic sanction administered or enforced by the United States Government (including OFAC), the United Nations Security Council, the European Union or any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“SEC”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
“Second Amendment Effective Date”: November 16, 2020.
“Secured Parties”: the collective reference to the Administrative Agent, the Lenders (including any Issuing Lender in its capacity as Issuing Lender and any Swingline Lender in its capacity as Swingline Lender), any Cash Management Bank (in its or their respective capacities as providers of Cash Management Services), and any Qualified Counterparties.
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“Securities Account”: any “securities account” as defined in the UCC with such additions to such term as may hereafter be made.
“Securities Account Control Agreement”: any Control Agreement entered into by the Administrative Agent, a Loan Party and a securities intermediary holding a Securities Account of such Loan Party pursuant to which the Administrative Agent is granted “control” (for purposes of the UCC) over such Securities Account.
“Securities Act”: the Securities Act of 1933, as amended from time to time and any successor statute.
“Security Documents”: the collective reference to (a) the Guarantee and Collateral Agreement, (b) the Mortgages (if any), (c) each Deposit Account Control Agreement, (d) each Securities Account Control Agreement, (e) all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the Obligations of any Loan Party arising under any Loan Document, (f) each Pledge Supplement, (g) each Assumption Agreement, and (h) all financing statements, fixture filings, assignments, acknowledgments and other filings, documents and agreements made or delivered pursuant to any of the foregoing.
“Settlement Date”: as defined in Section 2.4(c).
“Solvency Certificate”: the Solvency Certificate, dated the Closing Date, delivered to the Administrative Agent pursuant to Section 5.1(s), which Solvency Certificate shall be in substantially the form of Exhibit D.
“Solvent”: when used with respect to any Person, as of any date of determination, (a) the amount of the “fair value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise,” as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the “present fair saleable value” of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim,” and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
“Specified Customer Accounts”: the Borrower’s account with Wells Fargo identified as the customer funds account on the Collateral Information Certificated delivered on or prior to the Closing DateCertificate, any replacement thereof, and any similar customer funds account of the Group Members; provided that the applicable Group Member shall identify such account in writing to the Administrative Agent promptly after the opening thereof (or identify such accounts on the Collateral Information Certificate to the extent that they exist todayon the Second Amendment Effective Date).
“Specified Swap Agreement”: any Swap Agreement entered into by a Loan Party and any Qualified Counterparty (or any Person who was a Qualified Counterparty as of the Closing Date or as of the date such Swap Agreement was entered into) to the extent permitted under Section 7.13.
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“Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Holdings.
“Surety Indebtedness”: as of any date of determination, indebtedness (contingent or otherwise) owing to sureties arising from surety bonds issued on behalf of any Loan Party or its respective Subsidiaries as support for, among other things, their contracts with customers, whether such indebtedness is owing directly or indirectly by such Loan Party or any such Subsidiary.
“SVB”: as defined in the preamble hereto.
“Swap Agreement”: any agreement with respect to any swap, hedge, forward, future or derivative transaction or option or similar agreement (including without limitation, any Interest Rate Agreement) involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Group Members shall be deemed to be a “Swap Agreement.”
“Swap Obligation”: with respect to any Guarantor, any obligation of such Guarantor to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section la(47) of the Commodity Exchange Act.
“Swap Termination Value”: in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (a) for any date on or after the date any such Swap Agreement has been closed out and termination value determined in accordance therewith, such termination value, and (b) for any date prior to the date referenced in clause (a), the amount determined as the mark-to-market value for such Swap Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Agreements (which may include a Qualified Counterparty).
“Swingline Commitment”: the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 2.6 in an aggregate principal amount at any one time outstanding not to exceed $85,000,000100,000,000; provided that so long as SVB is the Swingline Lender, the Swingline Commitment shall not exceed at any time the lesser of (a) $100,000,000 and (b) an amount that would result in the sum of the following amounts exceeding $100,000,000: (i) the aggregate undrawn amount of all outstanding Letters of Credit issued by SVB and its Affiliates at such time, (ii) the aggregate amount of all L/C Disbursements in respect of any Letters of Credit issued by SVB and its Affiliates that have not yet been reimbursed or converted into Loans at such time, (iii) the principal amount of SVB ’s and its Affiliates’ outstanding Revolving Loans at such time, (iv) SVB’s and its Affiliates' L/C Percentage of the aggregate undrawn amount of all outstanding Letters of Credit at such time issued by a Person other than SVB and its Affiliates. (v) SVB’s and its Affiliates’ L/C Percentage of the aggregate amount of all L/C Disbursements in respect of Letters of Credit issued by a Person other than SVB and its Affiliates that have not yet been reimbursed or converted into Revolving Loans at such time, and (vi) the aggregate outstanding amount of Swingline Loans.
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“Swingline Lender”: SVB, in its capacity as the lender of Swingline Loans or such other Lender as the Borrower may from time to time select as the Swingline Lender hereunder pursuant to Section 2.7(f); provided that such Lender has agreed to be a Swingline Lender.
“Swingline Loan Note”: a promissory note in the form of Exhibit H-2, as it may be amended, supplemented or otherwise modified from time to time.
“Swingline Loans”: as defined in Section 2.6.
“Swingline Participation Amount”: as defined in Section 2.7(c).
“Synthetic Lease Obligation”: the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
“Taxes”: all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Total Credit Exposure”: is, as to any Lender at any time, the unused Commitments and Revolving Extensions of Credit of such Lender at such time.
“Total Commitments”: at any time, the aggregate amount of the Commitments then in effect.
“Total L/C Commitments”: at any time, the sum of all L/C Commitments at such time, as the same may be reduced from time to time pursuant to Section 2.10 or 3.5(b) . The initial amount of the Total L/C Commitments on the ClosingSecond Amendment Effective Date is $10,000,00030,000,000.
“Total Revolving Extensions of Credit”: at any time, the aggregate amount of the Revolving Extensions of Credit outstanding at such time.
“Trade Date”: as defined in Section 10.6(b)(i)(B).
“Transferee”: any Eligible Assignee or Participant.
“UK Financial Institution”: any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority. which includes certain credit institutions and investment firms. and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority”: the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unfriendly Acquisition”: any acquisition that has not, at the time of the first public announcement of an offer relating thereto, been approved by the board of directors (or other legally recognized governing body) of the Person to be acquired; except that with respect to any acquisition of a non-U.S. Person, an otherwise friendly acquisition shall not be deemed to be unfriendly if it is not customary in such jurisdiction to obtain such approval prior to the first public announcement of an offer relating to a friendly acquisition.
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“Uniform Commercial Code” or “UCC”: the Uniform Commercial Code (or any similar or equivalent legislation) as in effect from time to time in the State of New York, or as the context may require, any other applicable jurisdiction.
“United States” and “U.S.”: the United States of America.
“U.S. Person”: any Person that is a “United States Person”as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate”: as defined in Section 2.20(f).
“Withholding Agent”: as applicable, any of any applicable Loan Party and the Administrative Agent, as the context may require.
“Write-Down and Conversion Powers”: (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises. to convert all or part of that liability into shares. securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, (v) references to a given time of day shall, unless otherwise specified, be deemed to refer to Pacific time, and (vi) references to agreements (including this Agreement) or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated, amended and restated or otherwise modified from time to time.
(c) The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, unless otherwise specified. The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (ii) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
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Exhibits and Schedules to, this Agreement, and (iii) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.
(e) Any reference in any Loan Document to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a Division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a Division or allocation), as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable, to, of or with a separate Person. Any Division of a limited liability company shall constitute a separate Person under the Loan Documents (and each Division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity) on the first date of its existence. In connection with any Division, if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then such asset shall be deemed to have been transferred from the original Person to the subsequent Person.
(f) Any change in GAAP occurring after the date hereof that would require operating leases to be treated as capital leases shall be disregarded for purposes of determining Indebtedness and any financial ratio or compliance requirement contained in any Loan Document.
1.3 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
SECTION 2
AMOUNT AND TERMS OF COMMITMENTS
2.1 [Reserved].
2.2 [Reserved].
2.3 [Reserved].
2.4 Commitments.
(a) Subject to the terms and conditions hereof, each Revolving Lender severally agrees to make revolving credit loans (each, a “Revolving Loan” and, collectively, the “Revolving Loans”) to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which, when added to the aggregate outstanding amount of the Swingline Loans, the aggregate undrawn amount of all outstanding Letters of Credit, and the aggregate amount of all L/C Disbursements that have not yet been reimbursed or converted into Loans, incurred on behalf of the Borrower and owing to such Lender, does not exceed the amount of such Lender's Commitment. In addition, such aggregate obligations shall not at any time exceed the Total Commitments in effect at such time. During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Revolving Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.
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(b) The Borrower shall repay all outstanding Revolving Loans on the Maturity Date.
2.5 Procedure for Revolving Loan Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Business Day; provided that the Borrower shall give the Administrative Agent an irrevocable Notice of Borrowing (which must be received by the Administrative Agent prior to 10:00 A.M. on the requested Borrowing Date) (provided that any such Notice of Borrowing for Revolving Loans to be funded on the Closing Date must be given prior to 10:00 A.M. 1 Business Day prior to the requested Borrowing Date), in each such case specifying (i) the amount of Revolving Loans to be borrowed, (ii) the requested Borrowing Date, (iii) [reserved], and (iv) instructions for remittance of the proceeds of the applicable Revolving Loans to be borrowed. Each borrowing under the Commitments shall be in an amount equal to $1,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitment is less than $1,000,000, such lesser amount): provided that the Swingline Lender may request, on behalf of the Borrower, borrowings under the Commitments in other amounts pursuant to Section 2.7. Upon receipt of any such Notice of Borrowing from the Borrower, the Administrative Agent shall promptly notify each Revolving Lender thereof. Each Revolving Lender will make the amount of its pro rata share of each such borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 P.M. on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting such account as is designated in writing to the Administrative Agent by the Borrower with the aggregate of the amounts made available to the Administrative Agent by the Revolving Lenders and in like funds as received by the Administrative Agent or, if so specified in the funding instructions and funds flow memorandum regarding the disbursement of Revolving Loans on the Closing Date, the Administrative Agent shall wire transfer all or a portion of such aggregate amounts in accordance with the wire instructions specified therein.
2.6 Swingline Commitment. Subject to the terms and conditions hereof, the Swingline Lender agrees to make available a portion of the credit accommodations otherwise available to the Borrower under the Commitments from time to time during the Commitment Period by making swing line loans (each a “Swingline Loan” and, collectively, the “Swingline Loans”) to the Borrower; provided that (a) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect, (b) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the Available Commitment would be less than zero, and (c) the Borrower shall not use the proceeds of any Swingline Loan to refinance any then outstanding Swingline Loan. During the Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing Swingline Loans, all in accordance with the terms and conditions hereof. The Swingline Lender shall not make a Swingline Loan during the period commencing at the time it has received notice (by telephone or in writing) from the Administrative Agent at the request of any Lender, acting in good faith, that one or more of the applicable conditions specified in Section 5.2 (other than Section 5.2(d)) is not then satisfied and has had a reasonable opportunity to react to such notice and ending when such conditions are satisfied or duly waived.
2.7 Procedure for Swingline Borrowing; Refunding of Swingline Loans.
(a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans the Borrower shall give the Swingline Lender irrevocable telephonic notice (which telephonic notice must be received by the Swingline Lender not later than 11:00 A.M. on the proposed Borrowing Date) confirmed promptly in writing by a Notice of Borrowing, specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date (which shall be a Business Day during the Commitment Period), and (iii)
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instructions for the remittance of the proceeds of such Loan. Each borrowing under the Swingline Commitment shall be in an amount equal to $100,000 or a whole multiple of $100,000 in excess thereof. Promptly thereafter, on the Borrowing Date specified in a notice in respect of Swingline Loans, the Swingline Lender shall make available to the Borrower an amount in immediately available funds equal to the amount of the Swingline Loan to be made by depositing such amount in the account designated in writing to the Administrative Agent by the Borrower. Unless a Swingline Loan is sooner refinanced by the advance of a Revolving Loan pursuant to Section 2.7(b), the Borrower shall repay to the Swingline Lender the then unpaid principal amount of each Swingline Loan no later than the earlier of (i) five (5) Business Days after the advance of such Swingline Loan and (ii) the Maturity Date.
(b) The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one Business Day’s telephonic notice given by the Swingline Lender no later than 12:00 P.M. and promptly confirmed in writing, request each Revolving Lender to make, and each Revolving Lender hereby agrees to make, a Revolving Loan, in an amount equal to such Revolving Lender’s Revolving Percentage of the aggregate amount of such Swingline Loan (each a “Refunded Swingline Loan”) outstanding on the date of such notice, to repay the Swingline Lender. Each Revolving Lender shall make the amount of such Revolving Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M. one Business Day after the date of such notice. The proceeds of such Revolving Loan shall immediately be made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loan. The Borrower irrevocably authorizes the Swingline Lender to charge the Borrower's accounts with the Administrative Agent (up to the amount available in each such account) immediately to pay the amount of any Refunded Swingline Loan to the extent amounts received from the Revolving Lenders are not sufficient to repay in full such Refunded Swingline Loan.
(c) If prior to the time that the Borrower has repaid the Swingline Loans pursuant to Section 2.7(a) or a Revolving Loan has been made pursuant to Section 2.7(b), one of the events described in Section 8.l(f) shall have occurred or if for any other reason, as determined by the Swingline Lender in its sole discretion, Revolving Loans may not be made as contemplated by Section 2.7(b) , each Revolving Lender shall, on the date such Revolving Loan was to have been made pursuant to the notice referred to in Section 2.7(b) or on the date requested by the Swingline Lender (with at least one (1) Business Days’ notice to the Revolving Lenders), purchase for cash an undivided participating interest in the then outstanding Swingline Loans by paying to the Swingline Lender an amount (the “Swingline Participation Amount”) equal to (i) such Revolving Lender’s Revolving Percentage times (ii) the sum of the aggregate principal amount of the outstanding Swingline Loans that were to have been repaid with such Revolving Loans.
(d) Whenever, at any time after the Swingline Lender has received from any Revolving Lender such Lender’s Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Lender its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Lender’s pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due): provided that in the event that such payment received by the Swingline Lender is required to be returned, such Revolving Lender will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender.
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(e) Each Revolving Lender’s obligation to make the Revolving Loans referred to in Section 2.7(b) and to purchase participating interests pursuant to Section 2.7(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender or the Borrower may have against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Revolving Lender, or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
(f) The Swingline Lender may resign at any time by giving 30 days’ prior notice to the Administrative Agent, the Lenders and the Borrower. Following such notice of resignation from the Swingline Lender, the Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the Required Lenders and the successor Swingline Lender. After the resignation or replacement of the Swingline Lender hereunder, the retiring Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of the Swingline Lender under this Agreement and the other Loan Documents with respect to Swingline Loans made by it prior to such resignation or replacement, but shall not be required or permitted to make any additional Swingline Loans.
2.8 [Reserved].
2.9 Fees.
(a) Fee Letter. The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates as set forth in the Fee Letter and to perform any other obligations contained therein.
(b) Commitment Fee. As additional compensation for the Commitments, the Borrower shall pay to the Administrative Agent for the account of the Lenders, in arrears, on the first day of each month prior to the Maturity Date and on the Maturity Date, a fee for the Borrower’s non-use of available funds in an amount equal to the Commitment Fee Rate per annum multiplied by the difference between (x) the Total Commitments (as they may be reduced from time to time) and (y) the sum of (A) the average for the period of the daily closing balance of the Loans (including Swingline Loans), (B) the aggregate undrawn amount of all Letters of Credit outstanding at such time and (C) the aggregate amount of all L/C Disbursements that have not yet been reimbursed or converted into Revolving Loans at such time.
(c) Fees Nonrefundable. All fees payable under this Section 2.9 shall be fully earned on the date paid and nonrefundable.
2.10 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided that no such termination or reduction of the Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans and Swingline Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Available Commitment. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Commitments then in effect. The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the L/C Commitments or, from time to time, to reduce the amount of
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the L/C Commitments; provided that no such termination or reduction of L/C Commitments shall be permitted if, after giving effect thereto, the Total L/C Commitments shall be reduced to an amount that would result in the aggregate L/C Exposure exceeding the Total L/C Commitments (as so reduced). Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the L/C Commitments then in effect.
2.11 Optional Loan Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent no later than 10:00 A.M. on the date of the prepayment which notice shall specify the date and amount of the proposed prepayment; provided further that if such notice of prepayment indicates that such prepayment is to be funded with the proceeds of a refinancing or is conditioned on any other financing, sale or other transaction, such notice of prepayment may be revoked if the refinancing, other financing, sale or other transaction is not consummated. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with an Advance Support Reconciliation Worksheet. Partial prepayments of the Revolving Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof.
2.12 Mandatory Prepayments.
(a) If a Change of Control shall occur, the Borrower shall immediately prepay all outstanding Loans and otherwise discharge all Obligations hereunder in accordance with the terms hereof, and the Commitments shall automatically terminate concurrently with the occurrence of such Change of Control.
(b) Within 20 Business Days after the funding of any Loan (including any Swingline Loan), the Borrower shall be required to reduce the principal amount of all Revolving Loans (including Swingline Loans) to an amount that is less than or equal to the amount in the Borrower’s customer funds account maintained with SVB on the date of such reduction. Amounts prepaid pursuant to this clause (b) shall be accompanied by an Advance Support/Reconciliation Worksheet.
(c) No prepayment fee shall be payable in respect of any mandatory prepayments pursuant to this Section 2.12.
2.13 [Reserved].
2.14 [Reserved].
2.15 Interest Rates and Payment Dates.
(a) [Reserved].
(b) Each Loan (including any Swingline Loan) shall bear interest at a rate per annum equal to (i) the ABR plus (ii) the Applicable Margin.
(c) During the continuance of an Event of Default, at the request of the Required Lenders, all outstanding Loans shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2.00% and all Letter of Credit Fees shall accrue at a rate per annum equal to the rate that would otherwise be applicable thereto plus 2.00% (collectively, the “Default Rate”); provided that the Default Rate shall apply to all
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outstanding Loans and Letter of Credit Fees automatically and without any Required Lender consent therefor upon the occurrence of any Event of Default arising under Section 8.l(a) or (f).
(d) Interest shall be payable in arrears on each Interest Payment Date; provided that interest accruing pursuant to Section 2.15(c) shall be payable from time to time on demand.
2.16 Computation of Interest and Fees.
(a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365-(or 366-, as the case may be) day year for the actual days elapsed. Any change in the interest rate on a Loan resulting from a change in the ABR shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.16(a).
2.17 [Reserved].
2.18 Pro Rata Treatment and Payments.
(a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Commitments shall be made pro rata according to the respective L/C Percentages or Revolving Percentages, as the case may be, of the relevant Lenders.
(b) [Reserved].
(c) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Revolving Lenders.
(d) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff and shall be made prior to 10:00 A.M. on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. Any payment received by the Administrative Agent after 10:00 A.M. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
(e) Unless the Administrative Agent shall have been notified in writing by any Lender prior to the proposed date of any borrowing that such Lender will not make the amount that would
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constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date in accordance with Section 2, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not in fact made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender and the Borrower severally agree to pay to the Administrative Agent forthwith, on demand, such corresponding amount with interest thereon, for each day from and including the date on which such amount is made available to the Borrower but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, a rate equal to the greater of (A) the Federal Funds Effective Rate and (B) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, and (ii) in the case of a payment to be made by the Borrower, the rate per annum applicable to Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
(f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. Nothing herein shall be deemed to limit the rights of Administrative Agent or any Lender against any Loan Party .
(g) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Section 2, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable extension of credit set forth in Section 5.1 or Section 5.2 are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(h) The obligations of the Lenders hereunder to (i) make Revolving Loans, (ii) fund its participations in L/C Disbursements in accordance with its respective L/C Percentage, (iii) fund its respective Swingline Participation Amount of any Swingline Loan, and (iv) make payments pursuant to Section 9.7, as applicable, are several and not joint. The failure of any Lender to make any such Loan, to fund any such participation or to make any such payment under Section 9.7 on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 9.7.
(i) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
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(j) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied toward payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
(k) If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the principal of or interest on any Revolving Loan made by it, its participation in the L/C Exposure or other obligations hereunder, as applicable (other than pursuant to a provision hereof providing for non-pro rata treatment), in excess of its Revolving Percentage or L/C Percentage, as applicable, of such payment on account of the Revolving Loans or participations obtained by all of the Lenders, such Lender shall (a) notify the Administrative Agent of the receipt of such payment, and (b) within 5 Business Days of such receipt purchase (for cash at face value) from the Revolving Lenders or L/C Lenders, as applicable (through the Administrative Agent), without recourse, such participations in the Revolving Loans made by them and/or participations in the L/C Exposure held by them, as applicable, or make such other adjustments as shall be equitable, as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of the other Lenders in accordance with their respective Revolving Percentages or L/C Percentages, as applicable; provided, however, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest and (ii) the provisions of this paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment or sale of a participation in any of its Revolving Loans or participations in L/C Disbursements to any assignee or participant, other than to Holdings or any Subsidiary thereof (as to which the provisions of this paragraph shall apply). The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.18(k) may exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. No documentation other than notices and the like referred to in this Section 2.18(k) shall be required to implement the terms of this Section 2.18(k). The Administrative Agent shall keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.18(k) and shall in each case notify the Revolving Lenders or the L/C Lenders, as applicable, following any such purchase. The provisions of this Section 2.18(k) shall not be construed to apply to (i) any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (ii) the application of Cash Collateral provided for in Section 3.10, or (iii) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Loans or sub-participations in any L/C Exposure to any assignee or participant, other than an assignment to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply). The Borrower consents on behalf of itself and each other Loan Party to the foregoing and agrees, to the extent it may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Loan Party in the amount of such participation. For the avoidance of doubt, no amounts received by the Administrative Agent or any Lender from any Guarantor that is not a Qualified ECP Guarantor shall be applied in partial or complete satisfaction of any Excluded Swap Obligations.
(l) Notwithstanding anything to the contrary in this Agreement, the Administrative Agent may, in its discretion at any time or from time to time, without the Borrower’s request and even if
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the conditions set forth in Section 5.2 would not be satisfied, make a Revolving Loan in an amount equal to the portion of the Obligations constituting overdue interest and fees and Swingline Loans from time to time due and payable to itself, any Revolving Lender, the Swingline Lender or the Issuing Lender, and apply the proceeds of any such Revolving Loan to those Obligations; provided that after giving effect to any such Revolving Loan, the aggregate outstanding Revolving Loans will not exceed the Total Commitments then in effect.
2.19 Illegality; Applicable Law.
(a) [Reserved].
(b) Applicable Law. If the adoption of or any change in any Applicable Law or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority made subsequent to the date hereof:
(i) shall subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes, and (C) Connection Income Taxes) on its Loans, principal, Letters of Credit, Commitments, or other Obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
(ii) shall impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of or credit extended or participated in by, any Lender; or
(iii) impose on any Lender any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making or maintaining Loans or of maintaining its obligation to make such Loans, or such Lender or such other Recipient of issuing, maintaining or participating in Letters of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum receivable or received by such Lender or other Recipient hereunder in respect thereof (whether of principal, interest or any other amount), then, in any such case, upon the request of such Lender or other Recipient, the Borrower will promptly pay such Lender or other Recipient, as the case may be, any additional amount or amounts necessary to compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.
(c) If any Lender determines that any change in any Applicable Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such change in such Applicable Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy or liquidity), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or
38
amounts as will compensate such Lender or the Issuing Lender or such Lender’s or Issuing Lender’s holding company for any such reduction suffered.
(d) For purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case (i) and (ii) be deemed to be a change in any Applicable Law, regardless of the date enacted, adopted or issued.
(e) A reasonably detailed written certificate as to any additional amounts payable pursuant to paragraphs (b), (c), or (d) of this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt of such certificate. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation. Notwithstanding anything to the contrary in this Section 2.19, the Borrower shall not be required to compensate a Lender pursuant to this Section 2.19 for any amounts incurred more than nine months prior to the date that such Lender notifies the Borrower of the change in the Applicable Law giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor: provided that if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrower arising pursuant to this Section 2.19 shall survive the Discharge of Obligations and the resignation of the Administrative Agent.
2.20 Taxes.
For purposes of this Section 2.20, the term “Lender” includes the Issuing Lender and the term “Applicable Law” includes FATCA.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law, and the Borrower shall, and shall cause each other Loan Party, to comply with the requirements set forth in this Section 2.20. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.20) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) Payment of Other Taxes. Each of Holdings and the Borrower shall, and shall cause each other Loan Party to, timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes applicable to such Loan Party.
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(c) Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.20, the Borrower shall, or shall cause such other Loan Party to, deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(d) Indemnification by Loan Parties. The Borrower shall, and shall cause each other Loan Party to, jointly and severally indemnify each Recipient, within ten (10) Business Days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.20) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto (including any recording and filing fees with respect thereto or resulting therefrom and any liabilities with respect to, or resulting from, any delay in paying such Indemnified Taxes), whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A reasonably detailed written certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. If any Loan Party fails to pay any Indemnified Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, such Loan Party shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure.
(e) Indemnification by Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.6 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 2.20(e).
(f) Status of Lenders.
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two
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sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.20(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if the Lender is not legally entitled to complete, execute or deliver such documentation or, in the Lender’s reasonable judgment, such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or any successor form) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or any successor form) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “'business profits” or “other income” article of such tax treaty;
(2) executed copies of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or any successor form); or
(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or any successor form), a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable: provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner;
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(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D ), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(iii) Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so. Each Foreign Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Foreign Lender shall not be required to deliver any form pursuant to this paragraph that such Foreign Lender is not legally able to deliver.
(g) Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.20 (including by the payment of additional amounts pursuant to this Section 2.20), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party , upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.20(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.20(g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.20(g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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(h) Survival. Each party’s obligations under this Section 2.20 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender and the Discharge of Obligations.
2.21 [Reserved].
2.22 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.19(b), Section 2.19(c), Section 2.20(a), Section 2.20(b) or Section 2.20(d) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate a different lending office for funding or booking its Loans affected by such event or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.19 or 2.20, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender; provided that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.19(b), Section 2.19(c), Section 2.20(a), Section 2.20(b) or Section 2.20(d). The Borrower hereby agrees to pay all reasonable and documented costs and expenses incurred by any Lender in connection with any such designation or assignment made at the request of the Borrower.
2.23 Substitution of Lenders. Upon the receipt by the Borrower of any of the following (or in the case of clause (a) below, if the Borrower is required to pay any such amount), with respect to any Lender (any such Lender described in clauses (a) through (c) below being referred to as an “Affected Lender” hereunder):
(a) a request from a Lender for payment of Indemnified Taxes or additional amounts under Section 2.20 or of increased costs pursuant to Section 2.19 (and, in any such case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.22 or is a Non-Consenting Lender);
(b) a notice from the Administrative Agent under Section 10.l(b) that one or more Minority Lenders are unwilling to agree to an amendment or other modification approved by the Required Lenders and the Administrative Agent; or
(c) notice from the Administrative Agent that a Lender is a Defaulting Lender;
then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent and such Affected Lender: (i) request that one or more of the other Lenders acquire and assume all or part of such Affected Lender’s Loans and Commitment; or (ii) designate a replacement lending institution (which shall be an Eligible Assignee) to acquire and assume all or a ratable part of such Affected Lender’s Loans and Commitment (the replacing Lender or lender in (i) or (ii) being a “Replacement Lender”); provided, however, that if the Borrower elects to exercise such right with respect to any Affected Lender under clause (a) or (b) of this Section 2.23, then the Borrower shall be obligated to replace all Affected Lenders under such clauses. The Affected Lender replaced pursuant to this Section 2.23 shall be required to assign and delegate, without recourse, all of its interests, rights and obligations under this Agreement and the related Loan Documents to one or more Replacement Lenders that so agree to acquire and assume all or a ratable part of such Affected Lender’s Loans and Commitment upon payment to such Affected Lender of an amount (in the aggregate for all Replacement Lenders) equal to 100% of the outstanding principal of the Affected Lender’s Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from such Replacement Lenders (to the extent of such outstanding principal and accrued interest and fees)
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or the Borrower (in the case of all other amounts). Any such designation of a Replacement Lender shall be effected in accordance with, and subject to the terms and conditions of, the assignment provisions contained in Section 10.6 (with the assignment fee to be paid by the Borrower in such instance), and, if such Replacement Lender is not already a Lender hereunder or an Affiliate of a Lender or an Approved Fund, shall be subject to the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, with respect to any assignment pursuant to this Section 2.23, (a) in the case of any such assignment resulting from a claim for compensation under Section 2.19 or payments required to be made pursuant to Section 2.20, such assignment shall result in a reduction in such compensation or payments thereafter; (b) such assignment shall not conflict with Applicable Law and (c) in the case of any assignment resulting from a Lender being a Minority Lender referred to in clause (b) of this Section 2.23, the applicable assignee shall have consented to the applicable amendment, waiver or consent. Notwithstanding the foregoing, an Affected Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Affected Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
2.24 Defaulting Lenders.
(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:
(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 10.1 and in the definition of Required Lenders.
(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 8 or otherwise, and including any amounts made available to the Administrative Agent by such Defaulting Lender pursuant to Section 10.7), shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Lender or to the Swingline Lender hereunder; third, to be held as Cash Collateral for the funding obligations of such Defaulting Lender of any participation in any Letter of Credit; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a Deposit Account and released pro rata to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement, and (y) be held as Cash Collateral for the future funding obligations of such Defaulting Lender of any participation in any future Letter of Credit; sixth, to the payment of any amounts owing to any L/C Lender, Issuing Lender or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any L/C Lender, Issuing Lender or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default has occurred and is continuing, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (A) such payment is a payment of the principal amount of any
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Loans or L/C Advances in respect of which such Defaulting Lender has not fully funded its appropriate share and (B) such Loans or L/C Advances were made at a time when the conditions set forth in Section 5.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Advances owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Advances owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Advances and Swingline Loans are held by the Lenders pro rata in accordance with the Commitments under the applicable Facility without giving effect to Section 2.24(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.24(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees.
(A) No Defaulting Lender shall be entitled to receive any fee pursuant to Section 2.9(b) for any period during which such Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to such Defaulting Lender).
(B) Each Defaulting Lender shall be limited in its right to receive Letter of Credit Fees as provided in Section 3.3(d).
(C) With respect to any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letters of Credit or Swingline Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Lender and the Swingline Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Lender’s or the Swingline Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
(iv) Reallocation of Pro Rata Share to Reduce Fronting Exposure. During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each Non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit pursuant to Section 3.4 or in Swingline Loans pursuant to Section 2.7(c), the L/C Percentage of each Non-Defaulting Lender of any such Letter of Credit and the Revolving Percentage of each Non-Defaulting Lender of any such Swingline Loan, as the case may be, shall be computed without giving effect to the Commitment of such Defaulting Lender; provided that, (A) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Defaulting Lender, no Event of Default has occurred and is continuing; and (B) the aggregate obligations of each Non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swingline Loans shall not exceed the positive difference, if any, of (1) the Commitment of that Non-Defaulting Lender minus (2) the aggregate outstanding amount of the Revolving Loans of that Lender plus the aggregate amount of that Lender’s L/C Percentage of then outstanding Letters of Credit. Subject to Section 10.21, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(v) Cash Collateral. Repayment of Swingline Loans. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, (x) first, prepay Swingline Loans
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in an amount equal to the Swingline Lender’s Fronting Exposure and (y) second, Cash Collateralize the Issuing Lender’s Fronting Exposure in accordance with the procedures set forth in Section 3.10.
(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swingline Lender and the Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), such Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held on a pro rata basis by the Lenders in accordance with their respective Revolving Percentages and L/C Percentages, as applicable (without giving effect to Section 2,24(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided further that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender having been a Defaulting Lender.
(c) New Swingline Loans/Letters of Credit. So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan, and (ii) the Issuing Lender shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure in respect of Letters of Credit after giving effect thereto.
(d) Termination of Defaulting Lender. The Borrower may terminate the unused amount of the Commitment of any Lender that is a Defaulting Lender upon not less than ten Business Days’ prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), and in such event the provisions of Section 2.24(a)(ii) will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided that (i) no Event of Default shall have occurred and be continuing, and (ii) such termination shall not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, the Issuing Lender, the Swingline Lender or any other Lender may have against such Defaulting Lender.
2.25 Joint and Several Liability of the Borrowers. To the extent another Person joins this Agreement as a “Borrower” hereunder, pursuant to a Permitted Acquisition or otherwise:
(a) Each Borrower is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other the Borrowers to accept joint and several liability for the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other the Borrowers, with respect to the payment and performance of all of the Obligations (including any Obligations arising under this Section 2.25), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.
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(c) If and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligations.
(d) The Obligations of each Borrower under the provisions of this Section 2.25 constitute the absolute and unconditional, full recourse Obligations of each Borrower enforceable against each Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Loans made or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by the Administrative Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by Applicable Law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by the Administrative Agent or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of the Administrative Agent or Lender with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with Applicable Law or regulations thereunder, which might, but for the provisions of this Section 2.25 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this Section 2.25, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of each Borrower under this Section 2.25 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this Section 2.25 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower, the Administrative Agent or any Lender.
(f) Each Borrower represents and warrants to the Administrative Agent and Lenders that such Borrower is currently informed of the financial condition of the Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Borrower further represents and warrants to the Administrative Agent and Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents. Each Borrower hereby covenants that such Borrower will continue to keep informed of the Borrowers’ financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations.
(g) Each Borrower waives all rights and defenses (i) arising out of an election of remedies by the Administrative Agent or any Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed such
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Borrower’s rights of subrogation and reimbursement against any applicable Loan Party by the operation of Section 580 or 726 of the California Code of Civil Procedure or otherwise, and (ii) relating to any suretyship defenses available to it under the Uniform Commercial Code or any other applicable law, including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2787 through 2855, 2899 and 3433.
(h) Each Borrower waives all rights and defenses that such Borrower may have because the Obligations are secured by real property at any time. This means, among other things:
(i) The Administrative Agent and Lenders may collect from such Borrower without first foreclosing on any real or personal property Collateral pledged by the Borrowers.
(ii) If the Administrative Agent or any Lender forecloses on any Collateral consisting of real property pledged by the Borrowers:
(A) The amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B) The Administrative Agent and Lenders may collect from such Borrower even if the Administrative Agent or Lenders, by foreclosing on real property, has destroyed any right such Borrower may have to collect from the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such Borrower may have because the Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure.
(i) The provisions of this Section 2.25 are made for the benefit of the Administrative Agent, the Lenders, and their respective successors and assigns, and may be enforced by it or them from time to time against any or all the Borrowers as often as occasion therefor may arise and without requirement on the part of the Administrative Agent, any Lender, any successor or any assign first to marshal any of its or their claims or to exercise any of its or their rights against any Borrower or to exhaust any remedies available to it or them against any Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.25 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.25 will forthwith be reinstated in effect, as though such payment had not been made.
(j) Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Administrative Agent or Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to the Administrative Agent or Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior
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payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor. Notwithstanding anything to the contrary contained in this Section 2.25, no Borrower shall exercise any rights of subrogation, contribution, indemnity, reimbursement or other similar rights against, and shall not proceed or seek recourse against or with respect to any property or asset of, any other Borrower (the “Foreclosed Borrower”), including after payment in full of the Obligations, if all or any portion of the Obligations have been satisfied in connection with an exercise of remedies in respect of the Capital Stock of such Foreclosed Borrower whether pursuant to the Security Documents or otherwise.
(k) Each Borrower hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for the Administrative Agent, and such Borrower shall deliver any such amounts to the Administrative Agent for application to the Obligations in accordance with the terms of this Agreement.
(l) Subject to the foregoing, to the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the Obligations made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an “Accommodation Payment”), then the Borrower making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each other Borrower in an amount, for each of such other Borrower, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date of determination, the “Allocable Amount” of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (i) rendering such Borrower "insolvent" within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (iii) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.
2.26 Notes. If so requested by any Lender by written notice to the Borrower (with a copy to the Administrative Agent), the Borrower shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) (promptly after the Borrower’s receipt of such notice) a Note or Notes to evidence such Lender’s Loans.
2.27 Incremental Revolving Loans.
(a) [Reserved].
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(b) Total Commitments Increase. At any time after the Second Amendment Effective Date during the Commitment Period, provided no Default or Event of Default has occurred and is continuing and subject to the conditions set forth in clause (e) below, upon notice to the Administrative Agent, the Borrower may from time to time request one or more increases to the Total Commitments (each, an “Incremental Commitment”), in an aggregate amount not to exceed $75,000,000. Any Incremental Commitment shall be in the amount of at least $10,000,000 (or such lower amount that represents all remaining availability pursuant to this Section 2.27(b), or as otherwise agreed to by the Administrative Agent in its sole discretion).
(c) Lender Election to Increase; Prospective Lenders. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period (such period, the “Election Period”) within which each Lender is requested to respond (which Election Period shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders), and the Administrative Agent shall promptly thereafter notify each Lender of the Borrower’s request for such Incremental Commitment and the Election Period during which each Lender is requested to respond to such Borrower request; provided that if such notice indicates that it is conditioned upon the occurrence of a specified event, such notice may be revoked if such event does not occur prior to the requested funding date. No Lender shall be obligated to participate in any Incremental Commitment, and each such Lender’s determination to participate shall be in such Lender’s sole and absolute discretion. Any Lender not responding by the end of such Election Period shall be deemed to have declined to increase its respective Commitment. To the extent sufficient Lenders (or their Affiliates) do not agree to provide an Incremental Commitment on terms acceptable to the Borrower, the Borrower may invite any prospective lender that satisfies the criteria of being an “Eligible Assignee” and is reasonably satisfactory to the Administrative Agent in its sole reasonable discretion to become a Lender pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent in connection with the proposed Incremental Commitment, as applicable (provided that the joinder of any such “Lender” for the purpose of providing all or any portion of any such Incremental Commitment shall not require the consent of any other Lender (including any other “Lender” that is joining this Agreement to provide all or part of such Incremental Commitment).
(d) Effective Date and Allocations. If the Total Commitments are increased in accordance with this Section 2.27, the Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such Incremental Commitment. The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such Incremental Commitment and the Increase Effective Date.
(e) Each of the following shall be the only conditions precedent to the making of an Incremental Commitment:
(i) The Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of each such Loan Party certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such Incremental Commitment.
(ii) Each of the conditions precedent set forth in Section 5.2 shall be satisfied.
(iii) The Borrower shall be in compliance with the then applicable financial covenants set forth in Section 7.1 hereof both as of the end of the most recently ended fiscal quarter prior to the making of the Incremental Commitment and immediately after giving effect to the making of the Incremental Commitment on a pro forma basis;
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(iv) The Borrower shall have delivered to the Administrative Agent a Compliance Certificate certifying as to compliance with the requirements of clauses (ii) and (iii) above, together with all reasonably detailed calculations evidencing compliance with clause (iii) above.
(v) The Borrower shall (x) deliver to any Lender providing an increase in the Commitments hereunder (or any new Lender providing such Commitment hereunder) any Notes requested by such Lender in connection with the making of such increased or new Commitment, and (y) have executed any amendments to this Agreement and the other Loan Documents as may be required by the Administrative Agent to effectuate the provisions of this Section 2.27, including, if applicable, any amendment that may be necessary to ensure and demonstrate that the Liens and security interests granted by the Loan Documents are perfected under the UCC or other Applicable Law to secure the Obligations in respect of the Incremental Commitment.
(vi) The Borrower shall have paid to the Administrative Agent any fees required to be paid pursuant to the terms of the Fee Letter, and shall have paid to any Lender any fees required to be paid to such Lender in connection with its increased Commitment (or in the case of a new Lender, such new Commitment) hereunder.
(vii) Upon each Increase Effective Date, all outstanding Loans, participations hereunder in Letters of Credit and Swingline Loans held by each Lender shall be reallocated among the Lenders (including any newly added Lenders) in accordance with the Lenders’ respective revised Revolving Percentages and L/C Percentages, pursuant to procedures reasonably determined by the Administrative Agent in consultation with the Borrower.
(d) Distribution of Revised Commitments Schedule. The Administrative Agent shall promptly distribute to the parties an amended Schedule 1.1A (which shall be deemed incorporated into this Agreement), to reflect any such changes in the Commitments of the existing Lenders, or the addition of any new Lenders and their respective Commitment amounts, and the respective Revolving Percentages resulting therefrom.
(f) Conflicting Provisions. This Section shall supersede any provisions in Section 2.18 or 10.1 to the contrary.
(g) [Reserved].
(h) Any additional Revolving Loans made available pursuant to any such Incremental Commitment shall be treated on the same terms (including with respect to pricing and maturity date) as, and made pursuant to the same documentation as is applicable to, the original Revolving Facility.
(i) The Incremental Commitments shall, for purposes of prepayments, be treated substantially the same as the initial Commitment and shall have the same terms as the original Revolving Facility.
(j) Effect of Increase. Upon the increase in the Total Commitments under this Section 2.27, all references in this Agreement and in any other Loan Document (i) to the Commitment of any Lender shall be deemed to include any increase in such Lender’s Commitment pursuant to this Section 2.27, and (ii) to the Total Commitments shall be deemed to include the increase in the Total Commitments made pursuant to this Section 2.27. The Revolving Loans, Commitments, Total Commitments and Total L/C Commitments that are subject to an increase under this Section 2.27 shall be entitled to all of the benefits afforded by this Agreement and the other Loan Documents and shall benefit
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ratably from any guarantees and Liens provided under the Loan Documents in favor of the Secured Parties.
SECTION 3
LETTERS OF CREDIT
3.1 L/C Commitment.
(a) Subject to the terms and conditions hereof, the Issuing Lender agrees to issue letters of credit (“Letters of Credit”) for the account of the Borrower on any Business Day during the Letter of Credit Availability Period in such form as may reasonably be approved from time to time by the Issuing Lender: provided that the Borrower shall not request, and the Issuing Lender shall not issue, any Letter of Credit if, after giving effect to such issuance, either (x) the L/C Exposure would exceed the Total L/C Commitments at such time or (y) the Available Commitment would be less than zero. Unless otherwise agreed to by the Administrative Agent in its sole discretion, each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the Letter of Credit Maturity Date, provided that any Letter of Credit with a one-year term may provide for the extension thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above).
(b) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit if:
(i) such issuance would conflict with, or cause the Issuing Lender or any L/C Lender to exceed any limits imposed by, any Applicable Law;
(ii) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Lender from issuing, amending or reinstating such Letter of Credit, or any law, rule or regulation applicable to the Issuing Lender or any request, guideline or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance, amendment, extension or reinstatement of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise compensated) not in effect on the Closing Date, or shall impose upon the Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Lender in good faith deems material to it;
(iii) the Issuing Lender has received written notice from any Lender, the Administrative Agent or the Borrower, at least one (1) Business Day prior to the requested date of issuance, amendment, extension or reinstatement of such Letter of Credit, that one or more of the applicable conditions contained in Section 5.2 shall not then be satisfied;
(iv) any requested Letter of Credit is not in form and substance acceptable to the Issuing Lender, or the issuance, amendment or extension of a Letter of Credit shall violate any Applicable Law or any applicable policies of the Issuing Lender;
(v) such Letter of Credit contains any provisions providing for automatic reinstatement of the stated amount after any drawing thereunder;
(vi) except as otherwise agreed by the Administrative Agent and the Issuing Lender, such Letter of Credit is in an initial face amount less than $100,000; or
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(vii) any Lender is at that time a Defaulting Lender, unless the Issuing Lender has entered into arrangements, including the delivery of Cash Collateral pursuant to Section 3.10, satisfactory to the Issuing Lender (in its sole discretion) with the Borrower or such Defaulting Lender to eliminate the Issuing Lender’s actual or potential Fronting Exposure (after giving effect to Section 2.24(a)(iv)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or such Letter of Credit and all other L/C Exposure as to which the Issuing Lender has actual or potential Fronting Exposure, as it may elect in its sole discretion.
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3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit for the account of the Borrower by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof).
3.3 Fees and Other Charges.
(a) The Borrower agrees to pay, with respect to each outstanding Letter of Credit (including each Existing Letter of Credit) issued for the account of (or at the request of) the Borrower, (i) a fronting fee of 0.125% per annum on the daily amount available to be drawn under each such Letter of Credit to the Issuing Lender for its own account (a “Letter of Credit Fronting Fee”), (ii) a letter of credit fee equal to 1.85% per annum multiplied by the daily amount available to be drawn under each such Letter of Credit on the drawable amount of such Letter of Credit to the Administrative Agent for the ratable account of the L/C Lenders (determined in accordance with their respective L/C Percentages) (a “Letter of Credit Fee”), in each case payable monthly in arrears on the last Business Day of each month and on the Letter of Credit Maturity Date (each, an “L/C Fee Payment Date”) after the issuance date of such Letter of Credit, and (iii) the Issuing Lender's standard and reasonable fees with respect to the issuance, amendment, or extension of any Letter of Credit issued for the account of (or at the request of) the Borrower or processing of drawings thereunder (the fees in this clause (iii), collectively, the “Issuing Lender Fees”). All Letter of Credit Fronting Fees and Letter of Credit Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.
(b) In addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.
(c) The Borrower shall furnish to the Issuing Lender and the Administrative Agent such other documents and information pertaining to any requested Letter of Credit issuance, amendment or extension, including any L/C-Related Documents, as the Issuing Lender or the Administrative Agent may require. This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit).
(d) Any Letter of Credit Fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the Issuing Lender pursuant to Section 3.10 shall be payable, to the maximum extent permitted by Applicable Law, to the other L/C Lenders in accordance with the upward adjustments in their respective L/C Percentages allocable to such Letter of Credit pursuant to Section 2.24(a)(iv), with the balance of such fee, if any, payable to the Issuing Lender for its own account.
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(e) All fees payable under this Section 3.3 shall be fully earned on the date paid and nonrefundable.
3.4 L/C Participations; Existing Letters of Credit.
(a) L/C Participations. The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Lender, and, to induce the Issuing Lender to issue Letters of Credit, each L/C Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions set forth below, for such L/C Lender’s own account and risk an undivided interest equal to such L/C Lender’s L/C Percentage in the Issuing Lender’s obligations and rights under and in respect of each Letter of Credit and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Lender agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower pursuant to Section 3.5(a), such L/C Lender shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount equal to such L/C Lender’s L/C Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. Each L/C Lender’s obligation to pay such amount shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Lender may have against the Issuing Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5.2, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other L/C Lender, or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
(b) Existing Letters of Credit. On and after the Closing Date, the Existing Letters of Credit shall be deemed for all purposes, including for purposes of the fees to be collected pursuant to Sections 3.3(a) and (b), reimbursement of costs and expenses to the extent provided herein and for purposes of being secured by the Collateral, a Letter of Credit outstanding under this Agreement and entitled to the benefits of this Agreement and the other Loan Documents, and shall be governed by the applications and agreements pertaining thereto and by this Agreement (which shall control in the event of a conflict).
3.5 Reimbursement.
(a) If the Issuing Lender shall make any L/C Disbursement in respect of a Letter of Credit, the Issuing Lender shall notify the Borrower and the Administrative Agent thereof and the Borrower shall pay or cause to be paid to the Issuing Lender an amount equal to the entire amount of such L/C Disbursement not later than (i) the immediately following Business Day if the Issuing Lender issues such notice before 10:00 AM on the date of such L/C Disbursement, or (ii) on the second following Business Day if the Issuing Bank issues such notice at or after 10:00 AM on the date of such L/C Disbursement. Each such payment shall be made to the Issuing Lender at its address for notices referred to herein in Dollars and in immediately available funds; provided that the Borrower may, subject to the satisfaction of the conditions to borrowing set forth herein, request in accordance with Section 2.5 or Section 2.7(a) that such payment be financed with a Revolving Loan or a Swingline Loan, as applicable, in an equivalent amount and, to the extent so financed, the Borrower’s obligations to make such payment shall be discharged and replaced by the resulting Revolving Loan or Swingline Loan.
(b) If the Issuing Lender shall not have received from the Borrower the payment that it is required to make pursuant to Section 3.5(a) with respect to a Letter of Credit within the time specified in such Section, the Issuing Lender will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each L/C Lender of such L/C
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Disbursement and its L/C Percentage thereof, and each L/C Lender shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount equal to such L/C Lender’s L/C Percentage of such L/C Disbursement (and the Administrative Agent may apply Cash Collateral provided for this purpose); upon such payment pursuant to this paragraph to reimburse the Issuing Lender for any L/C Disbursement, the Borrower shall be required to reimburse the L/C Lenders for such payments (including interest accrued thereon from the date of such payment until the date of such reimbursement at the rate applicable to Revolving Loans plus 2% per annum) on demand: provided that if at the time of and after giving effect to such payment by the L/C Lenders, the conditions to borrowings and Revolving Loan Conversions set forth in Section 5.2 are satisfied, the Borrower may, by written notice to the Administrative Agent certifying that such conditions are satisfied and that all interest owing under this paragraph has been paid, request that such payments by the L/C Lenders be converted into Revolving Loans (a “Revolving Loan Conversion”), in which case, if such conditions are in fact satisfied, the L/C Lenders shall be deemed to have extended, and the Borrower shall be deemed to have accepted, a Revolving Loan in the aggregate principal amount of such payment without further action on the part of any party, and the Total L/C Commitments shall be permanently reduced by such amount; any amount so paid pursuant to this paragraph shall, on and after the payment date thereof, be deemed to be Revolving Loans for all purposes hereunder; provided that the Issuing Lender, at its option, may effectuate a Revolving Loan Conversion regardless of whether the conditions to borrowings and Revolving Loan Conversions set forth in Section 5.2 are satisfied.
3.6 Obligations Absolute. The Borrower’s obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower’s obligations hereunder shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower.
In addition to amounts payable as elsewhere provided in the Agreement, the Borrower hereby agrees to pay and to protect, indemnify, and save Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees and allocated costs of internal counsel) that the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit, or (B) the failure of Issuing Lender or of any L/C Lender to honor a demand for payment under any Letter of Credit thereof as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority, in each case other than to the extent solely as a result of the gross negligence or willful misconduct of Issuing Lender or such L/C Lender (as finally determined by a court of competent jurisdiction).
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3.7 Letter of Credit Payments. If a compliant drawing shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any drawing presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.
3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.
3.9 Interim Interest. If the Issuing Lender shall make any L/C Disbursement in respect of a Letter of Credit, then, unless either the Borrower shall have reimbursed such L/C Disbursement in full within the time period specified in Section 3.5(a) or the L/C Lenders shall have reimbursed such L/C Disbursement in full on such date as provided in Section 3.5(b), in each case the unpaid amount thereof shall bear interest for the account of the Issuing Lender, for each day from and including the date of such L/C Disbursement to but excluding the date of payment by the Borrower, at the rate per annum that would apply to such amount if such amount were a Revolving Loan; provided that the provisions of Section 2.15(c) shall be applicable to any such amounts not paid when due.
3.10 Cash Collateral.
(a) Certain Credit Support Events. Upon the request of the Administrative Agent or the Issuing Lender (i) if the Issuing Lender has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Advance by all the L/C Lenders that is not reimbursed by the Borrower or converted into a Revolving Loan or Swingline Loan pursuant to Section 3.5(b) , or (ii) if, as of the Letter of Credit Maturity Date, any L/C Exposure for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then effective L/C Exposure in an amount equal to 105% of such L/C Exposure.
At any time that there shall exist a Defaulting Lender, within one (1) Business Day following the request of the Administrative Agent or the Issuing Lender (with a copy to the Administrative Agent), the Borrower shall deliver to the Administrative Agent Cash Collateral in an amount sufficient to cover 105% of the Fronting Exposure relating to the Letters of Credit (after giving effect to Section 2.24(a)(iv) and any Cash Collateral provided by such Defaulting Lender).
(b) Grant of Security Interest. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts with the Administrative Agent. The Borrower, and to the extent provided by any Lender or Defaulting Lender, such Lender or Defaulting Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Lender and the L/C Lenders, and agrees to maintain, a first priority security interest and Lien in all such Cash Collateral and in all proceeds thereof, as security for the Obligations to which such Cash Collateral may be applied pursuant to Section 3.10(c). If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent or any Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than 105% of the applicable L/C Exposure, Fronting Exposure and other Obligations secured thereby, the Borrower or the relevant Lender or Defaulting Lender, as applicable, will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by such Defaulting Lender).
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(c) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 3.10, Section 2.24 or otherwise in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Exposure, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(d) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure in respect of Letters of Credit or other Obligations shall no longer be required to be held as Cash Collateral pursuant to this Section 3.10 following (i) the elimination of the applicable Fronting Exposure and other Obligations giving rise thereto (including by the termination of the Defaulting Lender status of the applicable Lender), or (ii) a determination by the Administrative Agent and the Issuing Lender that there exists excess Cash Collateral: provided, however, (A) that Cash Collateral furnished by or on behalf of a Loan Party shall not be released during the continuance of an Event of Default, and (B) that, subject to Section 2.24, the Person providing such Cash Collateral and the Issuing Lender may agree that such Cash Collateral shall not be released but instead shall be held to support future anticipated Fronting Exposure or other obligations, and provided further, that to the extent that such Cash Collateral was provided by the Borrower or any other Loan Party , such Cash Collateral shall remain subject to any security interest and Lien granted pursuant to the Loan Documents including any applicable Cash Management Agreement.
3.11 Additional Issuing Lenders. The Borrower may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of this Agreement. Any Lender designated as an issuing bank pursuant to this paragraph shall be deemed to be an “Issuing Lender” (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Lender and such Lender.
3.12 Resignation of the Issuing Lender. The Issuing Lender may resign at any time by giving at least 30 days’ prior written notice to the Administrative Agent, the Lenders and the Borrower. Subject to the next succeeding paragraph, upon the acceptance of any appointment as the Issuing Lender hereunder by a Lender that shall agree to serve as successor Issuing Lender, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Lender and the retiring Issuing Lender shall be discharged from its obligations to issue additional Letters of Credit hereunder without affecting its rights and obligations with respect to Letters of Credit previously issued by it. At the time such resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 3.3. The acceptance of any appointment as the Issuing Lender hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Issuing Lender under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term “Issuing Lender” shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the resignation of the Issuing Lender hereunder, the retiring Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation, but shall not be required to issue additional Letters of Credit or to extend or increase any existing Letter of Credit.
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3.13 Applicability of UCP and ISP. Unless otherwise expressly agreed by the Issuing Lender and the Borrower when a Letter of Credit is issued and subject to applicable laws, the Letters of Credit shall state therein that they are governed by and subject to (a) with respect to standby Letters of Credit, the rules of the ISP, and (b) with respect to commercial Letters of Credit, the rules of the Uniform Customs and Practice for Documentary Credits, as published in its most recent version by the International Chamber of Commerce on the date any commercial Letter of Credit is issued.
SECTION 4
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue the Letters of Credit, Holdings and the Borrower hereby jointly and severally represent and warrant to the Administrative Agent and each Lender, as to themselves and each of their respective Subsidiaries, that:
4.1 Financial Condition.
(a) The Pro Forma Financial Statements have been prepared giving effect (as if such events had occurred on such date) to (i) the Loans to be made on the Closing Date and the use of proceeds thereof, and (ii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Financial Statements have been prepared based on the information available to the Borrower as of the date of delivery thereof and assumptions believed by the Borrower to be reasonable when made and at the time so furnished, and present fairly in all material respects on a pro forma basis the Borrower’s good faith estimate of the financial position of Holdings and its consolidated Subsidiaries as of March 31, 2019, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount.
(b) The audited consolidated balances sheet of Holdings and its Subsidiaries as of December 31, 2016 and December 31, 2017, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries as at such dates, and the consolidated results of its operations and its consolidated cash flows for the fiscal years then ended. The unaudited consolidated balance sheet of Holdings and its Subsidiaries as at December 31, 2018, and the related unaudited consolidated statements of income and cash flows for the 12-month period ended on such date, present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the 12-month period then ended. The unaudited, internally prepared consolidated balance sheet of Holdings and its Subsidiaries as at April 30, 2019, and the related unaudited consolidated statements of income and cash flows for the 12-month period ended on such date, present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the 12-month period then ended (in each case, subject to normal year-end adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein) and subject to, in the case of unaudited financial statements, normal year-end adjustments and the absence of footnotes. No Group Member has, as of the Closing Date, any material Guarantee Obligations, material contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that (x) are not reflected in the most recent financial statements
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referred to in this Section4.1(b) or (y) have been incurred after the date of such financial statements and have not been disclosed to the Lenders. During the period from December 31, 2017 to and including the date hereof, there has been no Disposition by any Group Member of any material part of its business or property.
4.2 No Change. Since December 31, 2017, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
4.3 Existence; Compliance with Law. Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where the failure to be so qualified or in good standing could reasonably be expected to have a Material Adverse Effect and (d) is in material compliance with all Applicable Law except in such instances in which (i) such Applicable Law is being contested in good faith by appropriate proceedings diligently conducted and the prosecution of such contest would not reasonably be expected to result in a Material Adverse Effect, or (ii) the failure to comply therewith, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
4.4 Power, Authorization; Enforceable Obligations. Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No Governmental Approval or consent or authorization of, filing with, notice to or other act by or in respect of, any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) Governmental Approvals, consents, authorizations, filings and notices which have been obtained or made and are in full force and effect, and (ii) the filings referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the extensions of credit hereunder and the use of the proceeds thereof will not violate any Applicable Law applicable to any Group Member (except as set forth on Schedule 4.5) or any material Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any such Applicable Law or any such material Contractual Obligation (other than the Liens created by the Security Documents). No Group Member has violated any Applicable Law or violated or failed to comply with any Contractual Obligation applicable to it that could reasonably be expected to have a Material Adverse Effect. The absence of obtaining the Governmental Approvals described on Schedule 4.5 and the violations of Applicable Law referenced on Schedule 4.5 could not reasonably be expected to have a Material Adverse Effect.
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4.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of Holdings or the Borrower, threatened, by or against any Group Member or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.
4.7 No Default. No Group Member is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing, nor shall either result from the making of a requested credit extension.
4.8 Ownership of Property; Liens; Investments. Each Group Member has title in fee simple to, or a valid leasehold interest in, all of its real property, and good title to, or a valid leasehold interest in, all of its other property, in each case to the extent material to the conduct of its business and none of such property is subject to any Lien except as permitted by Section 7 .3. No Loan Party owns any Investment except as permitted by Section 7 .8. Section 10 of the Collateral Information Certificate sets forth a complete and accurate list of all real property owned by each Loan Party as of the ClosingSecond Amendment Effective Date, if any. Section 11 of the Collateral Information Certificate sets forth a complete and accurate list of all leases of real property under which any Loan Party is the lessee as of the ClosingSecond Amendment Effective Date.
4.9 Intellectual Property. Each Group Member owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted in all material respects; provided that no representation is made in this sentence regarding infringement of rights of other Persons (which representation is the subject of the third sentence of this Section 4.9). No claim has been asserted and is pending by any Person challenging or questioning any Group Member's use of any Intellectual Property or the validity or effectiveness of any Group Member's Intellectual Property, nor does Holdings or the Borrower know of any valid basis for any such claim, unless such claim could not reasonably be expected to have a Material Adverse Effect. The use of Intellectual Property by each Group Member, and the conduct of such Group Member's business, as currently conducted, does not infringe on or otherwise violate the rights of any Person, unless such infringement or violation could not reasonably be expected to have a Material Adverse Effect, and there are no claims pending or, to the knowledge of Holdings or the Borrower, threatened, to such effect unless such claim could not reasonably be expected to have a Material Adverse Effect.
4.10 Taxes. Each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all Federal, state and other material taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any taxes, fees, assessments or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member); no tax Lien has been filed (other than Liens permitted by Section 7.3(a)), and, to the knowledge of Holdings or the Borrower, no material claim is being asserted, with respect to any such tax, fee or other charge that is not being contested in good faith by appropriate proceedings.
4.11 Federal Regulations. The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of "buying' or "carrying" "margin stock" (within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect) or extending credit for the purpose of purchasing or carrying margin stock. No part of
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the proceeds of any Loans, and no other extensions of credit hereunder, will be used for buying or carrying any such margin stock or for extending credit to others for the purpose of purchasing or carrying margin stock in violation of Regulations T, U or X of the Board. If any margin stock directly or
indirectly constitutes Collateral securing the Obligations, if requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Group Member pending or, to the knowledge of Holdings or the Borrower, threatened; (b) hours worked by and payment made to employees of each Group Member have not been in violation of the Fair Labor Standards Act or any other Applicable Law dealing with such matters; and (c) all payments due from any Group Member on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Group Member.
4.13 ERISA.
(a) Schedule 4.13 sets forth a complete and accurate list of all Pension Plans maintained or sponsored by the Borrower or any ERlSA Affiliate or to which the Borrower or any ERlSA Affiliate contributes as of the ClosingSecond Amendment Effective Date;
(b) the Borrower and its ERlSA Affiliates are in compliance in all material respects with all applicable provisions and requirements of ERlSA with respect to each Plan, and have performed all their obligations under each Plan;
(c) no ERlSA Event has occurred or is reasonably expected to occur;
(d) the Borrower and each of its ERlSA Affiliates have met all applicable requirements under the ERlSA Funding Rules with respect to each Pension Plan, and no waiver of the minimum funding standards under the ERlSA Funding Rules has been applied for or obtained;
(e) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least 60%, and neither the Borrower nor any of its ERlSA Affiliates knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage to fall below 60% as of the most recent valuation date;
(f) except to the extent required under Section 4980B of the Code, or as described on Schedule 4.13, no Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Borrower or any of its ERlSA Affiliates;
(g) as of the most recent valuation date for any Pension Plan, the amount of outstanding benefit liabilities (as defined in Section 4001(a)(18) of ERlSA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $100,000;
(h) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder will not involve any transaction that is subject to the prohibitions of Section 406 of ERlSA or in connection with which taxes could be imposed pursuant to Section 4975(c)(l)(A)-(D) of the Code;
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(i) all liabilities under each Plan are (i) funded to at least the minimum level required by law or, if higher, to the level required by the terms governing the Plans, (ii) insured with a
reputable insurance company, (iii) provided for or recognized in the financial statements most recently delivered to the Administrative Agent and the Lenders pursuant hereto or (iv) estimated in the formal notes to the financial statements most recently delivered to the Administrative Agent and the Lenders pursuant hereto;
(j) there are no circumstances which may give rise to a liability in relation to any Plan which is not funded, insured, provided for, recognized or estimated in the manner described in clause (g); and
(k) (i) the Borrower is not and will not be a "plan" within the meaning of Section
4975(e) of the Code; (ii) the assets of the Borrower do not and will not constitute "plan assets" within the meaning of the United States Department of Labor Regulations set forth in 29 C.F .R. §2510.3-101; (iii) the Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERlSA; and (iv) transactions by or with the Borrower are not and will not be subject to state statutes applicable to the Borrower regulating investments of fiduciaries with respect to governmental plans.
4.14 Investment Company Act; Other Regulations. No Loan Party is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Except as set forth on Schedule 4.5, no Loan Party is subject to regulation under any Applicable Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
4.15 Subsidiaries.
(a) Except as disclosed to the Administrative Agent by the Borrower or Holdings in writing from time to time after the ClosingSecond Amendment Effective Date, (a) Schedule 4.15 sets forth the name and jurisdiction of organization of each Subsidiary of Holdings and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party, and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of Holdings or any Subsidiary, except as may be created by the Loan Documents.
(b) As of the last day of the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 6.l(b), no Immaterial Subsidiary (a) holds assets representing more than 15% of Holdings' consolidated total assets (determined in accordance with GAAP), (b) has generated more than 15% of Holdings' consolidated total revenues determined in accordance with GAAP for the four fiscal quarter period ending on the last day of the most recent fiscal quarter for which financial statements have been delivered after the Closing Date pursuant to Section 6.1(b); provided that all Subsidiaries that are individually an Immaterial Subsidiary do not have aggregate consolidated total assets that would represent 25% or more of Holdings' consolidated total assets nor have generated 25% or more of Holdings' consolidated total revenues for such four fiscal quarter period, in each case determined in accordance with GAAP, or (c) owns any material Intellectual Property. If at any time that Remitly Canada, Inc. becomes a Guarantor, the percentages in the proviso above shall be reduced from 25%to20%.
4.16 Use of Proceeds. All or a portion of the proceeds of the Loans and the Letters of Credit shall be used to refinance the obligations of the Group Members outstanding under the Existing Credit Facility, to pay fees and expenses incurred in connection with the Loan Documents and for working
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capital and other general corporate purposes, including pre-funding foreign accounts of the Group
Members.
4.17 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) except as disclosed on Schedule 4.17, the facilities and properties owned, leased or operated by such Group Member (the "Properties") do not contain, and, to the knowledge of the Group Members, have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or have constituted a violation of, or could give rise to liability under, any Environmental Law;
(b) no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or noncompliance with Environmental Laws with regard to any of the Properties or the business operated by any Group Member (the "Business"), nor does Holdings or the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;
(c) no Group Member has transported or disposed of Materials of Environmental Concern from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law; nor has any Group Member generated, treated, stored or disposed of Materials of Environmental Concern at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of Holdings and the Borrower, threatened, under any Environmental Law to which any Group Member is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties arising from or related to the operations of any Group Member or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under Environmental Laws;
(f) the Properties and all operations of the Group Members at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and except as set forth on Schedule 4.17, to the knowledge of the Borrower, there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and
(g) no Group Member has assumed any liability of any other Person under
Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document or any other document, certificate or statement furnished by or on behalf of any Loan Party to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished, when taken as a whole, any untrue
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statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading in any material respect. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.
4.19 Security Documents.
(a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement that are securities represented by stock certificates or otherwise constituting certificated securities within the meaning of Section 8-102(a)(15) of the UCC or the corresponding code or statute of any other applicable jurisdiction ("Certificated Securities"), when certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral constituting personal property described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 4.19(a) in appropriate form are filed in the offices specified on Schedule 4.19(a). the Administrative Agent, for the benefit of the Secured Parties, shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations, in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3). As of the ClosingSecond Amendment Effective Date, none of the Borrower or any Guarantor that is a limited liability company or partnership has any Capital Stock that is a Certificated Security.
(b) Each of the Mortgages delivered after the Closing Date (if any) will be, upon execution, effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices for the applicable jurisdictions in which the Mortgaged Properties are located, each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (except Liens permitted by Section 7.3 that have priority by operation of law).
4.20 Solvency; Voidable Transaction. The Group Members taken as a whole are, and after giving effect to the incurrence of all Indebtedness, Obligations and obligations being incurred in connection herewith, will be Solvent. No transfer of property is being made by any Loan Party and no obligation is being incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of such Loan Party
4.21 Regulation H. No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special
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flood hazards and in which flood insurance has not been made available under the National Flood Insurance Act of 1968.
4.22 Designated Senior Indebtedness. The Loan Documents and all of the Obligations have been deemed "Designated Senior Indebtedness" or a similar concept thereto, if applicable, for purposes of any other Indebtedness of the Loan Parties.
4.23 [Reserved].
4.24 Insurance. (a) All insurance maintained by the Loan Parties is in full force and effect, (b) all insurance premiums have been duly paid, (c) no Loan Party has received notice of violation or cancellation thereof, and (d) except as could not reasonably be expected to have a Material Adverse Effect, there exists no default under any requirement of such insurance policies. Each Loan Party maintains insurance with financially sound and reputable insurance companies on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability, and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.
4.25 No Casualty. No Loan Party has received any notice of, nor does any Loan Party have any knowledge of, the occurrence or pendency or contemplation of any Casualty Event affecting all or any material portion of its property.
4.26 [Reserved].
4.27 Capitalization. Schedule 4.27 sets forth (a) the beneficial owners of all Capital Stock of Holdings' consolidated Subsidiaries, and the amount of Capital Stock held by each such owner, and (b) the beneficial owners that hold 5% or more of the Capital Stock of Holdings' and the amount of Capital Stock held by each such owner, in each case, as of the ClosingSecond Amendment Effective Date.
4.28 OFAC. Neither Holdings, the Borrower, nor any of their respective Subsidiaries, nor, to the knowledge of Holdings, the Borrower or any such Subsidiary, any director, officer, employee, agent, affiliate or representative thereof, is an individual or an entity that is, or is owned or controlled by an individual or entity that is a Sanctioned Person.
4.29 Anti-Corruption Laws; AML Laws; Sanctions. Holdings and its Subsidiaries have conducted their businesses in compliance with applicable Anti-Corruption Laws, AML Laws and Sanctions and have instituted and maintain policies and procedures designed to promote and achieve compliance by Holdings and its Subsidiaries and their respective directors, officers, employees, agents and affiliates with applicable Anti-Corruption Laws, AML Laws and Sanctions.
4.30 Holding Company. Holdings is a holding company and does not have any material liabilities (other than liabilities arising under the Loan Documents), own any material assets (other than cash and Cash Equivalents for ordinary operating expenses (including contribution to Holdings' Subsidiaries) and the Capital Stock of the Borrower and the other Group Members) or engage in any operations or business (other than the ownership of cash and Cash Equivalents for ordinary operating expenses (including contribution to Holdings' Subsidiaries) and the Capital Stock of the Borrower and the other Group Members).
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SECTION 5
CONDITIONS PRECEDENT
5.1 Conditions to Closing Date. The effectiveness of this Agreement and the obligation of each Lender to make its initial extension of credit hereunder shall be subject to the satisfaction or waiver, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received each of the following, each of which shall be in form and substance reasonably satisfactory to the Administrative Agent:
(i) this Agreement, executed and delivered by the Administrative Agent, the
Borrower and each Lender listed on Schedule 1.1A;
(ii) the Collateral Information Certificate, executed by a Responsible Officer;
(iii) [reserved];
(iv) if required by any Revolving Lender, a Revolving Loan Note executed by the Borrower in favor of such Revolving Lender;
(v) if required by the Swingline Lender, the Swingline Loan Note executed by the Borrower in favor of such Swingline Lender;
(vi) the Guarantee and Collateral Agreement, executed and delivered by each Grantor named therein;
(vii) each other Security Document, executed and delivered by the applicable Loan Party party thereto; and
(viii) a Compliance Certificate for the period ended April 30, 2019.
(b) [Reserved].
(c) Financial Statements. The Administrative Agent shall have received (i) the Pro Forma Financial Statements, and (ii) the financial statements of Holdings and its Subsidiaries referenced in Section 4.1(b),
(d) Approvals. All Governmental Approvals and consents and approvals of, or notices to, any other Person (including the holders of any Capital Stock issued by any Loan Party) required in connection with the execution, delivery and performance of the Loan Documents and the consummation of the transactions contemplated hereby shall have been obtained and be in full force and effect.
(e) Secretary's or Managing Member's Certificates: Certified Operating Documents: Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Loan Party, dated the Closing Date and executed by a Responsible Officer of such Loan Party, substantially in the form of Exhibit C, with appropriate insertions and attachments, including (A) the Operating Documents of such Loan Party certified, in the case of formation documents, as of a recent date by the secretary of state or similar official of the relevant jurisdiction of organization of such Loan Party, (B) the relevant board resolutions or written consents of such Loan Party adopted by such Loan Party for the purposes of authorizing such Loan Party to enter into and perform the Loan Documents to which such Loan Party is party and (C) the names, titles, incumbency and signature specimens of those
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representatives of such Loan Party who have been authorized by such resolutions and/or written consents to execute Loan Documents on behalf of such Loan Party, (ii) a long form good standing certificate for each Loan Party from its respective jurisdiction of organization, and (iii) a certificate of foreign qualification from each jurisdiction where the failure of any Loan Party to be qualified could reasonably be expected to have a Material Adverse Effect.
(f) Responsible Officer's Certificates. The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower, dated as of the Closing Date and in form and substance reasonably satisfactory to the Administrative Agent, certifying (A) that the conditions specified in Sections 5.2(a) and (e) have been satisfied, and (B) that there has been no event or circumstance since December 31, 2017, that has had or that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
(g) Patriot Act, etc. The Administrative Agent and each Lender shall have received all documentation and other information requested to comply with applicable "know your customer" and AML Laws, including the Patriot Act, and a properly completed and signed IRS Form W-8 or W-9, as applicable, for each Loan Party.
(h) Due Diligence Investigation. The Administrative Agent shall have completed a due diligence investigation of the Borrower and its Subsidiaries in scope, and with results, satisfactory to the Administrative Agent and shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries and shall have received such financial, business and other information regarding each of the foregoing Persons and businesses as it shall have requested.
(i) Reports. The Administrative Agent shall have received, in form and substance reasonably satisfactory to it, such other reports and certifications, as it has reasonably requested.
(j) Existing Credit Facility, Etc. The Borrower shall have provided notice to the Existing Lender in accordance with the terms of the Existing Credit Facility of its intent to pay all obligations of the Group Members outstanding under the Existing Credit Facility on the Closing Date, (B) the Administrative Agent shall have received the Payoff Letter executed by the Existing Lender and the Borrower, (C) all obligations of the Group Members in respect of the Existing Credit Facility shall, substantially contemporaneously with the funding of certain Loan proceeds on the Closing Date have been paid in full, and (D) the Administrative Agent shall be satisfied that all actions necessary to terminate the agreements evidencing the obligations of the Group Members in respect of the Existing Credit Facility and the Liens of the Existing Lender in the assets of the Group Members securing obligations under the Existing Credit Facility shall have been, or substantially contemporaneously with the Closing Date, shall be, taken.
(k) Collateral Matters.
(i) Lien Searches. The Administrative Agent shall have received the results of recent Lien, judgment and litigation searches reasonably required by the Administrative Agent, and such searches shall reveal no Liens on any of the assets of the Loan Parties except for Liens permitted by Section 7.3 or Liens to be discharged on or prior to the Closing Date.
(ii) Pledged Stock: Stock Powers: Pledged Notes. Subject to Section 5.3, the Administrative Agent shall have received (A) the certificates representing the shares of Capital Stock
(to the extent constituting Certificated Securities) pledged to the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Guarantee and Collateral Agreement, together with an undated stock
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power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, and (B) each promissory note (if any) pledged to the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Guarantee and Collateral Agreement, endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.
(iii) Filings, Registrations, Recordings, Agreements, Etc, Subject to Section 5.3, each document (including any UCC financing statements, Deposit Account Control Agreements, Securities Account Control Agreements, and landlord access agreements and/or bailee waivers; it being agreed that prior to the Closing Date, the Borrower shall only be required to have used commercially reasonable efforts to obtain such landlord access agreements from its corporate headquarters and any other location in the United States where Collateral with a value in excess of $1,000,000 is maintained on the Closing Date) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create in favor of the Administrative Agent (for the benefit of the Secured Parties), a perfected Lien on the Collateral described therein, prior and superior in right and priority to any Lien in the Collateral held by any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall have been executed and delivered to the Administrative Agent or, as applicable, be in proper form for filing, registration or recordation.
(1) Insurance. Subject to Section 5.3 the Administrative Agent shall have received insurance certificates and endorsements satisfying the requirements of Section 6.6 hereof and Section 5.2(b) of the Guarantee and Collateral Agreement, in form and substance reasonably satisfactory to the Administrative Agent.
(m) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid on or prior to the Closing Date (including pursuant to the Fee Letter), and all reasonable and documented fees and expenses for which invoices have been presented (including the reasonable and documented fees and expenses of legal counsel to the Administrative Agent) for payment on or before the Closing Date.
(n) Legal Opinions. The Administrative Agent shall have received the executed legal opinion of Fenwick & West LLP, counsel to the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent.
(o) Liquidity. On the Closing Date, after giving effect to the refinancing of the Existing Credit Facility and the payment of all fees and expenses in connection with this Agreement, Liquidity shall be at least $50,000,000.
(p) Solvency Certificate. The Administrative Agent shall have received a Solvency Certificate from the chief financial officer or treasurer of Holdings.
(q) No Material Adverse Effect. There shall not have occurred since December 31, 2017, any event or condition that has had or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(r) No Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of any Group Member, threatened, that could reasonably be expected to be determined adversely to any Group Member, which if so determined, could reasonably be expected to have a Material Adverse Effect.
For purposes of determining compliance with the conditions specified in this Section 5.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent (or made available) by the Administrative
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Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender, unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Closing Date specifying such Lender's objection thereto and either such objection shall not have been withdrawn by notice to the Administrative Agent to that effect on or prior to the Closing Date or, if any extension of credit on the Closing Date has been requested, such Lender shall not have made available to the Administrative Agent on or prior to the Closing Date such Lender's Revolving Percentage of such requested extension of credit.
5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by each Loan Party in or pursuant to any Loan Document (i) that is qualified by materiality shall be true and correct, and (ii) that is not qualified by materiality, shall be true and correct in all material respects, in each case, on and as of such date as if made on and as of such date, except to the extent any such representation and warranty expressly relates to an earlier date, in which case such representation and warranty shall have been true and correct in all material respects (or all respects, as applicable) as of such earlier date.
(b) [Reserved].
(c) Availability. With respect to any requests for any Revolving Extensions of Credit, after giving effect to such Revolving Extension of Credit, the availability and borrowing limitations specified in Section 2.4 shall be complied with.
(d) Notices of Borrowing. The Administrative Agent shall have received a Notice of Borrowing in connection with any such request for extension of credit which complies with the requirements hereof, and attaching (i) an Advance Support/Reconciliation Worksheet and (ii) certifications that (A) the Adjusted Quick Ratio is at least 1.5:1.0 after giving effect to the requested credit extension as of the last date of the most recently ended month for which financial statements have been delivered hereunder and (B) to the knowledge of the Borrower, the requested credit extension will not cause the Adjusted Quick Ratio fall below 1.5: 1.0 as of the date of such credit extension.
(e) No Default. No Default or Event of Default shall have occurred and be continuing as of or on such date or after giving effect to the extensions of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder and each Revolving Loan Conversion shall constitute a representation and warranty by the Borrower as of the date of such extension of credit, Revolving Loan Conversion that the conditions contained in this Section 5.2 have been satisfied.
5.3 Post-Closing Conditions Subsequent. The Borrower shall satisfy each of the conditions subsequent to the Closing Date specified in this Section 5.3 to the satisfaction of the
Administrative Agent, in each case, by no later than the date specified for such condition below (or such later date as the Administrative Agent shall agree in its sole discretion):
(a) Within thirty (30) days after the Closing Date, (i) the Borrower shall have caused its Capital Stock to become certificated, and (ii) to the extent not delivered on or prior to the Closing
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Date, the Administrative Agent shall have received the certificates representing the shares of Capital Stock (to the extent constituting Certificated Securities) pledged to the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof.
(b) Within thirty (30) days after the Closing Date, to the extent not delivered on or prior to the Closing Date, the Administrative Agent shall have received insurance certificates and endorsements satisfying the requirements of Section 6.6 hereof and Section 5.2(b) of the Guarantee and Collateral Agreement, in form and substance reasonably satisfactory to the Administrative Agent.
(c) Within sixty (60) days after the Closing Date, the Loan Parties shall have delivered Control Agreements, in form and substance reasonably satisfactory to the Agent, with respect to each of their domestic Deposit Account and domestic Securities Account (in each case, other than Excluded Accounts (as defined in the Guarantee and Collateral Agreement) and Deposit Accounts maintained with the Administrative Agent); provided that a Control Agreement will be required with respect to the Borrower's customer funds account maintained with the Administrative Agent.
SECTION 6
AFFIRMATIVE COVENANTS
The Borrower agrees that, at all times prior to the Discharge of Obligations, the Borrower shall, and, where applicable, shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent:
(a) as soon as available, but in any event within 120 days after the end of each fiscal year of Holdings, a copy of the audited consolidated balance sheet of Holdings and its consolidated Subsidiaries as at the end of such fiscal year and the related audited consolidated statements of income and of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception (other than as a result of an upcoming scheduled maturity of the Obligations), or qualification arising out of the scope of the audit, by PWC or other independent certified public accountants of nationally recognized standing and reasonably acceptable to the Administrative Agent; and
(b) as soon as available, but in any event not later than 30 days after the end of each month occurring during each fiscal year of Holdings, (i) the unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the trailing twelve month period ending on the last day of such month, setting forth in each case in comparative form the figures for the corresponding periods of the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments and the absence of footnotes) and (ii) a report of transaction volume with respect to the Specified Customer Funds Accounts during such month, broken down by each account.
All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein, and, in the case of monthly financial statements, subject to normal year-end adjustments and the absence of footnotes) consistently throughout the periods reflected therein and with prior periods.
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6.2 Certificates; Reports; Other Information. Furnish (or, in the case of clause (a), use commercially reasonable efforts to furnish) to the Administrative Agent, for distribution to each Lender (or, in the case of clause (kj), to the relevant Lender):
(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), an annual risk assessment report prepared by the compliance officer of the Borrower in form substantially consistent with the risk assessment reports delivered under the Existing Credit Facility;
(b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii)(x) a Compliance Certificate containing all information and calculations necessary for determining compliance by each Group Member with the provisions of this Agreement referred to therein as of the last day of the month, fiscal quarter or fiscal year of Holdings, as the case may be, and (y) to the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization of any Loan Party since the date of the most recent report delivered pursuant to this clause (ii) (or, in the case of the first such report so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than the earlier of (i) 60 days after the end of each fiscal year of Holdings and (y) 45 days after approval by Holdings' board of directors, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of Holdings and its Subsidiaries as of the end of each fiscal quarter of such fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer of Holdings stating that such Projections are based on good faith estimates, information and assumptions believed by Holdings to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount;
(d) promptly, and in any event within 5 Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof (other than routine comment letters from the staff of the SEC relating to the Group Members' filings with the SEC);
(e) within 5 days after the same are sent, copies of each annual report, proxy or financial statement or other material report that any Group Member sends to the holders of any class of the its Indebtedness or public equity securities and, within 5 days after the same are filed, copies of all annual, regular, periodic and special reports and registration statements which any Group Member may file with the SEC under Section 13 or 15(d) of the Exchange Act, or with any national securities exchange, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(f) upon request by the Administrative Agent, within 5 days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any
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Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Applicable Law, and, in each case, that could reasonably be expected to have a Material Adverse Effect on any of the Governmental Approvals or otherwise on the operations of the Group Members;
(g) within 7 Business Days after the end of each month, a monthly detailed cash report as of the last day of such month, including the name and location of each of the Group Members' accounts and the balance within each such account;
(h) promptly once available (and in any case not less than once per calendar year), a copy of the annual audit report from an independent auditor of the Group Members' anti-money laundering program , including all findings of the audit, recommendations and action-items, if any;
(i) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a report of a reputable insurance broker with respect to the insurance coverage required to be maintained pursuant to Section 6.6, together with any supplemental reports with respect thereto which the Administrative Agent may reasonably request; and
(j) promptly after any request therefor, such additional financial and other information, including, without limitation, any certification or other evidence confirming any Loan Party's compliance with the terms of this Agreement, as the Administrative Agent or any Lender may from time to time reasonably request.
6.3 [Reserved].
6.4 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.
6.5 Maintenance of Existence; Compliance. (a)(i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain or obtain all Governmental Approvals and all other rights, privileges and franchises necessary in the normal conduct of its business or necessary for the performance by such Person of its Obligations under any Loan Document, except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) comply with all Contractual Obligations and Applicable Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; and (c) comply with all Governmental Approvals, and any term, condition, rule, filing or fee obligation, or other requirement related thereto, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, the Borrower shall, and shall cause each of its ERlSA Affiliates to: (1) maintain each Plan in compliance in all material respects with the applicable provisions of ERlSA, the Code or other Federal or state law; (2) cause each Qualified Plan to maintain its qualified status under Section 401(a) of the Code; (3) make all required contributions to any Plan; (4) not become a party to any Multiemployer Plan; (5) ensure that all liabilities under each Plan are either (x) funded to at least the minimum level required by law or, if higher, to the level required by the terms governing such Plan; (y) insured with a reputable insurance company; or (z) provided for or recognized in the financial statements most recently delivered to the Administrative Agent and the Lenders pursuant hereto; and (6) ensure that the contributions or premium payments to or in respect of each Plan are and continue to be promptly paid at no less than the rates required under the
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rules of such Plan and in accordance with the most recent actuarial advice received in relation to such Plan and Applicable Law.
6.6 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.
6.7 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Applicable Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives and independent contractors of the Administrative Agent and any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and upon 5 Business Days' notice (unless an Event of Default has occurred and is continuing, in which case no notice shall be required) and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with officers, directors and employees of the Group Members and with their independent certified public accountants; provided that such inspections shall not be undertaken more frequently than once every twelve (12) months, unless an Event of Default has occurred and is continuing, in which case such inspections and audits shall occur as often as the Administrative Agent shall reasonably determine is necessary.
6.8 Notices. Give prompt written notice to the Administrative Agent of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual Obligation of any Group Member that, if not cured could reasonably be expected to have a Material Adverse Effect or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority that if adversely determined, could reasonably be expected to have a Material Adverse Effect, in each case, after a Responsible Officer first has knowledge thereof;
(c) any litigation or proceeding affecting any Group Member (i) in which the amount involved is $1,000,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought against any Group Member but only if such relief could reasonably be expected to have a Material Adverse Effect or (iii) which relates to any Loan Document;
(d) (i) promptly after a Responsible Officer first has knowledge of the occurrence of any of the following ERISA Events affecting the Borrower or any ERISA Affiliate (but in no event more than ten days after such event), the occurrence of any of the following ERISA Events, and shall provide the Administrative Agent with a copy of any notice with respect to such event that may be required to be filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Borrower or any ERISA Affiliate with respect to such event, if such event could reasonably be expected to result in a liability in excess of $100,000 of any Loan Party or any of their respective ERISA Affiliates: (A) an ERISA Event, (B) the adoption of any new Pension Plan by the Borrower or any ERISA Affiliate, (C) the adoption of any amendment to a Pension Plan, if such amendment will result in a material increase in benefits or unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), or (D) the commencement of contributions by the Borrower or any ERISA Affiliate to any Plan that is subject to Title IV of ERISA or Section 412 of the Code; and
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(ii) (A) promptly after the giving, sending or filing thereof, or the receipt thereof, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates with the IRS with respect to each Pension Plan, (2) all notices received by the Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event, and (3) copies of such other documents or governmental reports or filings relating to any Plan as the Administrative Agent shall reasonably request; and (B), without limiting the generality of the foregoing, such certifications or other evidence of compliance with the provisions of Sections 4.13 and 7.9 as any Lender (through the Administrative Agent) may from time to time reasonably request;
(e) any changes to the beneficial ownership information set forth in the Collateral Information Certificate. The Loan Parties understand and acknowledge that the Secured Parties rely on such true, accurate and up-to-date beneficial ownership information to meet their regulatory obligations to obtain, verify and record information about the beneficial owners of their legal entity customers;
(f) any material change in accounting policies or financial reporting practices by any Loan Party; and
(g) any development or event that has had or could reasonably be expected to have a Material Adverse Effect after a Responsible Officer first has knowledge thereof.
Each notice pursuant to this Section 6.8 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Group Member proposes to take with respect thereto.
6.9 Environmental Laws.
(a) Comply in all material respects with, and use commercially reasonable efforts to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and use commercially reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.
6.10 Banking Relationship; Cash Management.
(a) Except for the Specified Customer Accounts, the Borrower's existing account with Stripe, Inc. and other payment processing accounts, de minimis accounts and except as otherwise approved by the Administrative Agent (such approval not to be unreasonably withheld, conditioned or delayed), the Group Members shall maintain all domestic depository and domestic securities accounts with a Lender or an Affiliate thereof, and the Borrower shall maintain at least one customer funds account with SVB.
(b) At all times, the Group Members shall maintain a cash management system, including flow of customer funds, substantially consistent with the cash management system maintained on the date hereof or otherwise reasonably acceptable to the Administrative Agent: provided that the
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Group Members will not be restricted from modifying or entering into new arrangements with payment processors.
6.11 Audits. At reasonable times, on 5 Business Days' prior notice (provided that no notice is required if an Event of Default has occurred and is continuing), the Administrative Agent, or its agents, shall have the right to inspect the Collateral and the right to audit and copy any and all of any Loan Party's books and records including ledgers, federal and state tax returns, records regarding assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information. The foregoing inspections and audits shall be at the Borrower's expense, and the charge therefor shall be $1,000 per person per day (or such higher amount as shall represent the Administrative Agent's then-current standard charge for the same), plus reasonable out-of-pocket expenses. Such inspections and audits shall not be undertaken more frequently than once every twelve (12) months unless an Event of Default has occurred and is continuing, in which case such inspections and audits shall occur as often as the Administrative Agent shall reasonably determine is necessary.
6.12 Additional Collateral, Etc.
(a) With respect to any property (to the extent included in the definition of Collateral and not constituting Excluded Assets) acquired after the Closing Date by any Loan Party (other than (x) any property described in paragraph (b), (c) or (d) below, and (y) any property subject to a Lien expressly permitted by Section 7.3(g)) as to which the Administrative Agent, for the benefit of the Secured Parties, does not have a perfected Lien, promptly (and in any event within ten Business Days or such longer period as the Administrative Agent shall agree in its sole discretion) (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent may reasonably deem necessary or advisable to evidence that such Loan Party is a Guarantor and to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in such property and (ii) take all actions necessary or advisable in the opinion of the Administrative Agent to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority (except as expressly permitted by Section 7.3) security interest and Lien in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent.
(b) With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $1,000,000 acquired after the Closing Date by any Loan Party (other than any such real property subject to a Lien expressly permitted by Section 7.3(g)), promptly (and in any event within ninety (90) days (or such longer time period as the Administrative Agent may agree in its sole discretion)) after such acquisition, to the extent requested by the Administrative Agent, (i) execute and deliver a first priority Mortgage, in favor of the Administrative Agent, for the benefit of the Secured Parties, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with title and extended coverage insurance covering such real property in an amount not in excess of the fair market value as reasonably estimated by the Borrower as well as a current ALTA survey thereof, together with a surveyor's certificate, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if reasonably requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. In connection with the foregoing, no later than five (5) Business Days prior to the date on which a Mortgage is executed and delivered pursuant to this Section 6.12, in order to comply with the Flood Laws, the
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Administrative Agent (for delivery to each Lender) shall have received the following documents (collectively, the "Flood Documents"): (A) a completed standard "life of loan" flood hazard determination form (a "Flood Determination Form") and such other documents as any Lender may reasonably request to complete its flood due diligence, (B) if the improvement(s) to the applicable improved real property is located in a special flood hazard area, a notification to the applicable Loan Party (if applicable) ("Loan Party Notice") that flood insurance coverage under the National Flood Insurance Program ("NFIP) is not available because the community does not participate in the NFIP, (C) documentation evidencing the applicable Loan Party's receipt of any such Loan Party Notice (e.g., countersigned Loan Party Notice, return receipt of certified U.S. Mail, or overnight delivery), and (D) if the Loan Party Notice is required to be given and, to the extent flood insurance is required by any applicable requirement of Applicable Law or any Lenders' written regulatory or compliance procedures and flood insurance is available in the community in which the property is located, a copy of one of the following: the flood insurance policy, the applicable Loan Party's application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has been issued, or such other evidence of flood insurance that complies with all applicable laws and regulations reasonably satisfactory to the Administrative Agent and each Lender (any of the foregoing being "Evidence of Flood Insurance"). Notwithstanding anything contained herein to the contrary, no Mortgage will be executed and delivered until each Lender has confirmed to the Administrative Agent that such Lender has satisfactorily completed its flood insurance due diligence and compliance requirements.
(c) With respect to any new direct or indirect Subsidiary (other than an Excluded Subsidiary) created or acquired after the Closing Date by any Loan Party (including pursuant to a Permitted Acquisition), any Subsidiary formed by Division or any Subsidiary no longer qualifying as an Excluded Subsidiary, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned directly by such Loan Party, (ii) deliver to the Administrative Agent such documents and instruments as may be reasonably required to grant, perfect, protect and ensure the priority of such security interest, including but not limited to, the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Loan Party, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions as are necessary or advisable in the opinion of the Administrative Agent to grant to the Administrative Agent for the benefit of the Secured Parties a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement, with respect to such Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such Subsidiary, in a form reasonably satisfactory to the Administrative Agent, with appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent; it being agreed that is such new Subsidiary is formed by Division, the foregoing requirements shall be satisfied substantially concurrently with the formation of such Subsidiary.
(d) With respect to any new direct Foreign Subsidiary that is an Excluded Subsidiary under clause (a) of the definition thereof and that is not an Immaterial Subsidiary or any new direct Foreign Subsidiary Holding Company that is an Excluded Subsidiary under clause (b) of the definition thereof, in each case, created or acquired after the Closing Date by any Loan Party , promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral
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Agreement, as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such Foreign Subsidiary or Foreign Subsidiary Holding Company that is directly owned by any such Loan Party (provided that in no event shall more than 66% of the total outstanding voting Capital Stock of any such new Foreign Subsidiary or Foreign Subsidiary Holding Company be required to be so pledged if pledging a greater amount of such voting Capital Stock could reasonably be expected to result in material adverse tax consequences), (ii) deliver to the Administrative Agent any certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Loan Party , and take such other action (including, as applicable, the delivery of any foreign law pledge documents reasonably requested by the Administrative Agent) as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if reasonably requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.
(e) At the request of the Administrative Agent, each Loan Party shall use commercially reasonable efforts to obtain a landlord's agreement or bailee letter, as applicable, from (i) the lessor its headquarters location and (ii) to the extent requested by the Administrative Agent, from the lessor of or the bailee relating to any other location in the United Sates where Collateral is stored or located with a value in excess of $1,000,000, which agreement or letter, in any such case, shall contain a waiver or subordination of all Liens or claims that the landlord or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to the Administrative Agent.
(f) Notwithstanding the foregoing, (i) in the case of Foreign Subsidiaries, all guarantees and security shall be subject to any applicable general mandatory statutory limitations, fraudulent preference, equitable subordination, foreign exchange laws or regulations (or analogous restrictions), transfer pricing or ''thin capitalization" rules, earnings stripping, exchange control restrictions, applicable maintenance of capital, retention of title claims, employee consultation or approval requirements, corporate benefit, financial assistance, protection of liquidity, and similar laws, rules and regulations and customary guarantee limitation language in the relevant jurisdiction; provided that the relevant Group Member shall use commercially reasonable endeavors to overcome such limitations (including by way of debt pushdown or seeking requisite approvals), and (ii) Subsidiaries may be excluded from the guarantee requirements in circumstances where (1) the Borrower and the Administrative Agent reasonably agree that the cost or other consequence of providing such a guarantee is excessive in relation to the value afforded thereby or (2) in the case of Foreign Subsidiaries, such requirements would contravene any legal prohibition, could reasonably be expected to result in any violation or breach of, or conflict with, fiduciary duties or result in a risk of personal or criminal liability on the part of any officer, director, member or manager of such Subsidiary ; provided that the relevant Loan Party shall use commercially reasonable endeavors to overcome such limitations. As a result of the limitations in clause (i) above, the Administrative Agent may elect to waive the requirement to cause a Group Member to become a Guarantor hereunder and such Group Member shall not be a Loan Party for any purposes hereof.
6.13 Use of Proceeds. Use the proceeds of each credit extension only for the purposes specified in Section 4.16.
6.14 Designated Senior Indebtedness. Cause the Loan Documents and all of the Obligations to be deemed "Designated Senior Indebtedness" or a similar concept thereto, if applicable, for purposes of any Indebtedness of the Loan Parties.
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6.15 Anti-Corruption Laws; AML Laws. Conduct its business in compliance with all applicable Anti-Corruption Laws, AML Laws and Sanctions and maintain policies and procedures designed to promote and achieve compliance by Holdings and its Subsidiaries and their respective directors, officers, employees, agents and affiliates with applicable Anti-Corruption Laws, AML Laws and Sanctions.
6.16 Further Assurances. Execute any further instruments and take such further action as the Administrative Agent reasonably deems necessary to perfect, protect, ensure the priority of or continue the Administrative Agent's Lien on the Collateral or to effect the purposes of this Agreement.
6.17 Required Capital Raise. Between May 1, 2019 and September 30, 2019, Holdings shall have received (and shall have contributed to the Borrower) proceeds of at least $100,000,000 (the "Required Capital Raise") from the issuance of Capital Stock (other than Disqualified Stock).
SECTION 7
NEGATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, at all times prior to the Discharge of Obligations, neither Holdings nor the Borrower shall, nor shall Holdings and the Borrower permit any of their respective Subsidiaries, to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Minimum Adjusted Quick Ratio. Permit the Adjusted Quick Ratio as of the last day of any month to be less than 1.50:1.00.
(b) Minimum Consolidated Adjusted EBITDA. Permit Consolidated Adjusted EBITDA for any period of twelve consecutive trailing months set forth below to be less than the correlative amount specified below opposite such fiscal quarter:
Quarter Ending | Minimum Consolidated Adjusted EBITDA | ||||
September 30 2020 | ($55,000,000) | ||||
MarehDecember 31, 2020 March 31 2021 | $(45,000,000)($51,000,000) | ||||
| March 31, 2021 | $(47,000,000.00) | ||||
June 30, 20202021 | ($55,000,000)($45,000,000) | ||||
September 30, 20202021 | ($57,000,000)($45,000,000) | ||||
December 31, 20202021 | ($57,000,000)($41,000,000) | ||||
March 31, 20212022 | ($57,000,000)($37,000,000) | ||||
June 30, 20212022 | ($55,000,000)($31,000,000) | ||||
September 30, 20212022 | ($52,500,000)($26,000,000) | ||||
December 31, 20212022 | ($50,000,000)($21,000,000) | ||||
March 31, 20222023 | ($45,000,000)($13,000,000) | ||||
June 30, 2022 2023 | ($40,000,000)($4,000,000) | ||||
| September 30 2023 | $(5,000,000.00) | ||||
7.2 Indebtedness. Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document and under any
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Cash Management Agreement;
(b) Indebtedness of (i) any Loan Party owing to any other Loan Party; (ii) any Group Member (which is not a Loan Party) owing to any other Group Member (which is not a Loan Party); (iii) any Group Member (which is not a Loan Party) owing to any Loan Party, which constitutes an Investment permitted by Section 7.8(f)(iii); provided, that, such Indebtedness owing from any Group Member (which is not a Loan Party) to a Loan Party shall be evidenced by a master promissory note and such promissory note shall be pledged as Collateral; and (iv) any Loan Party owing to any Group Member (which is not a Loan Party); provided that such Indebtedness is subordinated to the Obligations on terms and conditions reasonably acceptable to the Administrative Agent;
(c) Guarantee Obligations (i) of any Loan Party of the Indebtedness of any other Loan Party; (ii) of any Group Member (which is not a Loan Party) of the Indebtedness of any Loan Party; (iii) by any Group Member (which is not a Loan Party) of the Indebtedness of any other Group Member (which is not a Loan Party) or (iv) of any Loan Party of the Indebtedness of any Group Member that is not a Loan Party, so long as the aggregate amount of such Guarantee Obligations is an Investment permitted by Section 7.8(f)(iii); provided that, in any case of clauses (i), (ii), (iii) or (iv), the underlying Indebtedness so guaranteed is otherwise permitted by the terms hereof;
(d) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(d) and any refinancings, refundings, renewals or extensions thereof (which do not shorten the maturity thereof or increase the principal amount thereof);
(e) Indebtedness (including, without limitation, Capital Lease Obligations and purchase money financing) secured by Liens permitted by Section 7.3(g) in an aggregate principal amount not to exceed $2,500,000 at any one time outstanding (or such greater amount as the Administrative Agent shall agree in its sole discretion) and any refinancings, refundings, renewals or extensions thereof (which do not shorten the maturity thereof or increase the principal amount thereof);
(f) Surety Indebtedness and any other Indebtedness in respect of letters of credit, banker's acceptances or similar arrangements, in each case, in favor of state, federal and foreign agencies and regulatory authorities in connection with the Group Members' licensing and, registration and regulatory requirements in the ordinary course of business. provided that the aggregate amount of any such Indebtedness outstanding at any time shall not exceed $50,000,00075,000,000;
(g) [reserved]other Indebtedness in respect of letters of credit in an aggregate face amount not to exceed $5,000,000 at any time;
(h) other Indebtedness of Holdings and its Subsidiaries in an aggregate principal amount, for all such Indebtedness taken together, not to exceed $1,000,000 at any one time outstanding;
(i) obligations (contingent or otherwise) of the Borrower or any of its Subsidiaries existing or arising under any Swap Agreement, provided that such obligations are (or were) entered into by such Person in accordance with Section 7.13 and not for purposes of speculation;
(j) Indebtedness of a Person (other than the Borrower or a Subsidiary) existing at the time such Person is merged with or into a Subsidiary of Holdings or becomes a Subsidiary of Holdings, provided that (i) such Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition, (ii) such merger or acquisition constitutes a Permitted Acquisition, (iii) with respect to any such Person who becomes a Subsidiary, (A) such Subsidiary is the only obligor in respect of such Indebtedness, and (B) to the extent such Indebtedness is
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permitted to be secured hereunder, only the assets of such Subsidiary secure such Indebtedness, and (iv) the aggregate principal amount of such Indebtedness shall not exceed $1,000,000 at any time outstanding;
(k) Indebtedness in the form of purchase price adjustments, earn-outs, deferred compensation, or other arrangements representing acquisition consideration or deferred payments of a similar nature incurred in connection with any Permitted Acquisition or other Investment permitted by Section 7.8 which amount shall be deemed part of the cost of such acquisition or other Investment (collectively, "Deferred Payment Obligations"), the amount of which shall be deemed to be the amount required to be accrued as a liability in accordance with GAAP or the amount actually paid;
(1) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(m) Indebtedness consisting of the financing of insurance premiums;
(n) Indebtedness incurred in connection with electronic funds transfer, automatic clearing house arrangements, merchant services and other similar arrangements incurred in the ordinary course of business, but excluding overdraft facilities;
(o) Indebtedness incurred in connection with cash management services (excluding overdraft facilities), including treasury, depository, overdraft, credit or debit card or purchase cards, not to exceed $1,000,0002,000,000 at any one time outstanding (or such greater amount as the Administrative Agent shall agree in its sole discretion); and
(p) (i) Indebtedness of any Group Member the proceeds of which shall be used solely to support post-funding arrange ments for remittances disburs ed in foreign eountrie sincurred in connection with any Post Funding Line of Credit not to exceed $50,000,000 (or such greater amount as the Administrative Agent shall agree in its sole discretion) at any one time outstanding, and (ii) Indebtedness of any Foreign Subsidiary in an aggregate principal amount, for all such Indeb tedne ss taken together under clauses- (i) and (ii), not to exceed $10,000,000 (or such greater amount as the Administrative Agent shall agree in its sole discretion) at any one time outstanding;
(q) an unsecured daylight overdraft facility with Wells Bank, N.A. or an Affiliate thereof; and
(r) Indebtedness in respect of other daylight overdraft facilities so long as the outstanding amount thereunder does not exceed $1,000,000 at the end of any Business Day.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings; provided that adequate reserves with respect thereto are maintained on the books of the applicable Group Member in conformity with GAAP;
(b) carriers', warehousemen's, landlord's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;
(c) pledges or deposits made in connection with workers' compensation, unemployment insurance, employment insurance, other social security legislation and other similar obligations in the ordinary course of business;
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(d) pledges or deposits made to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business (other than for indebtedness or any Liens arising under ERISA);
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Group Member;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f); provided that (i) no such Lien is spread to cover any additional property after the Closing Date, (ii) the amount of Indebtedness secured or benefitted thereby is not increased, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured thereby is permitted by Section 7 .2(d):
(g) Liens securing Indebtedness incurred pursuant to Section 7.2(e) to finance the acquisition of, construction or improvement of any fixed or capital assets; provided that (i) such Liens shall be created substantially simultaneously with, or within 90 days after, the acquisition or the completion of such completion of such construction or improvement of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, and (iii) the amount of Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor, sublessor, licensor or sublicensor under any lease, sublease, license or sublicense entered into by a Group Member in the ordinary course of its business and covering only the assets or real property so leased, subleased, licensed or sublicensed;
(j) judgment Liens that do not constitute a Default or an Event of Default under
Section 8.l(h) of this Agreement;
(k) without duplication of Liens described in clause (r) below, bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash, Cash Equivalents, securities, commodities and other funds on deposit in one or more accounts maintained by a Group Member, in each case arising in the ordinary course of business in favor of banks, other depository institutions, securities or commodities intermediaries or brokerages with which such accounts are maintained securing amounts owing to such banks or financial institutions with respect to cash management and operating account management (excluding overdraft facilities) or are arising under Section 4-208 or 4-210 of the UCC on items in the course of collection;
(1) (i) cash deposits and liens on cash and Cash Equivalents pledged to secure Indebtedness permitted under SeetionSections 7.2(f) and (g), (ii) Liens securing reimbursement obligations with respect to letters of credit permitted by SectionSections 7 .2(f) and (g) that encumber documents and other property relating to such letters of credit, and (iii) Liens securing Obligations under any Swap Agreements permitted by Section 7 .2(i):
(m) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with a Group Member or becomes a Subsidiary of a Group Member or acquired by a Group Member: provided that (i) such Liens were not created in contemplation of such acquisition, merger, consolidation or Investment, (ii) such Liens do not extend to any assets other than
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those of such Person, and (iii) the applicable Indebtedness secured by such Lien is permitted under Section 7 .2;
(n) the replacement, extension or renewal of any Lien permitted by clause (m) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Indebtedness secured thereby;
(o) Liens on insurance proceeds in favor of insurance companies granted solely to secured financed insurance premiums;
(p) Liens in favor of custom and revenue authorities arising as a matter of law to secure the payment of custom duties in connection with the importation of goods;
(q) Liens on any earnest money deposits required in connection with a Permitted Acquisition or consisting of earnest money deposits required in connection with an acquisition of property not otherwise prohibited hereunder;
(r) Liens on cash or cash equivalents in an aggregate amount not to exceed
$10,000,000 (or such greater amount as the Administrative Agent shall agree in its sole discretion) securing obligations in respect of (i) the Group Members' processing accounts maintained with Wells Fargo Bank, National Association, Stripe, Inc. and other payment processors identified in writing to the Administrative Agent and (ii) transfer and foreign currency exchange accounts;
(s) Liens securing assets of the Group Members to secure Indebtedness described in
SeetionSections 7.2(p) and (r);
(t) Liens securing licensing and regulatory requirements in the ordinary course of business;
(u) Liens arising from precautionary UCC financing statements filed under any lease;
(v) Liens, claims or rights of any Governmental Authority or customers with respect to Specified Customer Accounts and customer funds pursuant to applicable money transmission laws and other requirements of Applicable Law;
(w) (i) non-exclusive licenses of patents, trademarks, copyrights, and other Intellectual Property rights in the ordinary course of business; and (ii) licenses of patents, trademarks, copyrights, and other Intellectual Property rights customary for companies of similar size and in the same industry as Borrower which would not result in a legal transfer of title of such licensed Intellectual Property, but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discrete geographical areas outside of the United States; and
(x) other Liens securing obligations in an outstanding amount not to exceed $1,000,000 at any one time.
Notwithstanding the foregoing, no Group Member shall permit any Lien on any of its Intellectual Property other than Liens arising by operation of Applicable Law and Liens described in Section 7.3(w) that in each case, do not secure any Indebtedness for borrowed money.
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7.4 Fundamental Changes. Consummate any merger, consolidation, amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that:
(a) (i) any Group Member that is not a Loan Party may be merged, amalgamated or consolidated with or into (A) any Loan Party (provided that a Loan Party shall be the continuing or surviving Person, or the continuing or surviving Person shall become a Loan Party substantially contemporaneous with such merger, amalgamation or consolidation) or (B) any Group Member that is not a Loan Party, and (ii) any Loan Party may be merged, amalgamated or consolidated with or into with any other Loan Party (provided that if such merger, amalgamation or consolidation involves the Borrower, the Borrower shall be the continuing or surviving Person);
(b) (i) any Group Member that is not a Loan Party may Dispose of any or all of its assets (including upon voluntary liquidation, dissolution or otherwise) (A) to any other Group Member or (B) pursuant to a Disposition permitted by Section 7.5; and (ii) any Loan Party (other than the Borrower) may Dispose of any or all of its assets (including upon voluntary liquidation, dissolution or otherwise) (A) to any other Loan Party or (B) pursuant to a Disposition permitted by Section 7.5; and
(c) any Investment not prohibited by Section 7.8 may be structured as a merger, consolidation or amalgamation.
7.5 Disposition of Property. Dispose of any of its property, whether now owned or hereafter acquired, or, in the case of any Subsidiary of Holdings, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) Dispositions of obsolete, worn out or no longer useful property in the ordinary course of business;
(b) Dispositions of inventory in the ordinary course of business;
(c) Dispositions permitted by Sections 7.4(b)(i)(A) and (b)(ii)(A);
(d) the sale or issuance of the Capital Stock of any Subsidiary of the Borrower (i) to the Borrower or any other Loan Party, or (ii) in connection with any transaction that does not result in a Change of Control;
(e) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents;
(f) the non-exclusive licensing of patents, trademarks, copyrights, and other Intellectual Property rights in the ordinary course of business; and (ii) licensing of patents, trademarks, copyrights, and other Intellectual Property rights customary for companies of similar size and in the same industry as Borrower which would not result in a legal transfer of title of such licensed Intellectual Property, but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discrete geographical areas outside of the United States;
(g) the Disposition of property (i) from any Loan Party to any other Loan Party, and (ii) from any Group Member (which is not a Loan Party) to any other Group Member; provided that in each case in which there is a Lien over the relevant property in favor of the Administrative Agent in advance of the Disposition, an equivalent Lien will be granted to the Administrative Agent by the Group Member which acquires the property;
(h) Dispositions of property subject to a Casualty Event;
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(i) leases or subleases of real property;
(j) the sale, transfer, disposition or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;
(k) any abandonment, cancellation, non-renewal or discontinuance of use or maintenance of Intellectual Property (or rights relating thereto) of any Group Member that the Borrower determines in good faith is desirable in the conduct of its business and not materially disadvantageous to the interests of the Lenders;
(1) Restricted Payments permitted by Section 7.6, Investments permitted by Section
7.8 and Liens permitted by Section 7.3;
(m) dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property; and
(n) Dispositions of other property having a fair market value not to exceed $500,000 in the aggregate for any fiscal year of Holdings, provided that at the time of any such Disposition, no Event of Default shall have occurred and be continuing or would result from such Disposition;
provided however. that any Disposition made pursuant to this Section 7.5 (other than Dispositions (x) solely between Loan Parties, (y) Dispositions solely between Group Members that are not Loan Parties or (z) Dispositions between a Loan Party and a Group Member that is not a Loan Party in which the terms thereof in favor of a Loan Party are at least arm's length terms) shall be made in good faith on an arm's length basis for fair value (as determined in good faith by the Board of Directors of Holdings).
7.6 Restricted Payments. Make any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness, pay any Deferred Payment Obligations, declare or pay any dividend (other than dividends payable solely in Capital Stock that is not Disqualified Stock) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Group Member, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Group Member (collectively, "Restricted Payments"), except that, so long as no Event of Default shall have occurred and be continuing at the time of any action described below or would result therefrom:
(a) any Group Member may make Restricted Payments to any Loan Party (other than Holdings), and any Group Member that is not a Loan Party may make Restricted Payments to any other Group Member;
(b) each Loan Party may (i) purchase common stock or common stock options from present or former officers or employees of any Group Member upon the death, disability or termination of employment of such officer or employee; provided that the aggregate amount of payments made under this clause (i) shall not exceed $5,000,000 during the term of this Agreement and immediately after giving effect to such payment, the Borrower and its Subsidiaries shall be in compliance with each of the covenants set forth in Section 7.1, based upon (if requested by the Administrative Agent) financial statements delivered to the Administrative Agent which give pro forma effect to such payment, and (ii)
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declare and make dividend payments or other distributions payable solely in the Capital Stock (other than Disqualified Stock) of Holdings;
(c) the Group Members may pay dividends to Holdings in an amount not to exceed $1,000,000 during any fiscal year;
(d) the Group Members may make payments in respect of Deferred Payment Obligations consisting of purchase price adjustments in connection with a Permitted Acquisition;
(e) Holdings and its Subsidiaries may make payments in respect of Deferred Payment Obligations (other than purchase price adjustments) so long as (i) immediately after giving effect to such payment, the Borrower and its Subsidiaries shall be in compliance with each of the covenants set forth in Section 7.1 on a Pro Forma Basis as of the last day of the most recent month (in the case of Section 7.l(a)) or quarter (in the case of Section 7.l(b)) for which financial statements have been delivered pursuant to Section 6.1(b), and (ii) the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent (including, if requested by the Administrative Agent, financial statements giving pro forma effect to such payments), certifying that all of the requirements set forth in this clause (e) have been satisfied or will be satisfied on or prior to the consummation of such payment;
(f) any Group Member may make payments in respect of Subordinated Indebtedness solely to the extent such payment is made in accordance with Section 7.21;
(g) Holdings may make Restricted Payments to redeem in whole or in part any of its Capital Stock for another class of its Capital Stock or rights to acquire its Capital Stock or with proceeds from substantially concurrent equity contributions or issuances of new Capital Stock; provided that the only consideration paid for any such redemption is Capital Stock (other than Disqualified Stock) of Holdings or the proceeds of any substantially concurrent equity contribution or issuance of Capital Stock (other than Disqualified Stock);
(h) Holdings may repurchase fractional shares of its Capital Stock arising out of stock dividends, splits or combinations, business combinations or conversions of convertible securities or exercises of warrants or options;
(i) Holdings may redeem or otherwise cancel Capital Stock or rights in respect thereof granted to (or make payments on behalf of) directors, officers, employees or other providers of services to the Group Members in an amount required to satisfy tax withholding obligations relating to the vesting, settlement or exercise of such Capital Stock or rights;
(j) to the extent cashless, Holdings may repurchase Capital Stock deemed to occur upon the exercise of options or warrants if such repurchased Capital Stock represents a portion of the exercise price of such options or warrants;
(k) repurchases of Capital Stock and Capital Stock options pursuant to a tender offer made in connection with a substantially concurrent equity contribution or issuance of Capital Stock and/or Capital Stock Options (in each case, other than Disqualified Stock); provided that the only consideration paid for any such repurchase is Capital Stock and/or Capital Stock Options (in each case, other than Disqualified Stock) or the proceeds of any substantially concurrent equity contribution or issuance of Capital Stock and/or Capital Stock Options (in each case, other than Disqualified Stock) (plus up to $250,000 of transaction expenses in any fiscal year in connection therewith, which for the avoidance of doubt, may be funded by the Borrower, rather than from proceeds of any such equity contribution or issuance); and
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(1) the Borrower and its Subsidiaries may make Restricted Payments not otherwise permitted by one of the foregoing clauses of this Section 7.6; provided that the aggregate amount of all such Restricted Payments made pursuant to this clause (1) shall not exceed $500,000 in any fiscal year.
7.7 [Reserved].
7.8 Investments. Make any advance, loan, extension of credit (by way of guarantee or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) (i) Investments in cash and Cash Equivalents and (ii) any Investments permitted by the Borrower's investment policy, if any, approved by the Borrower's board of directors, as adopted and amended from time to time, provided that such investment policy (and any amendment thereto) has been approved in writing by the Administrative Agent;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of any Group Member in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $250,000 at any one time outstanding (or such greater amount as the Administrative Agent shall agree in its sole discretion);
(e) Investments in Swap Agreements permitted under Section 7.13;
(f) intercompany Investments by (i) any Loan Party in any other Loan Party, (ii) any Group Member that is not a Loan Party in any other Group Member, (iii) any Loan Party in any Group Member that is not a Loan Party to fund any requirements under Applicable Law with respect to the initial capitalization of such Group Member; or (iii) other Investments by any Loan Party in any Group Member that is not a Loan Party to the extent that (A) no Default or Event of Defaults exists or would result therefrom and (B) such Investments do not exceed $5,000,000 at any one time outstanding (or such greater amount as the Administrative Agent shall agree in its sole discretion);
(g) Investments in the ordinary course of business consisting of endorsements of negotiable instruments for collection or deposit;
(h) Investments received in settlement of amounts due to any Group Member effected in the ordinary course of business or owing to such Group Member as a result of Insolvency Proceedings involving an account debtor or upon the foreclosure or enforcement of any Lien in favor of such Group Member;
(i) Investments held by any Person as of the date such Person is acquired in connection with a Permitted Acquisition, provided that (A) such Investments were not made, in any case, by such Person in connection with, or in contemplation of, such Permitted Acquisition, and (B) with respect to any such Person which becomes a Subsidiary as a result of such Permitted Acquisition, such Subsidiary remains the only holder of such Investment;
(j) [reserved];
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(k) deposits made to secure the performance of leases, licenses or contracts in the ordinary course of business, and other deposits made in connection with the incurrence of Liens permitted under Section 7.3;
(1) promissory notes and other noncash consideration received in connection with Dispositions permitted by Section 7.5, to the extent not exceeding the limits specified therein with respect to the receipt of noncash consideration in connection with such Dispositions;
(m) purchases or other acquisitions by any Group Member of the Capital Stock in a Person that, upon the consummation thereof, will be a Subsidiary (including as a result of a merger or consolidation) or all or substantially all of the assets of, or assets constituting one or more business units of, any Person (each, a "Permitted Acquisition"); provided that, with respect to each such purchase or other acquisition:
(i) the newly-created or acquired Subsidiary (or assets acquired in connection with such asset sale) shall be (x) in the same or a related line of business as that conducted by the Borrower on the date hereof, or (y) in a business that is permitted by Section 7.17;
(ii) all transactions related to such purchase or acquisition shall be consummated in all material respects in accordance with all Applicable Law;
(iii) no Loan Party shall, as a result of or in connection with any such purchase or acquisition, assume or incur any direct or contingent liabilities (whether relating to environmental, tax, litigation or other matters) that, as of the date of such purchase or acquisition, could reasonably be expected to result in the existence or incurrence of a Material Adverse Effect, as determined by the board of directors of Holdings in good faith;
(iv) the Borrower shall give the Administrative Agent at least ten (10) Business Days' prior written notice of any such purchase or acquisition;
(v) the Borrower shall provide to the Administrative Agent as soon as available but in any event not later than five (5) Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to any such purchase or acquisition;
(vi) any such newly-created or acquired Subsidiary , or the Loan Party that is the acquirer of assets in connection with an asset acquisition, shall comply with the requirements of Section 6.12, except to the extent compliance with Section 6.12 is prohibited by pre-existing Contractual Obligations or Applicable Law binding on such Subsidiary or its properties;
(vii) (x) immediately before and immediately after giving effect to any such purchase or other acquisition, no Default or Event of Default shall have occurred and be continuing and (y) immediately after giving effect to such purchase or other acquisition, Holdings and its Subsidiaries shall be in compliance with each of the covenants set forth in Section 7.1, based upon financial statements delivered to the Administrative Agent which give effect, on a Pro Forma Basis, to such acquisition or other purchase;
(viii) the Borrower shall not, based upon the knowledge of the Borrower as of the date any such acquisition or other purchase is consummated, reasonably expect such acquisition or other purchase to result in a Default or an Event of Default under Section 8.1(c), at any time during the term of this Agreement, as a result of a breach of any of the financial covenants set forth in Section 7.1;
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(ix) no Indebtedness is assumed or incurred in connection with any such purchase or acquisition other than Indebtedness permitted by the terms of Section 7.2(j);
(x) such purchase or acquisition shall not constitute an Unfriendly Acquisition;
(xi) (A) the aggregate amount of the consideration (excluding Capital Stock of the Borrower that is not Disqualified Stock, but including Deferred Payment Obligations unless repaid with Capital Stock of Holdings that is not Disqualified Stock) paid by such Group Member in connection with any particular Permitted Acquisition shall not exceed $5,000,000, and (B) the aggregate amount of the consideration (excluding Capital Stock of the Borrower that is not Disqualified Stock, but including Deferred Payment Obligations unless repaid with Capital Stock of Holdings that is not Disqualified Stock) paid by all Group Members in connection with all such Permitted Acquisitions consummated from and after the Closing Date shall not exceed $15,000,000; and
(xii) the Borrower shall have delivered to the Administrative Agent, at least 5 Business Days prior to the date on which any such purchase or other acquisition is to be consummated (or such later date as is agreed by the Administrative Agent in its sole discretion), a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this definition have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition; and
(n) so long as no Event of Default exists at the time of such Investment or immediately after giving effect thereto, in addition to the Investments otherwise expressly permitted by this Section 7.8, Investments by the Group Members in an aggregate amount for all such Investments (valued at cost) not to exceed $1,000,000 during any fiscal year of Holdings.
7.9 ERISA. The Borrower shall not, and shall not permit any of its ERISA Affiliates to: (a) terminate any Pension Plan so as to result in any material liability to the Borrower or any ERISA Affiliate, (b) permit to exist any ERISA Event, or any other event or condition, which presents the risk of a material liability to any ERISA Affiliate, (c) make a complete or partial withdrawal (within the meaning of ERISA Section 4201) from any Multiemployer Plan so as to result in any material liability to the Borrower or any ERISA Affiliate, (d) enter into any new Plan or modify any existing Plan so as to increase its obligations thereunder which could result in any material liability to any ERISA Affiliate, (e) permit the present value of all nonforfeitable accrued benefits under any Plan (using the actuarial assumptions utilized by the PBGC upon termination of a Plan) materially to exceed the fair market value of Plan assets allocable to such benefits, all determined as of the most recent valuation date for each such Plan, or (f) engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by the Administrative Agent or any Lender of any of its rights under this Agreement, any Note or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA or Section 4975 of the Code.
7.10 Optional Payments and Modifications of Certain Preferred Stock and Debt Instruments. (a) Amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Preferred Stock (i) that would move to an earlier date the scheduled redemption date (but only to the extent that moving any such scheduled redemption date would result in the redemption to be prior to ninety-one (91) days after the Maturity Date) or increase the amount of any scheduled redemption payment or increase the rate or move to an earlier date any date for payment of dividends thereon or (ii) that could reasonably be expected to be otherwise materially adverse to any Lender or any other Secured Party; or (b) other than pursuant to any refinancing or replacement of Indebtedness permitted by Section 7.2, amend, modify, waive or otherwise
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change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of any Indebtedness permitted by Section 7.2 (other than Indebtedness pursuant to any Loan Document and Subordinated Indebtedness which is addressed in Section 7.21) that would shorten the maturity (but only to the extent such shortening, would result in the maturity of such Indebtedness to be prior to ninety-one (91) days after the Maturity Date) or increase the amount of any payment of principal thereof or the rate of interest thereon or shorten any date for payment of interest thereon or that could reasonably be expected to be otherwise materially adverse to any Lender or any other Secured Party.
7.11 Transactions with Affiliates. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than any other Loan Party) except, (a) transactions otherwise permitted under this Agreement, (b) payment of reasonable compensation to directors, officers and employees for services actually rendered, and payment of customary directors', officers' and employees' indemnification claims, (c) transactions among Group Members in respect of transfer pricing, cost plus and cost sharing arrangements in the ordinary course of business and on terms not less favorable to the Borrower or Holdings, as applicable than could be obtained on an arm's-length basis from unrelated third parties, (d) transactions solely among Loan Parties, and (e) other transactions in the ordinary course of business of the relevant Group Member, upon fair and reasonable terms no less favorable to the relevant Group Member than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate.
7.12 Sale Leaseback Transactions. Enter into any Sale Leaseback Transaction, except in connection with transactions that would be permitted under this Section 7.
7.13 Swap Agreements. Enter into any Swap Agreement, except Swap Agreements which are entered into by a Group Member to (a) hedge or mitigate risks to which such Group Member has actual exposure (other than those in respect of Capital Stock), or (b) effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of such Group Member.
7.14 Accounting Changes. Make any change in its (a) accounting policies or reporting practices, except as required by GAAP, or (b) fiscal year.
7.15 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure its Obligations under the Loan Documents to which it is a party, other than (a) this Agreement and the other Loan Documents, (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (c) customary restrictions on the assignment of leases, licenses and other agreements, (d) customary provisions in joint venture agreements and similar agreements that restrict transfer of assets of, or equity interests in, joint ventures, (e) any agreement in effect at the time any Subsidiary becomes a Subsidiary of a Loan Party, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary or, in any such case, that is set forth in any agreement evidencing any amendments, restatements, supplements, modifications, extensions, renewals and replacements of the foregoing, so long as such amendment, restatement, supplement, modification, extension, renewal or replacement applies only to such Subsidiary and does not otherwise expand in any material respect the scope of any restriction or condition contained therein, and (f) any restriction pursuant to any document, agreement or instrument governing or relating to any Lien permitted under Sections 7.3(c), (m) and (n) or any agreement or option to Dispose any asset of any Group Member, the
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Disposition of which is permitted by any other provision of this Agreements (in each case, provided that any such restriction relates only to the assets or property subject to such Lien or being Disposed.
7.16 Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or to pay any Indebtedness owed to, any other Group Member, (b) make loans or advances to, or other Investments in, any other Group Member, or (c) transfer any of its assets to any other Group Member, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with a Disposition permitted hereby of all or substantially all of the Capital Stock or assets of such Subsidiary, (iii) customary restrictions on the assignment of leases, licenses and other agreements, (iv) restrictions of the nature referred to in clause (c) above under agreements governing purchase money liens or Capital Lease Obligations otherwise permitted hereby which restrictions are only effective against the assets financed thereby, or (v) any agreement in effect at the time any Subsidiary becomes a Subsidiary of a Borrower, so long as such agreement applies only to such Subsidiary, was not entered into solely in contemplation of such Person becoming a Subsidiary or in each case that is set forth in any agreement evidencing any amendments, restatements, supplements, modifications, extensions, renewals and replacements of the foregoing, so long as such amendment, restatement, supplement, modification, extension, renewal or replacement does not expand in any material respect the scope of any restriction or condition contained therein, or (vi) any restriction pursuant to any document, agreement or instrument governing or relating to any Lien permitted under Section 7.3(c), (m) and (n) (provided that any such restriction relates only to the assets or property subject to such Lien or being Disposed).
7.17 Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which Holdings and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related, complementary, ancillary or incidental thereto.
7.18 Designation of other Indebtedness. Designate any Indebtedness or indebtedness other than the Obligations as "Designated Senior Indebtedness" or a similar concept thereto, if applicable.
7.19 Amendments to Organizational Agreements and Material Contracts. (a) Amend or permit any amendments to any Loan Party's organizational documents if such amendment would be adverse to the Administrative Agent or the Lenders in any material respect; or (b) amend or permit any amendments to, or terminate or waive any provision of, any material Contractual Obligation if such amendment, termination, or waiver could reasonably be excepted to have a Material Adverse Effect.
7.20 Use of Proceeds. Use the proceeds of any Loan or extension of credit hereunder, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the Board) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose, in each case in violation of, or for a purpose which violates, or would be inconsistent with, Regulation T, U or X of the Board; (b) to finance an Unfriendly Acquisition; (c) to fund any activities of or business with any individual or entity that, at the time of such funding, is a Sanctioned Person, or in any other manner that will result in a violation by any individual or entity (including any individual or entity participating in the transaction, whether as Lender, Arranger, Administrative Agent, the Issuing Lender, the Swingline Lender, or otherwise) of Sanctions (or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other individual or entity in violation of the foregoing); or (d) for any purpose which would breach applicable Anti-Corruption Laws or AML Laws.
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7.21 Subordinated Debt.
(a) Amendments. Amend, modify, supplement, waive compliance with, or consent to noncompliance with, any Subordinated Debt Document, unless the amendment, modification, supplement, waiver or consent (i) does not adversely affect the Borrower's or any of Holdings' or any of its Subsidiaries', as applicable, ability to pay and perform each of its Obligations at the time and in the manner set forth herein and in the other Loan Documents and is not otherwise adverse to the Administrative Agent and the Lenders, and (ii) is in compliance with the subordination provisions therein and any subordination agreement with respect thereto in favor of the Administrative Agent and the Lenders.
(b) Payments. Make any payment (including any interest payment, other than paid-in-king interest), prepayment or repayment on, redemption, exchange or acquisition for value of, any sinking fund or similar payment with respect to, any Subordinated Indebtedness, except as permitted by the subordination provisions in the applicable Subordinated Debt Documents and any subordination agreement with respect thereto in favor of the Administrative Agent and the Lenders.
7.22 Anti-Terrorism Laws. Conduct, deal in or engage in or permit any Affiliate or agent of any Loan Party within its control to conduct, deal in or engage in any of the following activities: (a) conduct any business or engage in any transaction or dealing with any person blocked pursuant to Executive Order No. 13224 (a "Blocked Person"), including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person; (b) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224; or (c) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or the Patriot Act.
SECTION 8
EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any of the following shall constitute an Event of Default:
(a) the Borrower shall fail to pay any amount of principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any amount of interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within three (3) Business Days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document (i) if qualified by materiality, shall be incorrect or misleading when made or deemed made, or (ii) if not qualified by materiality, shall be incorrect or misleading in any material respect when made or deemed made; or
(c) (i) any Loan Party shall default in the observance or performance of any agreement contained in, Section 5.3, Section 6.1, Section 6.2, clause (i) or (ii) of Section 6.5(a), Section 6.6(b), Section 6.8(a), Section 6.10, or Section 7 of this Agreement or (ii) an "Event of Default" under and as defined in any Security Document shall have occurred and be continuing; or
(d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in
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paragraphs (a) through (c) of this Section 8.1), and such default shall continue unremedied for a period of 30 days thereafter; or
(e) (i) any Group Member shall (A) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; (B) default in making any payment of any interest, fees, costs or expenses on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; (C) default in making any payment or delivery under any such Indebtedness constituting a Swap Agreement beyond the period of grace, if any, provided in such Swap Agreement; or (D) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to (1) cause, or to permit the holder or beneficiary of, or, in the case of any such Indebtedness constituting a Swap Agreement, counterparty under, such Indebtedness (or a trustee or agent on behalf of such holder, beneficiary, or counterparty) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable or (in the case of any such Indebtedness constituting a Swap Agreement) to be terminated, or (2) to cause, with the giving of notice if required, any Group Member to purchase, redeem, mandatorily prepay or make an offer to purchase, redeem or mandatorily prepay such Indebtedness prior to its stated maturity; provided that, unless such Indebtedness constitutes a Specified Swap Agreement, a default, event or condition described in clauses ((A), (B), (C), or (D) of this Section 8.1(e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in any of clauses (i)(A), (B), (C) or (D) of this Section 8.l(e) shall have occurred with respect to Indebtedness, the outstanding principal amount (and, in the case of Swap Agreements, other than Specified Swap Agreements, the Swap Termination Value) of which, individually or in the aggregate for all such Indebtedness, exceeds $5,000,000 or (ii) any default or event of default (however designated) shall occur with respect to any Subordinated Indebtedness of any Group Member; or
(f) (i) any Group Member shall commence any case, proceeding or other action (a) under any Debtor Relief Law seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (b) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (x) results in the entry of an order for relief or any such adjudication or appointment or (y) remains undismissed, undischarged or unbonded for a period of 60 days (provided that, during such 60 day period, no Loan shall be advanced or Letters of Credit issued hereunder); or (iii) there shall be commenced against any Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof (provided that, during such 60 day period, no Loan shall be advanced or Letters of Credit issued hereunder); or (iv) any Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or
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(g) there shall occur one or more ERISA Events which individually or in the aggregate results in or otherwise is associated with liability of any Loan Party or any ERISA Affiliate thereof in excess of $5,000,000 during the term of this Agreement; or there exists an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) which exceeds $5,000,000; or
(h) there is entered against any Group Member (i) one or more final judgments or orders for the payment of money involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $5,000,000 or more, or (ii) one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 45 days from the entry thereof; or
(i) (i) any of the Security Documents shall cease, for any reason other than as the result of action or omission by the Administrative Agent or any Lender, to be in full force and effect (other than pursuant to the terms thereof), or any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or
(ii) any court order enjoins, restrains or prevents a Loan Party from conducting all or any material part of its business; or
(j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party shall so assert; or
(k) Holdings shall (i) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of cash and the Capital Stock of the Borrower and the other Group Members, (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (w) Indebtedness incurred pursuant to Sections 7.2(b), or (c) or (g). (x) nonconsensual obligations imposed by operation of law, (y) obligations pursuant to the Loan Documents to which it is a party, and (z) obligations with respect to its Capital Stock, or (iii) own, lease, manage or otherwise operate any properties or assets other than the ownership of cash and shares of Capital Stock of the Borrower and the other Group Members; or
(1) a Material Adverse Effect shall occur;
(m) any of the Governmental Approvals shall have been (i) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (ii) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of the Governmental Approvals or that could result in the Governmental Authority taking any of the actions described in clause (i) above, and such decision or such revocation, rescission, suspension, modification or nonrenewal has, or could reasonably be expected to have, a Material Adverse Effect; or
(n) any Loan Document (including the subordination provisions of any subordination or intercreditor agreement governing Subordination Indebtedness) not otherwise referenced in Section 8.l(i) or (j), at any time after its execution and delivery and for any reason other than as expressly
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permitted hereunder or thereunder or the Discharge of Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or any further liability or obligation under any Loan Document to which it is a party, or purports to revoke, terminate or rescind any such Loan Document.
8.2 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:
(a) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of Section 8.1 with respect to the Borrower, the Commitments shall immediately terminate automatically and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall automatically immediately become due and payable, and
(b) if such event is any other Event of Default, any of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the
Commitments, the Swingline Commitments and the L/C Commitments to be terminated forthwith, whereupon the Commitments, the Swingline Commitments and the L/C Commitments shall immediately terminate; (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable; (iii) any Cash Management Bank may terminate any Cash Management Agreement then outstanding and declare all Obligations then owing by the Group Members under any such Cash Management Agreements then outstanding to be due and payable forthwith, whereupon the same shall immediately become due and payable; and (iv) the Administrative Agent may exercise on behalf of itself, any Cash Management Bank , the Lenders and the Issuing Lender all rights and remedies available to it, any such Cash Management Bank, the Lenders and the Issuing Lender under the Loan Documents.
With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall Cash Collateralize an amount equal to 105% of the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts so Cash Collateralized shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other Obligations of the Borrower hereunder and under the other Loan Documents in accordance with Section 8.3.
In addition, (x) the Borrower shall also Cash Collateralize the full amount of any Swingline Loans then outstanding, and (y) to the extent elected by any applicable Cash Management Bank , the Borrower shall also Cash Collateralize the amount of any Obligations in respect of Cash Management Services then outstanding, which Cash Collateralized amounts shall be applied by the Administrative Agent to the payment of all such outstanding Cash Management Services, and any unused portion thereof remaining after all such Cash Management Services shall have been fully paid and satisfied in full shall be applied by the Administrative Agent to repay other Obligations of the Loan Parties hereunder and under the other Loan Documents in accordance with the terms of Section 8.3.
(c) After all such Letters of Credit and Cash Management Agreements shall have been terminated, expired or fully drawn upon, as applicable, and all amounts drawn under any such Letters of Credit shall have been reimbursed in full and all other Obligations of the Borrower and the
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other Loan Parties (including any such Obligations arising in connection with Cash Management Services) shall have been paid in full, the balance, if any, of the funds having been so Cash Collateralized shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.
8.3 Application of Funds. After the exercise of remedies provided for in Section 8.2, any amounts received by the Administrative Agent on account of the Obligations shall be applied by the Administrative Agent in the following order:
First, to the payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest but including any Collateral-Related Expenses, fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Sections 2.19 and 2.20 (including interest thereon)) payable to the Administrative Agent, in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees. indemnities and other amounts (other than principal. interest. and Letter of Credit Fees) payable to the Lenders. the Issuing Lender ((including any Letter of Credit Fronting Fees and Issuing Lender Fees), and any Qualified Counterparty and any applicable Cash Management Bank (in its respective capacity as a provider of Cash Management Services), and the documented out-of-pocket fees. charges and disbursements of counsel to the respective Lenders and the Issuing Lender, and amounts payable under Sections 2.19 and 2.20), in each case. ratably among them in proportion to the respective amounts described in this clause Second payable to them;
Third, to the extent that the Swingline Lender has advanced any Swingline Loans that have not been refunded by each Lender's Swingline Participation Amount, payment to the Swingline Lender of that portion of the Obligations constituting the unpaid principal of and interest upon the Swingline Loans advanced by the Swingline Lender;
Fourth, to the payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest in respect of any Cash Management Services and on the Loans and L/C Disbursements which have not yet been converted into Loans, and to payment of premiums and other fees (including any interest thereon) under any Specified Swap Agreements and any Cash Management Agreements, in each case, ratably among the Lenders, any applicable Cash Management Bank (in its respective capacity as a provider of Cash Management Services), and any Qualified Counterparties, in each case, ratably among them in proportion to the respective amounts described in this clause Fourth payable to them;
Fifth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, L/C Disbursements which have not yet been converted into Loans, and settlement amounts, payment amounts and other obligations (including, without limitation, termination payment obligations) under any Specified Swap Agreements and Cash Management Agreements, in each case, ratably among the Lenders, any applicable Cash Management Bank (in its respective capacity as a provider of Cash Management Services), and any applicable Qualified Counterparties, in each case, ratably among them in proportion to the respective amounts described in this clause Fifth and payable to them;
Sixth, to the Administrative Agent for the account of the Issuing Lender, to Cash Collateralize that portion of the L/C Exposure comprised of the aggregate undrawn amount of Letters of Credit pursuant to Section 3.10;
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Seventh, for the account of any applicable Qualified Counterparty and any applicable Cash Management Bank, to cash collateralize Obligations arising under any then outstanding Specified Swap Agreements and Cash Management Services, in each case, ratably among them in proportion to the respective amounts described in this clause Seventh payable to them;
Eight, to the payment of all other Obligations of the Loan Parties that are then due and payable to the Administrative Agent and the other Secured Parties on such date, in each case, ratably among them in proportion to the respective aggregate amounts of all such Obligations described in this clause Eight and payable to them;
Last, the balance, if any, after the Discharge of Obligations, to the Borrower or as otherwise required by Law.
Subject to Sections 2.24(a), 3.4, 3.5 and 3.10, amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Sixth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral for Letters of Credit after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
Notwithstanding the foregoing, no Excluded Swap Obligation of any Guarantor shall be paid with amounts received from such Guarantor or from any Collateral in which such Guarantor has granted to the Administrative Agent a Lien (for the benefit of the Secured Parties) pursuant to the Guarantee and Collateral Agreement: provided, however, that each party to this Agreement hereby acknowledges and agrees that appropriate adjustments shall be made by the Administrative Agent (which adjustments shall be controlling in the absence of manifest error) with respect to payments received from other Loan Parties to preserve the allocation of such payments to the satisfaction of the Obligations in the order otherwise contemplated in this Section 8.3.
SECTION9
THE ADMINISTRATIVE AGENT
9.1 Appointment and Authority.
(a) Each of the Lenders hereby irrevocably appoints SVB to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b) The provisions of Section 9 are solely for the benefit of the Administrative Agent, the Lenders, the Issuing Lender, and the Swingline Lender, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or obligations, except those expressly set forth herein and in the other Loan Documents, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. It is understood and agreed that the use of the term "agent" herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
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(c) The Administrative Agent shall also act as the collateral agent under the Loan Documents, and each of the Lenders (in their respective capacities as a Lender and, as applicable, Qualified Counterparty and provider of Cash Management Services)_hereby irrevocably (i) authorizes the Administrative Agent to enter into all other Loan Documents, as applicable, including the Guarantee and Collateral Agreement and any Subordination Agreements, and (ii) appoints and authorizes the Administrative Agent to act as the agent of the Secured Parties for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. The Administrative Agent, as collateral agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.2 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent, shall be entitled to the benefits of all provisions of this Section 9 and Section 10 (including Section 9.7, as though such co-agents, sub-agents and attorneys-in-fact were the collateral agent under the Loan Documents) as if set forth in full herein with respect thereto. Without limiting the generality of the foregoing, the Administrative Agent is further authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action, or permit the any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent to take any action, with respect to any Collateral or the Loan Documents which may be necessary to perfect and maintain perfected the Liens upon any Collateral granted pursuant to any Loan Document.
9.2 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Section shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Facilities provided for herein as well as activities as the Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub agents.
9.3 Exculpatory Provisions. The Administrative Agent shall have no duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder and thereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent shall not:
(a) be subject to any fiduciary or other implied duties, regardless of whether any Default or any Event of Default has occurred and is continuing;
(b) have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), as applicable; provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may
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effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(c) except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and the Administrative Agent shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by any Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 8.2 and 10.1), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 5.1, Section 5.2 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
9.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for any of the Loan Parties), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or such other number or percentage of Lenders as shall be provided for herein or in the other Loan Documents) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or such other number or percentage of Lenders as shall be provided for herein or in the other Loan
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Documents), and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice in writing from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action or refrain from taking such action with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys in fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of a Group Member or any Affiliate of a Group Member, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties, and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, operations, property, financial and other condition and creditworthiness of the Group Members and their Affiliates and made its own credit analysis and decision to make its Loans hereunder and enter into this Agreement. Each Lender also agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under or based upon this Agreement, the other Loan Documents or any related agreement or any document furnished hereunder or thereunder, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Group Members and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Group Member or any Affiliate of a Group Member that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys in fact or Affiliates.
9.7 Indemnification. Each of the Lenders agrees to indemnify each of the Administrative Agent, the Issuing Lender and the Swingline Lender and each of its Related Parties in its capacity as such (to the extent not reimbursed by Holdings, the Borrower or any other Loan Party and without limiting the obligation of Holdings, the Borrower or any other Loan Party to do so) according to its Aggregate Exposure Percentage in effect on the date on which indemnification is sought under this Section 9.7 (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, in accordance with its Aggregate Exposure Percentage immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent or such other Person in any way relating to or arising out of, the Commitments, this
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Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent or such other Person under or in connection with any of the foregoing and any other amounts not reimbursed by Holdings, the Borrower or such other Loan Party; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted primarily from the Administrative Agent's or such other Person's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower, Holdings or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
9.9 Successor Administrative Agent.
(a) The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the "Resignation Effective Date"), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that in no event shall any such successor Administrative Agent be a Defaulting Lender. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by Applicable Law, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the "Removal Effective Date"), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.
(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Secured Parties under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed and such collateral security is assigned to such successor Administrative Agent) and (ii) except for any indemnity payments owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such
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time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than any rights to indemnity payments owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent's resignation or removal hereunder and under the other Loan Documents, the provisions of Section 9 and Section 10.5 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as the Administrative Agent.
9.10 Collateral and Guaranty Matters.
(a) The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion,
(i) to release any Lien on any Collateral or other property granted to or held by the Administrative Agent under any Loan Document (i) upon the Discharge of Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the applicable Issuing Lender shall have been made), (ii) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted hereunder or under any other Loan Document, or (iii) subject to Section 10.1, if approved, authorized or ratified in writing by the Required Lenders;
(ii) to subordinate any Lien on any Collateral or other property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Sections 7.3(g) and (i); and
(iii) to release any Guarantor from its obligations under the Guarantee and Collateral Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent's authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the guaranty pursuant to this Section 9.10.
(b) The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent's Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
(c) Notwithstanding anything contained in any Loan Document, no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any guaranty of the Obligations (including any such guaranty provided by the Guarantors pursuant to the Guarantee and Collateral Agreement), it being understood and agreed that all powers, rights and remedies under the
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Loan Documents may be exercised solely by the Administrative Agent on behalf of the Secured Parties in accordance with the terms thereof; provided that, for the avoidance of doubt, in no event shall a Secured Party be restricted hereunder from filing a proof of claim on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law or any other judicial proceeding. In the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Secured Party may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition, and the Administrative Agent, as agent for and representative of such Secured Party (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Administrative Agent on behalf of the Secured Parties at such sale or other disposition. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and of the guarantees of the Obligations provided by the Loan Parties under the Guarantee and Collateral Agreement, to have agreed to the foregoing provisions. In furtherance of the foregoing, and not in limitation thereof, no Specified Swap Agreement and no Cash Management Agreement, the Obligations under which constitute Obligations, will create (or be deemed to create) in favor of any Secured Party that is a party thereto any rights in connection with the management or release of any Collateral or of the Obligations of any Loan Party under any Loan Document except as expressly provided herein or in the Guarantee and Collateral Agreement. By accepting the benefits of the Collateral and of the guarantees of the Obligations provided by the Loan Parties under the Guarantee and Collateral Agreement, any Secured Party that is a Cash Management Bank or a Qualified Counterparty shall be deemed to have appointed the Administrative Agent to serve as administrative agent and collateral agent under the Loan Documents and to have agreed to be bound by the Loan Documents as a Secured Party thereunder, subject to the limitations set forth in this paragraph.
9.11 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or Obligation in respect of any Letter of Credit shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated), by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Obligations in respect of any Letter of Credit and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.9 and 10.5) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable
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compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.9 and 10.5.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
9.12 No Other Duties, etc.. Anything herein to the contrary notwithstanding, none of the "Bookrunners," or "Arrangers" listed on the cover page hereof, if any, shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender, the Issuing Lender or the Swingline Lender hereunder.
9.13 Cash Management Bank and Qualified Counterparty Reports. Each Cash Management Bank and each Qualified Counterparty agrees to furnish to the Administrative Agent, as frequently as the Administrative Agent may reasonably request, with a summary of all Obligations in respect of Cash Management Services and/or Specified Swap Agreements, as applicable, due or to become due to such Cash Management Bank or Qualified Counterparty, as applicable. In connection
with any distributions to be made hereunder, the Administrative Agent shall be entitled to assume that no amounts are due to any Cash Management Bank or Qualified Counterparty (in its capacity as a Cash Management Bank or Qualified Counterparty and not in its capacity as a Lender) unless the Administrative Agent has received written notice thereof from such Cash Management Bank or Qualified Counterparty and if such notice is received, the Administrative Agent shall be entitled to assume that the only amounts due to such Cash Management Bank or Qualified Counterparty on account of Cash Management Services or Specified Swap Agreements are set forth in such notice.
9.14 Survival. This Section 9 shall survive the Discharge of Obligations.
SECTION 10
MISCELLANEOUS
10.1 Amendments and Waivers.
(a) Neither this Agreement, any other Loan Document (other than any L/C Related Document), nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (i) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (ii) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided that no such waiver and no such amendment, supplement or modification shall (A) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder (except that a waiver of any Event of Default or the right to receive interest at the Default Rate shall not constitute a reduction in the rate of interest or fees for purposes of this clause (A)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment without the written consent of each Lender directly affected thereby; (B)
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eliminate or reduce the voting rights of any Lender under this Section 10.1 without the written consent of such Lender; (C) reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral, contractually subordinate the Administrative Agent's Lien on all or substantially all of the Collateral. or release all or substantially all of the value of the guarantees (taken as a whole) of the Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case without the written consent of all Lenders; (D) (i) amend, modify or waive the pro rata requirements of Section 2.18 or any other provision of the Loan Documents requiring pro rata treatment of the Lenders in a manner that adversely affects Revolving Lenders without the written consent of each Revolving Lender or (ii) amend, modify or waive the pro rata requirements of Section 2.18 or any other provision of the Loan Documents requiring pro rata treatment of the Lenders in a manner that adversely affects the L/C Lenders without the written consent of each L/C Lender; (E) [reserved]; (F) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent; (G) amend, modify or waive any provision of Section 2.6 or 2.7 without the written consent of the Swingline Lender; (H) amend, modify or waive any provision of Section 3 without the written consent of the Issuing Lender; or (I) (i) amend or modify the application of payments set forth in Section 8.3 in a manner that adversely affects Revolving Lenders without the written consent of the Required Lenders, (ii) amend or modify the application of payments set forth in Section 8.3 in a manner that adversely affects the L/C Lenders without the written consent of the L/C Lenders, or (iii) amend or modify the application of payments provisions set forth in Section 8.3 in a manner that adversely affects the Issuing Lender, any Cash Management Bank or any Qualified Counterparty, as applicable, without the written consent of the Issuing Lender, such Cash Management Bank or any such Qualified Counterparty, as applicable. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent, the Issuing Lender, each Cash Management Bank, each Qualified Counterparty, and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured during the period such waiver is effective; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Notwithstanding the foregoing, the Issuing Lender may amend any of the L/C Related Documents without the consent of the Administrative Agent or any other Lender and the Issuing Lender, Administrative Agent and the Borrower may make customary technical amendments if any Letter of Credit shall be issued hereunder in a currency other than U.S. Dollars. Notwithstanding the foregoing, the Issuing Lender may amend any of the L/C-Related Documents without the consent of the Administrative Agent or any other Lender. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.
(b) Notwithstanding anything to the contrary contained in Section 10.l(a) above, in the event that the Borrower requests that this Agreement or any of the other Loan Documents be amended or otherwise modified in a manner which would require the consent of all of the Lenders and such amendment or other modification is agreed to by the Borrower, the Required Lenders and the Administrative Agent, then, with the consent of the Borrower, the Administrative Agent and the Required
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Lenders, this Agreement or such other Loan Document may be amended without the consent of the Lender or Lenders who are unwilling to agree to such amendment or other modification (each, a "Minority Lender"), to provide for:
(i) the termination of the Commitment of each such Minority Lender;
(ii) the assumption of the Revolving Loans and Commitment of each such
Minority Lender by one or more Replacement Lenders pursuant to the provisions of Section 2.23; and
(iii) the payment of all interest, fees and other obligations payable or accrued in favor of each Minority Lender and such other modifications to this Agreement or to such Loan Documents as the Borrower, the Administrative Agent and the Required Lenders may determine to be appropriate in connection therewith.
(c) [reserved].
(d) Notwithstanding any provision herein to the contrary, any Cash Management Agreement may be amended or otherwise modified by the parties thereto in accordance with the terms thereof without the consent of the Administrative Agent or any Lender.
(e) Notwithstanding any provision herein or in any other Loan Document to the contrary (other than as expressly set forth in Section 10.1(a)), no Cash Management Bank and no Qualified Counterparty shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of Cash Management Services or Specified Swap Agreements or Obligations owing thereunder, nor shall the consent of any such Cash Management Bank or Qualified Counterparty, as applicable, be required for any matter, other than in their capacities as Lenders, to the extent applicable.
(f) The Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the Loan Documents to cure any omission, mistake or defect.
10.2 Notices.
(a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile or electronic mail), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of facsimile or electronic mail notice, when received, addressed as follows in the case of the Borrower, Holdings and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:
| Holdings/Borrower: | c/o Remitly, Inc. | ||||
| 1111 3rd Avenue | |||||
| Seattle, Washington | |||||
| Attention: Chief Executive Officer and | |||||
| General Counsel | |||||
| E-Mail: [Redacted] and | |||||
| [Redacted] | |||||
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| with a copy to (which shall not constitute notice): | |||||
| and | |||||
| Fenwick & West LLP | |||||
| 1191 Second Avenue | |||||
| Seattle, Washington 98101 | |||||
| Attention: William H. Bromfield | |||||
| Fax:[Redacted] | |||||
| E-Mail: [Redacted] | |||||
| Administrative Agent: | Silicon Valley Bank | ||||
901 5th Avenue, Suite 3900 | |||||
| Seattle, WA 98164 | |||||
| Attention: Ryan Kirschling | |||||
| E-Mail: [Redacted] | |||||
| with a copy to (which shall not constitute notice): | |||||
| Morrison & Foerster LLP | |||||
| 200 Clarendon Street | |||||
| Boston, Massachusetts 02116 | |||||
Attention: Charles W. Stavros, Esq. | |||||
| E-Mail: [Redacted] | |||||
provided that any notice, request or demand to or upon the Administrative Agent or the Lenders shall not be effective until received.
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications (including email and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or any Loan Party may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an email address shall be deemed received upon the sender's receipt of an acknowledgment from the intended recipient (such as by the "return receipt requested" function, as available, return email or other written acknowledgment); and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its email address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice or other communication is not sent during the normal business hours of the recipient, such notice or
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communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.
(c) Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
(d) (i) Each Loan Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on the Platform.
(ii) The Platform is provided "as is" and "as available." The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the "Agent Parties") have any liability to the Borrower or the other Loan Parties, any Lender or any other Person for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower's, any Loan Party's or the Administrative Agent's transmission of communications through the Platform. "Communications" means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or the Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Revolving Loans and other extensions of credit hereunder.
10.5 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the Facilities, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment or extension of any Letter of Credit or any demand for payment thereunder, and (iii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the fees, charges and disbursements of one counsel for the Administrative Agent (and any local or special counsel reasonably
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required by the Administrative Agent) and one counsel to the Lenders taken as a whole (or any additional counsel in the event of an actual or potential conflict of interest), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued or participated in hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender (including the Issuing Lender), and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of one counsel for any Indemnitee (and any local or special counsel reasonable required by such Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower or any other Loan Party) other than such Indemnitee and its Related Parties arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Materials of Environmental Concern on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, willful misconduct of such Indemnitee, (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for material breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction, or (z) result from disputes arising solely among Indemnitees, other than (i) disputes involving SVB solely in its capacity as administrative agent or arranger for the Facilities but solely with respect to SVB in such capacity and not to any other Indemnitee, Person involved therewith, and (ii) claims arising out of any act or omission of any of the Borrower or any of its Subsidiaries or their respective officers, directors, equity holders, creditors, employees, agents, advisors and other representatives. This Section 10.5(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails indefeasibly to pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender, the Swingline Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender, the Swingline Lender or such Related Party, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender's share of the Total Credit Exposure at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that
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the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Issuing Lender or the Swingline Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the Issuing Lender or the Swingline Lender in connection with such capacity. The obligations of the Lenders under this paragraph (c) are subject to the provisions of Sections 2.1, 2.4 and 2.20(e).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by Applicable Law, the Borrower and each other Loan Party shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit, or the use of the proceeds thereof. Absent the gross-negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction by a final and nonappealable judgment, no Indemnitee referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(e) Payments. All amounts due under this Section shall be payable promptly after demand therefor.
(f) Survival. Each party's obligations under this Section 10.5 shall survive the Discharge of Obligations.
10.6 Successors and Assigns; Participations and Assignments.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (which, for purposes of this Section 10.6, shall include any Cash Management Bank and any Qualified Counterparty, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of Section 10.6(d). or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.6(e) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts.
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(A) in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and/or the Revolving Loans at the time owing to it or contemporaneous assignments to related Approved Funds (determined after giving effect to such assignments) that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in paragraph (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Revolving Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis. Notwithstanding the foregoing or anything herein to the contrary, the L/C
Facility is a sublimit of the Revolving Facility and the commitments and obligations in respect of the
Revolving Facility and the L/C Facility shall be assigned on a pro rata basis with each other.
(iii) Required Consents. No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) a Default or an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the consent of the Borrower for an assignment to any competitor of the Borrower may be given or denied by the Borrower in its sole discretion; and provided further, that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 7 Business Days after having received reasonably detailed written notice thereof;
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of assignments to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and
(C) the consent of the Issuing Lender and the Swingline Lender shall be required for any assignment in respect of the Revolving Facility.
(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent any such administrative questionnaire as the Administrative Agent may request.
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(v) No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower's Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B).
(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust established for, or owned and operated for the primary benefit of, a natural Person).
(vii) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Revolving Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lender, the Swingline Lender and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Revolving Loans and participations in Letters of Credit and Swingline Loans in accordance with its Revolving Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under Applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.19, 2.20, and 10.5 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender's having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in California a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Revolving Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
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hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person, a holding company, investment vehicle or trust established for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant') in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Revolving Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnities under Sections 2.20(e) and 9.7 with respect to any payments made by such Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver which affects such Participant and for which the consent of such Lender is required (as described in Section 10.1). The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.19 and 2.20 (subject to the requirements and limitations therein, including the requirements under Section 2.20(f) (it being understood that the documentation required under Section 2.20(f) shall be delivered by such Participant to the Lender granting such participation)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.6(b); provided that such Participant (A) agrees to be subject to the provisions of Sections 2.23 as if it were an assignee under Section 10.6(b); and (B) shall not be entitled to receive any greater payment under Sections 2.19 or 2.20, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change in any Applicable Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.23 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7 as though it were a Lender: provided that such Participant agrees to be subject to Section 2.18(k) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant's interest in the Revolving Loans or other obligations under the Loan Documents (the "Participant Register"); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any Commitments, Revolving Loans, Letters of Credit or its other Obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-l(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
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(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(f) Notes. The Borrower, upon receipt by the Borrower of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in Section 10.6.
(g) Representations and Warranties of Lenders. Each Lender, upon execution and delivery hereof or upon succeeding to an interest in the Commitments or Revolving Loans, as the case may be, represents and warrants as of the Closing Date or as of the effective date of the applicable Assignment and Assumption that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments, loans or investments such as the Commitments and Revolving Loans; and (iii) it will make or invest in its Commitments and Revolving Loans for its own account in the ordinary course of its business and without a view to distribution of such Commitments and Revolving Loans within the meaning of the Securities Act or the Exchange Act, or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, the disposition of such Commitments and Revolving Loans or any interests therein shall at all times remain within its exclusive control).
10.7 Adjustments; Set-off.
(a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender) shall, at any time after the Loans and other amounts payable hereunder shall immediately become due and payable pursuant to Section 8.2, receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8.l(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders: provided that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.
(b) Upon (i) the occurrence and during the continuance of any Event of Default and (ii) obtaining the prior written consent of the Administrative Agent, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, without prior notice to Holdings, the Borrower or any other Loan Party, any such notice being expressly waived by Holdings, the Borrower and each Loan Party, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, at any time held or owing, and any other credits, indebtedness, claims or obligations, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender, its Affiliates or any branch or agency thereof to or for the credit or the account of Holdings, the Borrower or any other Loan Party, as the case may be, against any and all of the obligations of Holdings, the Borrower or such other Loan Party now or hereafter existing under this Agreement or any other Loan Document to such
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Lender or its Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of Holdings, the Borrower or such other Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender or any of its Affiliates shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.23 and, pending such payment, shall be segregated by such Defaulting Lender or Affiliate thereof from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender or Affiliate thereof as to which it exercised such right of setoff. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application made by such Lender or any of its Affiliates; provided that the failure to give such notice shall not affect the validity of such setoff and application.
10.8 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the Discharge of Obligations.
10.9 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
10.10 Counterparts; Electronic Execution of Assignments.
(a) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile or other electronic mail transmission shall be effective as delivery of an original executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.
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(b) The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
10.11 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.11, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited under or in connection with any Insolvency Proceeding, as determined in good faith by the Administrative Agent or the Issuing Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
10.12 Integration. This Agreement and the other Loan Documents represent the entire agreement of Holdings, the Borrower, the other Loan Parties, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
10.13 GOVERNING LAW. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, AND ANY CLAIM, CONTROVERSY, DISPUTE, CAUSE OF ACTION, OR PROCEEDING (WHETHER BASED IN CONTRACT, TORT, OR OTHERWISE) BASED UPON, ARISING OUT OF, CONNECTED WITH, OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAW RULES) OF THE STATE OF NEW YORK. This Section 10.13 shall survive the Discharge of Obligations.
10.14 Submission to Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally:
(a) agrees that all disputes, controversies, claims, actions and other proceedings involving, directly or indirectly, any matter in any way arising out of, related to, or connected with, this Agreement, any other Loan Document, any contemplated transactions related hereto or thereto, or the relationship between any Loan Party, on the one hand, and the Administrative Agent or any Lender or any other Secured Party, on the other hand, and any and all other claims of any of Holdings and the Borrower against the Administrative Agent or any Lender or any other Secured Party of any kind, shall be brought only in a state court located in the Borough of Manhattan, City of New York, State of New York, or in a federal court sitting in the Southern District of New York; provided that nothing in this Agreement shall be deemed to operate to preclude the Administrative Agent or any Lender or any other Secured Party from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Administrative
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Agent or such Lender or any other Secured Party. Each of Holdings and the Borrower, on behalf of itself and each other Loan Party, (i) expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court and to the selection of any referee referred to below, (ii) hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court, and (iii) agrees that it shall not file any motion or other application seeking to change the venue of any such suit or other action. Each of Holdings and the Borrower, on behalf of itself and each other Loan Party, hereby waives personal service of any summons, complaints, and other process issued in any such action or suit and agrees that service of any such summons, complaints, and other process may be made by registered or certified mail addressed to the Borrower or Holdings at the address set forth in Section 10.2 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of the Borrower's or Holdings' actual receipt thereof or three days after deposit in the U.S. mails, proper postage prepaid;
(b) WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ITS RIGHT TO A JURY TRIAL OF ANY CLAIM, CAUSE OF ACTION, OR PROCEEDING (WHETHER BASED IN CONTRACT, TORT, OR OTHERWISE) BASED UPON, ARISING OUT OF, CONNECTED WITH, OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY TRANSACTION CONTEMPLATED HEREBY AND THEREBY, AMONG ANY OF THE PARTIES HERETO AND THERETO. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH OF HOLDINGS AND THE BORROWER HAS REVIEWED THIS WAIVER WITH ITS COUNSEL; and
(c) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
This Section 10.14 shall survive the Discharge of Obligations.
10.15 Acknowledgements. Each of Holdings and the Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;
(b) in connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower, on behalf of each Group Member, acknowledges and agrees that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent and any Affiliate thereof, and the Lenders and any Affiliate thereof are arm's-length commercial transactions between the Borrower, each other Loan Party and their respective Affiliates, on the one hand, and the Administrative Agent, the Lenders and their respective applicable Affiliates (collectively, solely for purposes of this Section, the "Lenders"), on the other hand, (B) each of the Borrower and the other Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the Borrower and each other Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, its Affiliates, each Lender and their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrower, any other Loan Party or any of their respective Affiliates, or any other Person and (B) neither the Administrative Agent, its Affiliates, any Lender nor any of their Affiliates has any obligation to the Borrower, any other Loan Party or any of their
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respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, its Affiliates, the Lenders and their Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, the other Loan Parties and their respective Affiliates, and neither the Administrative Agent, its Affiliates, any Lender nor any of their Affiliates has any obligation to disclose any of such interests to the Borrower, any other Loan Party or any of their respective Affiliates. To the fullest extent permitted by law, each of the Borrower and each other Loan Party hereby waives and releases any claims that it may have against the Administrative Agent, its Affiliates, each Lender and any of their Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transactions contemplated hereby; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Group Members and the Lenders.
10.16 Releases of Guarantees and Liens.
(a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 10.1) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (1) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 10.1 or (2) under the circumstances described in Section 10.16(b) below.
(b) Upon the Discharge of Obligations, the Collateral (other than any cash collateral securing any Specified Swap Agreements, any Cash Management Services or outstanding Letters of Credit) shall be released from the Liens created by the Security Documents and Cash Management Agreements (other than any Cash Management Agreements used to Cash Collateralize any Obligations arising in connection with Cash Management Agreements), and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party under the Security Documents and Cash Management Agreements (other than any Cash Management Agreements used to Cash Collateralize any Obligations arising in connection with Cash Management Agreements) shall terminate, all without delivery of any instrument or performance of any act by any Person.
10.17 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties having a need to know such information in connection with the transactions contemplated by this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), in which case such Person agrees, except with respect to any audit or examination conducted by bank accountants or any regulatory authority exercising examination or regulator authority, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof; (c) to the extent required by Applicable Law or by any subpoena or similar legal process (in which case such Person agrees, to the extent practicable and not prohibited by applicable laws, regulations, subpoena or legal process, to inform the Borrower promptly thereof); (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or
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proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder; (g) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the Facilities or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Facilities; (h) with the consent of the Borrower; or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower. In addition, the Administrative Agent, the Lenders, and any of their respective Related Parties, may (A) disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry and service providers to the Administrative Agent or the Lenders in connection with the administration of this Agreement, the other Loan Documents, and the Commitments; and (B) use any information (not constituting Information subject to the foregoing confidentiality restrictions) related to the syndication and arrangement of the credit facilities contemplated by this Agreement in connection with marketing publications and the placement of ''tombstone" advertisements in publications of its choice at its own expense, and, subject to the approval of the Borrower (such approval not to be unreasonably withheld, delayed or conditioned), press releases and other transactional announcements or updates provided to investor or trade publications.
(c) Each of the Administrative Agent, the Lenders, and the Issuing Lender acknowledges that (x) the Information may include material non-public information concerning a Group Member, (y) it has developed compliance procedures regarding the use of material non-public information, and (z) it will handle such material non-public information in accordance with applicable Requirements of Law, including applicable federal and state securities laws, rules and regulations.
Notwithstanding anything herein to the contrary , any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws, rules, and regulations.
For purposes of this Section,"Information" means all information received from the Borrower or any of its Subsidiaries relating to Holdings or any of its Subsidiaries or any of their respective businesses (including confidential information delivered prior to the Closing Date pursuant to the Engagement Letter dated as of March 29, 2019 between the Borrower and SVB), other than any such information that is available to the Administrative Agent or any Lender on a non-confidential basis prior to disclosure by Holdings or any of its Subsidiaries; provided that, in the case of information received from Holdings or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information, but in no event less than reasonable care.
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10.18 Automatic Debits. With respect to any principal, interest, fee, or any other cost or expense (including attorney costs of the Administrative Agent or any Lender payable by the Borrower hereunder) due and payable to the Administrative Agent or any Lender under the Loan Documents, the Borrower hereby irrevocably authorizes the Administrative Agent to debit any deposit account of the Borrower maintained with the Administrative Agent in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such principal, interest, fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount then due, such debits will be reversed (in whole or in part, in the Administrative Agent's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section 10.18 shall be deemed a set-off.
10.19 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Borrower and each other Loan Party in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender, as the case may be, of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or such Lender, as the case may be, may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or any Lender from the Borrower or any other Loan Party in the Agreement Currency, the Borrower and each other Loan Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender, as the case may be, against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or any Lender in such currency, the Administrative Agent or such Lender, as the case may be, agrees to return the amount of any excess to the Borrower or other Loan Party, as applicable (or to any other Person who may be entitled thereto under Applicable Law).
10.20 Patriot Act; Other Regulations. Each Lender and the Administrative Agent (for itself and not on behalf of any other party) hereby notifies Holdings, the Borrower and each other Loan Party that, pursuant to the requirements of "know your customer" and AML Laws, including the Patriot Act and 31 C.F .R. § 1010.230, it is required to obtain, verify and record information that identifies Holdings, the Borrower and each other Loan Party and certain related parties thereto, which information includes the names and addresses and other information that will allow such Lender or the Administrative Agent, as applicable, to identify Holdings, the Borrower, each other Loan Party and certain of their beneficial owners and other officers in accordance with the Patriot Act and 31 C.F.R. § 1010.230. The Borrower, Holdings and each other Loan Party will, and will cause each of their respective Subsidiaries to, provide, to the extent commercially reasonable or required by any requirement of Applicable Law, such information and documents and take such actions as are reasonably requested by the Administrative Agent or any Lender to assist the Administrative Agent and the Lenders in maintaining compliance with "know your customer" requirements under the PATRIOT Act, 31 C.F.R. § 1010.230 or other AML Laws.
10.21 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document or in any other agreement. arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEAAffected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEAthe
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applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEAthe applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EE4Affected Financial Institution; and
(b) the effects of any Bail-In Action on any liability. including. if applicable:
(i)a reduction in full or in part of cancellation of any such liability:
(ii)(b)a conversion of all, or a portion of, such liability into Capital Stockshares or other instruments of ownership in such EEAAffected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such Capital Stockshares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)(c)the variation of the terms of such liability in connection with the exercise of the write-downWrite-Down and conversion powers of any EEAConversion Powers of the applicable Resolution Authority.
10.22 Acknowledgment Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such support, "QFC Credit Support' and each such QFC a "Supported QFC), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the "U.S. Special Resolution Regimes") in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a) In the event a Covered Entity that is party to a Supported QFC (each, a "Covered Party") becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States.
(b) As used in this Section 10.22, the following terms have the following meanings:
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"BHC Act Affiliate" of a party means an "affiliate" (as such term is defined under, and interpreted in accordance with, 12 U.S. C. 1841 (k)) of such party.
"Covered Entity" means any of the following:
(i)a "covered entity'' as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b)
(ii)a "covered bank" as that term is defined in, and interpreted in accordance with,2 C1F.R. § 47.3(b); or
(iii)a "covered FSI" as that term is defined in, and interpreted in accordance with 12 C.F.R. § 382.2(b).
"Default Right" has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 CF.R. §§ 252.81, 47.2 or 382.1, as applicable.
"OFC" has the meaning assigned to the term "qualified financial contract" in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
HOLDINGS: | ||||||||||||||
REMITLY GLOBAL, INC. | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
BORROWER: | ||||||||||||||
REMITLY, INC. | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
Signature Page to Credit Agreement
ADMINISTRATIVE AGENT: | ||||||||||||||
| SILICON VALLEY BANK | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
Signature Page to Credit Agreement
LENDERS: | ||||||||||||||
SILICON VALLEY BANK as Issuing Lender, Swingline Lender and as a Lender | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
Signature Page to Credit Agreement
BARCLAYS BANK PLC | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
Signature Page to Credit Agreement
GOLDMAN SACHS LENDING PARTNERS LLC | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
WESTERN ALLIANCE BANK | ||||||||||||||
| By: | ||||||||||||||
| Name: | ||||||||||||||
| Title: | ||||||||||||||
SCHEDULE 1.1A
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SCHEDULE 4.13
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SCHEDULE 4.15
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SCHEDULE 4.27
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Schedule 1.1A
Annex B-2: Schedules to Guarantee and Collateral Agreement
SCHEDULE 1
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SCHEDULE 2
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SCHEDULE 3
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SCHEDULE 4
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SCHEDULE 5
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SCHEDULE 6
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Annex C
Exhibit B
FORM OF COMPLIANCE CERTIFICATE
REMITLY, INC.
Date: , 20_
This Compliance Certificate is delivered pursuant to Section 6.2(b) of that certain Credit Agreement, dated as of June 12, 2019, by and among REMITLY GLOBAL, INC., a Delaware corporation ("Holdings"), REMITLY, INC., a Delaware corporation (the "Borrower”), the Lenders from time to time party thereto, and SILICON VALLEY BANK, as Administrative Agent (as amended, restated, amended and restated, supplemented, restructured or otherwise modified from time to time, the "Credit Agreement). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
1.The undersigned, a duly authorized and acting Responsible Officer of Holdings, hereby certifies, in his/her capacity as an officer of Holdings, and not in any personal capacity, as follows:
2.I have reviewed and am familiar with the contents of this Compliance Certificate.
3.I have reviewed the terms of the Credit Agreement and the other Loan Documents and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and condition of Holdings, the Borrower and their respective Subsidiaries during the accounting period covered by the financial statements attached hereto as Attachment 1 (the "Financial Statements"). Except as set forth on Attachment 2, such review did not disclose, and I have no knowledge of the existence as of the date of this Compliance Certificate of, any condition or event which constitutes an ongoing Default or an Event of Default.
4.Attached hereto as Attachment 3 are the computations showing compliance with the covenants set forth in Section 7 .1 of the Credit Agreement.
5.[To the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization of any Loan Party is as follows:
| Loan Party | Former Jurisdiction | New Jurisdiction | ||||||
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, I have executed this Compliance Certificate as of the date first written above.
REMITLY GLOBAL, INC.
| By: | |||||||||||
| Name: | |||||||||||
| Title: | |||||||||||
Attachment 1
to Compliance Certificate
[Attach Financial Statements]
Attachment 2
to Compliance Certificate
Except as set forth below, no Default or Event of Default has occurred and is continuing. [If a Default or Event of Default has occurred, the following describes the nature of the Default or Event of Default in reasonable detail and the steps, if any, being taken or contemplated by Holdings and the Borrower to be taken on account thereof.]
Attachment 3 to Compliance Certificate
The information described herein is as of [ ], [ ] (the “Statement Date”).
I.Minimum Adjusted Quick Ratio (Section 7.1(a) of the Credit Agreement)
| A. | Quick Assets as of the Statement Date (without duplication): | |||||||||||||
| 1. | the aggregate value of the unrestricted cash and disbursement prefunding of the Group Members: | $ | ||||||||||||
| 2. | the aggregate value of the Group Members' customer funds in transit and Accounts: | $ | ||||||||||||
| 3. | the aggregate value of Cash Equivalents of the Group Members | $ | ||||||||||||
| 4. | the aggregate value of customer funds held by the Group Members: | $ | ||||||||||||
| 5. | the aggregate amount of all Loans and L/C Exposure: | $ | ||||||||||||
| 6. | the aggregate amount of spot trades in transit re-classed to accrued liabilities of the Group Members: | $ | ||||||||||||
| 7. | the aggregate amount outstanding under any Post Funding Line of Credit | $ | ||||||||||||
| B. | Quick Assets as of the Statement Date (Sum of Lines I.A. I through I.A.3 minus the sum of Lines I.A.4 through I.A.7): | $ | ||||||||||||
| C. | Current Liabilities as of the Statement Date (without duplication): | |||||||||||||
| 1. | the aggregate amount of the Obligations: | $ | ||||||||||||
| 2. | the aggregate value of liabilities that should, under GAAP, be classified as liabilities on Holdings' consolidated balance sheet, including all Indebtedness, and not otherwise reflected in Quick Assets, that matures within one (1) year (but excluding non-cash deferred rent, non-cash lease incentive liabilities and non-cash foreign exchange adjustments to the extent otherwise included as Current Liabilities on Holdings' balance sheet and excluding subordinated indebtedness and excluding the aggregate amount outstanding under any Post Funding Line of Credit): | $ | ||||||||||||
| 3. | the aggregate obligations and liabilities with respect to customer funds: | $ | ||||||||||||
| 4. | the aggregate amount of outstanding Loans and the amount of L/C Exposure: | $ | ||||||||||||
| 5. | the aggregate amount of spot trades in transit re-classed to accrued liabilities | $ | ||||||||||||
| D. | Current Liabilities as of the Statement Date (Sum of Lines LC. I and LC.2. minus the sum of Lines LC.3 through LC.5): | $ | ||||||||||||
| E. | Adjusted Quick Ratio as of the Statement Date (Ratio of LB. to LD.): | _____:1.00 | ||||||||||||
| Minimum Required: | 1.50:1.00 | |||||||||||||
Covenant compliance: Yes ☐ No ☐ | ||||||||||||||
II.Minimum Consolidated Adjusted EBITDA (Section 7.1(b) of the Credit Agreement)
| A. | Consolidated Adjusted EBITDA for the Subject Period: | |||||||||||||
| (“Subject Period” means the twelve consecutive trailing month period ending on the Statement Date) | ||||||||||||||
| Statement Date) | ||||||||||||||
| 1. | Consolidated Net Income: | $ | ||||||||||||
| 2. | Consolidated Interest Expense: | $ | ||||||||||||
| 3. | provisions for Taxes based on income: | $ | ||||||||||||
| 4. | total depreciation expense: | $ | ||||||||||||
| 5. | total amortization expense: | $ | ||||||||||||
| 6. | noncash stock based compensation expense: | $ | ||||||||||||
| 7. | noncash exchange, transaction or performance losses relating to any foreign currency hedging transactions or currency fluctuations: | $ | ||||||||||||
| 8. | costs, fees and expenses (1) in connection with the execution and delivery of this Agreement and the other Loan Documents or (2) paid by any Group Member after the Closing Date in connection with its obligations under the Loan Documents which are incurred not later than six (6) months after the Closing Date in an aggregate amount not to exceed $500,000: | $ | ||||||||||||
| 9. | one-time costs, fees, and expenses in connection with Permitted Acquisitions or other transactions that if closed, would have constituted a Permitted Acquisition in an aggregate amount not to exceed $500,000 for any period: | $ | ||||||||||||
| 10. | noncash purchase accounting adjustments (including, but not limited to deferred revenue write down) and any adjustments as required or permitted by the application of FASB 141 (requiring the use of purchase method of accounting for acquisitions and consolidations), FASB 142 (relating to changes in accounting for the amortization of good will and certain other intangibles) and FASB 144 (relating to the write downs of long-lived assets), in each case, in connection with Permitted Acquisitions: | $ | ||||||||||||
| 11. | noncash charges for goodwill and other intangible write-offs and write-downs in connection with Permitted Acquisitions or otherwise: | $ | ||||||||||||
| 12. | other noncash items reducing Consolidated Net Income (excluding any such non cash item to the extent that it represents an accrual or reserve for potential cash items in any future period or amortization of a prepaid cash item that was paid in a prior period) approved by the Administrative Agent in writing as an ‘add back’ to Consolidated Adjusted EBITDA: | $ | ||||||||||||
| 13. | noncash items increasing Consolidated Net Income for such period (excluding any such noncash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period): | $ | ||||||||||||
| 14. | interest income: | $ | ||||||||||||
| 15. | capitalized software development costs: | $ | ||||||||||||
| B. | Consolidated Adjusted EBITDA for the Subject Period ((Line II.A.1 plus the sum, without duplication, of the amounts for such period but solely to the extent deducted in calculating Consolidated Net Income for such period of Lines II.A.2 through II.A.12 minus the sum, without duplication of the amounts for such period of Lines II.A.13 through II.A.15):1 | $ | ||||||||||||
___________________
1.Consolidated Adjusted EBITDA for any period shall be determined on a Pro Forma Basis to give effect to any Permitted Acquisitions or any Disposition of any business or assets consummated during such period, in each case as if such transaction occurred on the first day of such period and in accordance with Regulation S-X promulgated by the SEC; provided further, for purposes of calculating compliance with Section 7.1(b) of the Credit Agreement, the Consolidated Adjusted EBITDA attributable to assets or stock acquired in connection with any Permitted Acquisition shall be included in such calculation commencing on the date such Permitted Acquisition is consummated and thereafter for the applicable testing period and not as if such Permitted Acquisition occurred on the first day of such period.
Minimum required:
Quarter Ending | Minimum Consolidated Adjusted EBITDA | ||||
September 30, 2020 | ($55,000,000) | ||||
December 31, 2020 | ($51,000,000) | ||||
March 31, 2021 | ($47,000,000) | ||||
June 30, 2021 | ($45,000,000) | ||||
September 30, 2021 | ($45,000,000) | ||||
December 31, 2021 | ($41,000,000) | ||||
March 31, 2022 | ($37,000,000) | ||||
June 30, 2022 | ($31,000,000) | ||||
September 30, 2022 | ($26,000,000) | ||||
December 31, 2022 | ($21,000,000) | ||||
March 31, 2023 | ($13,000,000) | ||||
June 30, 2023 | ($4,000,000) | ||||
September 30, 2023 | $5,000,000 | ||||
Covenant compliance: Yes ☐ No ☐
Exhibit 10.3
REMITLY GLOBAL, INC.
2011 EQUITY INCENTIVE PLAN
As Adopted on November 4, 2011
(See Amendments at End of Document)
As Amended and Restated on November 4, 2020
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries by offering eligible persons an opportunity to participate in the Company’s future performance through the of Awards covering Shares. Capitalized terms not defined in the text are defined in Section 13 hereof. Although this Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701, grants may be made pursuant to this Plan that do not qualify for exemption under Rule 701.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 10 hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be 43,899,677 Shares. Subject to Sections 2.2, 4.10 and 10 hereof, Shares subject to Awards that are cancelled, forfeited, settled in cash or that expire by their terms will again be available for grant and issuance in connection with other Awards. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted and outstanding under this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding shares of the Company’s Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options and (c) the Purchase Prices of and/or number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee; and provided,further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares.
3. PLAN FOR BENEFIT OF SERVICE PROVIDERS.
3.1 Eligibility. The Committee will have the authority to select persons to receive Awards. ISOs (as defined in Section 4 hereof) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in Section 4 hereof) and all other types of Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising transaction when Rule 701 is to apply to the Award granted for such services. A person may be granted more than one Award under this Plan.
3.2 No Obligation to Employ. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary or limit in any way the right of the Company or any Parent or Subsidiary to terminate Participant’s employment or other relationship at any time, with or without Cause.
4. OPTIONS. The Committee may grant Options to eligible persons described in Section 3 hereof and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following.
4.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (“Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.
4.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.
4.3 Exercise Period. Options may be exercisable immediately but subject to repurchase pursuant to Section 9 hereof or may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that (a) no Option will be exercisable after the expiration often (10) years from the date the Option is granted; and (b) no ISO granted to a person who directly or by attribution owns more than ten percent ( 10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Shareholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
4.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and shall not be less than the Fair Market Value per Share unless expressly determined in writing by the Committee on the Option’s date of grant; provided that the Exercise Price of an ISO granted to a Ten Percent Shareholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof.
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4.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant). The Exercise Agreement will state (a) the number of Shares being purchased, (b) the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and (c) such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws. Each Participant’s Exercise Agreement may be modified by (i) agreement of Participant and the Company or (ii) substitution by the Company, upon becoming a public company, in order to add the payment terms set forth in Section 6.1 that apply to a public company and such other terms as shall be necessary or advisable in order to exercise a public company option. Upon exercise of an Option, Participant shall execute and deliver to the Company the Exercise Agreement then in effect, together with payment in full of the Exercise Price for the number of Shares being purchased and payment of any applicable taxes.
4.6 Termination. Subject to earlier termination pursuant to Sections 10 and 12.1 hereof and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following terms and conditions.
4.6.1 Other than Death or Disability or for Cause. If the Participant is Terminated for any reason other than death, Disability or for Cause, then the Participant may exercise such Participant’s Options only to the extent that such Options are exercisable as to Vested Shares upon the Termination Date or as otherwise determined by the Committee. Such Options must be exercised by the Participant, if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO) but in any event, no later than the expiration date of the Options.
4.6.2 Death or Disability. If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause), then Participant’s Options may be exercised only to the extent that such Options are exercisable as to Vested Shares by Participant on the Termination Date or as otherwise determined by the Committee. Such options must be exercised by Participant (or Participant’s legal representative or authorized assignee), if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6) months, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond (a) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code, or (a) twelve (12) months after the Termination Date when the Termination is for Participant’s disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than the expiration date of the Options.
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4.6.3 For Cause. If the Participant is terminated for Cause, the Participant may exercise such Participant’s Options, but not to an extent greater than such Options are exercisable as to Vested Shares upon the Termination Date and Participant’s Options shall expire on such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Committee.
4.6.4 Vesting. Except as may be set forth in the participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).
4.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable.
4.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 12.1 hereof) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
4.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 4.10 hereof, the Committee may reduce the Exercise Price of outstanding Options without the consent of Participants by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 4.4 hereof for Options granted on the date the action is taken to reduce the Exercise Price; provided, further, that the Exercise Price will not be reduced below the par value of the Shares, if any.
4.10 No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code. In no event shall the total number of Shares issued
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(counting each reissuance of a Share that was previously issued and then forfeited or repurchased by the Company as a separate issuance) under the Plan upon exercise of ISOs exceed 131,699,031 Shares (adjusted in proportion to any adjustments under Section 2.2 hereof) over the term of the Plan.
5. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to certain specified restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following terms and conditions.
5.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within such thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee.
5.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted or at the time the purchase is consummated. Payment of the Purchase Price must be made in accordance with Section 7 hereof.
5.3 Restrictions. Restricted Stock Awards may be subject to the restrictions set forth in Sections 8 and 9 hereof.
5.4 Termination of Participant. Except as may be set forth in the Participant’s Restricted Stock Purchase Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).
6. RESTRICTED STOCK UNITS.
6.1 Awards of Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an Award covering a number of Shares that may be settled in cash, by issuance of those Shares at a date in the future, or by a combination of cash and Shares. No Purchase Price shall apply to an RSU settled in Shares. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU, (b) the time or times during which the RSU may be settled, (c) the consideration to be distributed on settlement, and (d) the effect of the Participant’s Termination on each RSU. All grants of RSUs will be evidenced by an Award Agreement (the “RSU Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply
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with and be subject to the terms and conditions of this Plan. No RSU will have a term longer than ten (10) years from the date the RSU is granted.
6.2 Form and Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the RSU Agreement. To the extent permissible under applicable law, the Committee may permit a Participant to defer payment (including settlement) under an RSU to a date or dates after the RSU has vested, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code and any regulations or rulings promulgated thereunder, to the extent the Participant is subject to Section 409A of the Code.
6.3 Dividend Equivalent Payments. The Board may permit Participants holding RSUs to receive dividend equivalent payments on outstanding RSUs if and when dividends are paid to stockholders on Shares. In the discretion of the Board, such dividend equivalent payments may be paid in cash or Shares and they may either be paid at the same time as dividend payments are made to stockholders or delayed until Shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs. If the Board permits dividend equivalent payments to be made on RSUs, the terms and conditions for such dividend equivalent payments will be set forth in the RSU Agreement.
7. PAYMENT FOR PURCHASES AND EXERCISES.
7.1 Payment in General. Payment for Shares acquired pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed to the Participant;
(b) by surrender of shares of the Company that are clear of all liens, claims, encumbrances or security interests and: (i) for which the Company has received “full payment of the purchase price” within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or (ii) that were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; provided, further, that the portion of the Exercise Price or Purchase Price, as the case may be, equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the laws under which the Company is then incorporated or organized;
(d) by waiver of compensation due or accrued to the Participant from the Company for services rendered;
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(e) by participating in a formal cashless exercise program implemented by the Committee in connection with the Plan;
(f) subject to compliance with applicable law and solely in the discretion of the Committee, by exercising as set forth below, provided that a public market for the Company’s Common Stock exists:
(i) through a “same day sale” commitment from the Participant and a broker-dealer whereby the Participant irrevocably elects to exercise the Award and to sell a portion of the Shares so purchased sufficient to pay the total Exercise Price or Purchase Price, and whereby the broker-dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price or Purchase Price directly to the Company; or
(ii) through a “margin” commitment from the Participant and a broker-dealer whereby the Participant irrevocably elects to exercise the Award and to pledge the Shares so purchased to the broker-dealer in a margin account as security for a loan from the broker-dealer in the amount of the total Exercise Price or Purchase Price, and whereby the broker-dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price or Purchase Price directly to the Company; or
(g) by any combination of the foregoing or any other method of payment approved by the Committee provided that in the case of an ISO, the permissible methods of payment shall be determined at the time of grant.
7.2 Withholding Taxes.
7.2.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy applicable tax withholding requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash by the Company, such payment will be net of an amount sufficient to satisfy applicable tax withholding requirements.
7.2.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum tax withholding obligation by electing to have the Company withhold from the Shares to be issued up to the minimum number of Shares having a Fair Market Value on the date that the amount of tax to be withheld is to be determined that is not more than the minimum amount to be withheld; but in no event will the Company withhold Shares if such withholding would result in adverse accounting consequences to the Company. Any elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee.
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8. RESTRICTIONS ON AWARDS.
8.1 Transferability. Except as permitted by the Committee, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, other than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument to an inter vivos or testamentary trust in which the NQSOs are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “family member” as that term is defined in Rule 701, and may not be made subject to execution, attachment or similar process. For the avoidance of doubt, the prohibition against assignment and transfer applies to a stock option and, prior to exercise, the shares to be issued on exercise of a stock option, and pursuant to the foregoing sentence shall be understood to include, without limitation, a prohibition against any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” or any “call equivalent position” (in each case, as defined in Rule 16a-1 promulgated under the Exchange Act. During the lifetime of the Participant an Award will be exercisable only by the Participant or Participant’s legal representative and any elections with respect to an Award may be made only by the Participant or Participant’s legal representative. The terms of an Option shall be binding upon the executor, administrator, successors and assigns of the Participant who is a party thereto.
8.2 Securities Law and Other Regulatory Compliance. Although this Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act, grants may be made pursuant to this Plan that do not qualify for exemption under Rule 701. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (b) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure so do.
8.3 Exchange and Buyout of Awards. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree.
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9. RESTRICTIONS ON SHARES.
9.1 Privileges of Stock Ownership. No Participant will have any of the rights of a stockholder with respect to any Shares until such Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock. The Participant will have no right to retain such stock dividends or stock distributions with respect to Unvested Shares that are repurchased as described in this Section 9.
9.2 Rights of First Refusal and Repurchase. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement (a) a right of first refusal to purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a third party, provided that such right of first refusal terminates upon the Company’s initial public offering of Common Stock pursuant to an effective registration statement filed under the Securities Act and (b) a right to repurchase Unvested Shares held by a Participant for cash and/or cancellation of purchase money indebtedness owed to the Company by the Participant following such Participant’s Termination at any time.
9.3 Escrow; Pledge of Shares To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated. The Committee may cause a legend or legends referencing such restrictions to be placed on the certificate. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
9.4 Securities Law Restrictions. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other
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requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.
10. CORPORATE TRANSACTIONS.
10.1 Assumption or Replacement of Awards by Successor or Acquiring Entity. If an Acquisition or Other Combination shall occur, then any or all outstanding Awards may be assumed, converted or replaced by the successor or acquiring entity (if any) of such Acquisition or Other Combination (or by any of its Parents, if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, any successor or acquiring entity in such Acquisition or Other Combination (or any of its Parents, if any) may substitute equivalent awards for outstanding Awards or provide substantially similar consideration to Participants in respect of their outstanding Awards as was provided to stockholders of the Company in such Acquisition or Other Combination after taking into account the existing provisions of the outstanding Awards (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code). Any successor or acquiring entity in such Acquisition or Other Combination (or any of its Parents, if any) may also substitute by issuing, in place of any Award of outstanding Shares of the Company held by a Participant, substantially similar shares of stock or other property subject to repurchase restrictions and other provisions no less favorable to such Participant than those that applied to such outstanding Shares immediately prior to such Acquisition or Other Combination.
10.2 Awards Not Assumed or Replaced in an Acquisition. If, in the event of an Acquisition, neither the successor or acquiring entity (if any) nor any Parent (if any) of such successor or acquiring entity assumes, converts, replaces or substitutes outstanding Awards as provided above in Section 10.1, then notwithstanding any other provision in this Plan to the contrary, and unless otherwise approved by the Committee or otherwise required by the terms of any Award Agreement or any separate written agreement governing such Award that has been approved by the Board, each such Award that has not already terminated in accordance with the Plan or the applicable Award Agreement shall terminate, without accelerating vesting, immediately prior to the consummation of such Acquisition (or if such Acquisition is an Acquisition by Sale of Assets, immediately prior to the Company’s distribution of any funds or assets to the Company’s stockholders following such Acquisition by Sale of Assets) at such times and upon such conditions as the Committee may determine. Awards need not be treated similarly in a Corporate Transaction.
10.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another entity, whether in connection with an acquisition of such other entity or otherwise, by either (a) granting an Award under this Plan in substitution of such other entity’s award or (b) assuming and/or converting such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other entity had applied the rules of this Plan to such
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grant. In the event the Company assumes an award granted by another entity, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.
11. ADMINISTRATION.
11.1 Committee Authority. This Plan will be administered by the Committee or the Board if no Committee is created by the Board. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend, expand, modify and rescind or terminate rules and regulations relating to this Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to Awards granted under this Plan;
(f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;
(g) grant waivers of any conditions of this Plan or any Award;
(h) determine the terms of vesting, exercisability and payment of Awards to be granted pursuant to this Plan;
(i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned;
(k) extend the vesting period beyond a Participant’s Termination Date; and
(l) make all other determinations necessary or advisable in connection with the administration of this Plan.
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11.2 Committee Composition and Discretion. The Board may delegate full administrative authority over the Plan and Awards to a Committee consisting of at least one member of the Board (or such greater number as may then be required by applicable law). Unless in contravention of any express terms of this Plan or Award, any determination made by the Committee with respect to any Award will be made in its sole discretion either (a) at the time of grant of the Award, or (b) subject to Section 4.9 hereof, at any later time. Any such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. To the extent permitted by applicable law, the Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan, provided that each such officer is a member of the Board.
11.3 Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
11.4 Governing Law. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to that body of laws pertaining to conflict of laws.
12. EFFECTIVENESS, AMENDMENT AND TERMINATION OF THE PLAN.
12.1 Adoption and Stockholder Approval. This Plan will become effective on the date that it is adopted by the Board (the “Effective Date”). This Plan will be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that: (a) no Option may be exercised prior to initial stockholder approval of this Plan; and (b) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company.
12.2 Term of Plan. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, ten (10) years from the date of stockholder approval.
12.3 Amendment or Termination of Plan. Subject to Section 4.9 hereof, the Board may at any time (a) terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan and (b) terminate any and all outstanding Options or RSUs upon a dissolution or liquidation of the Company, followed by the payment of creditors and the distribution of any remaining funds to the Company’s stockholders; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval pursuant to the Code or the regulations promulgated under the Code as such provisions apply to ISO plans.
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13. DEFINITIONS. For all purposes of this Plan, the following terms will have the following meanings.
“Acquisition,” for purposes of Section 10, means:
(a) any consolidation or merger in which the Company is a constituent entity or is a party in which the voting stock and other voting securities of the Company that are outstanding immediately prior to the consummation of such consolidation or merger represent, or are converted into, securities of the surviving entity of such consolidation or merger (or of any Parent of such surviving entity) that, immediately after the consummation of such consolidation or merger, together possess less than fifty percent (50%) of the total voting power of all voting securities of such surviving entity (or of any of its Parents, if any) that are outstanding immediately after the consummation of such consolidation or merger;
(b) a sale or other transfer by the holders thereof of outstanding voting stock and/or other voting securities of the Company possessing more than fifty percent (50%) of the total voting power of all outstanding voting securities of the Company, whether in one transaction or in a series of related transactions, pursuant to an agreement or agreements to which the Company is a party and that has been approved by the Board, and pursuant to which such outstanding voting securities are sold or transferred to a single person or entity, to one or more persons or entities who are Affiliates of each other, or to one or more persons or entities acting in concert; or
(c) the sale, lease, transfer or other disposition, in a single transaction or series of related transactions, by the Company and/or any Subsidiary or Subsidiaries of the Company, of all or substantially all the assets of the Company and its Subsidiaries taken as a whole, (or, if substantially all of the assets of the Company and its Subsidiaries taken as a whole are held by one or more Subsidiaries, the sale or disposition (whether by consolidation, merger, conversion or otherwise) of such Subsidiaries of the Company), except where such sale, lease, transfer or other disposition is made to the Company or one or more wholly owned Subsidiaries of the Company (an “Acquisition by Sale of Assets”).
“Affiliate” of a specified person means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified (where, for purposes of this definition, the term “control” (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
“Award” means any award pursuant to the terms and conditions of this Plan, including any Option, Restricted Stock Unit or Restricted Stock Award.
“Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award as approved by the Committee.
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“Board” means the Board of Directors of the Company.
“Cause” means Termination because of (a) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the Company, the Participant’s conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration by the Participant of a common law fraud, (b) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (c) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent or Subsidiary of the Company and the Participant regarding the terms of the Participant’s service as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, officer, director or consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Parent or Subsidiary of the Company and the Participant, (d) Participant’s disregard of the policies of the Company or any Parent or Subsidiary of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (e) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or a Parent or Subsidiary of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the committee created and appointed by the Board to administer this Plan, or if no committee is created and appointed, the Board.
“Common Stock” means the Company’s common stock, $0.0001 par value per share.
“Company” means Remitly Global, Inc., or any successor corporation.
“Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exercise Price” means the price per Share at which a holder of an Option may purchase Shares issuable upon exercise of the Option.
“Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:
(a) if such Common Stock is then publicly traded on a national securities exchange, its closing price on the date of determination on the principal
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national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded but is not listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Committee may determine); or
(c) if none of the foregoing is applicable to the valuation in question, by the Committee in good faith.
“Option” means an award of an option to purchase Shares pursuant to Section 4 of this Plan.
“Other Combination” for purposes of Section 10 means any (a) consolidation or merger in which the Company is a constituent entity and is not the surviving entity of such consolidation or merger or (b) any conversion of the Company into another form of entity; provided that such consolidation, merger or conversion does not constitute an Acquisition.
“Parent” of a specified entity means, any entity that, either directly or indirectly, owns or controls such specified entity, where for this purpose, “control” means the ownership of stock, securities or other interests that possess at least a majority of the voting power of such specified entity (including indirect ownership or control of such stock, securities or other interests).
“Participant” means a person who receives an Award under this Plan.
“Plan” means this 2011 Equity Incentive Plan, as amended from time to time.
“Purchase Price” means the price at which a Participant may purchase Restricted Stock pursuant to this Plan.
“Restricted Stock” means Shares purchased pursuant to a Restricted Stock Award under this Plan.
“Restricted Stock Award” means an award of Shares pursuant to 5 hereof.
“Restricted Stock Unit” or “RSU” means an award made pursuant to Section 6 hereof.
“Rule 701” means Rule 701 et seq promulgated by the Commission under the Securities Act.
“SEC” means the Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended.
“Shares” means shares of the Company’s Common Stock, reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 10 hereof, and any successor security.
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“Subsidiary” means any entity (other than the Company) in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain owns stock or other equity securities representing fifty percent (50%) or more of the total combined voting power of all classes of stock or other equity securities in one of the other entities in such chain.
“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will not be deemed to have ceased to provide services in the case of sick leave, military leave, or any other leave of absence approved by the Committee; provided that such leave is for a period of not more than ninety (90) days (a) unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or (b) unless provided otherwise pursuant to formal policy adopted from time to time by the Company’s Board and issued and promulgated in writing. In the case of any Participant on sick leave, military leave or an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).
“Unvested Shares” means “Unvested Shares” as defined in the Award Agreement for an Award.
“Vested Shares” means “Vested Shares” as defined in the Award Agreement.
* * * * * * * * * * *
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AMENDMENTS
Plan originally adopted November 4, 2011 (4,126 shares) (approved by Board and stockholders effective November 4, 2011).
Plan amended effective December 22, 2011 (upon filing of Certificate of Amendment) to provide for 1-for-750 stock split resulting in 3,094,500 shares
Plan amended effective February 8, 2012 to increase reserved shares to 4,754,200 (approved by Board and stockholders effective February 8, 2012)
Plan amended effective April 18, 2012 to increase reserved shares to 6,128,467 (approved by Board and stockholders on April 18, 2012)
Plan amended effective December 20, 2013 to increase reserved shares to 8,755,621 (approved by Board and stockholders on December 20, 2013)
Plan amended effective March 11, 2015 to increase reserved shares to 11,538,654 (approved by Board and stockholders on March 10, 2015)
Plan amended effective July 3, 2015 to increase reserved shares to 12,793,654 (approved by Board on July 3, 2015 and stockholders on August 31, 2015)
Plan amended effective February 16, 2016 to increase reserved shares to 13,193,654 (approved by Board on February 16, 2016 and stockholders on February 19, 2016)
Plan amended effective February 16, 2016 to increase reserved shares to 17,905,727 (approved by Board on April 11, 2016 and stockholders on April 11, 2016)
Plan amended effective October 24, 2017 to increase reserved shares to 21,856,298 (approved by Board and stockholders effective October 24, 2017)
Plan amended effective July 13, 2018 to increase reserved shares to 27,016,798 (approved by Board effective July 13, 2018 and by stockholders effective July 16, 2018)
Plan amended effective February 8, 2019 to increase reserved shares to 28,682,168 (approved by Board effective February 8, 2019 and by stockholders effective February 20, 2019)
Plan amended effective May 29, 2019 to increase reserved shares to 32,599,677 (approved by Board effective May 29, 2019 and by stockholders effective May 30, 2019)
Plan amended effective February 4, 2020 to increase reserved shares to 35,599,677 (approved by Board effective February 4, 2020 and by stockholders effective March 5, 2020)
Plan amended effective November 4, 2020 to provide for award of Restricted Stock Units (RSUs) (approved by Board effective November 4, 2020; stockholder approval not required)
Plan amended effective February 17, 2021 to increase reserved shares to 43,899,677 shares (approved by Board effective February 17, 2021 and by stockholders effective July 29, 2021)
Exhibit 21.1
Subsidiary of Remitly Global, Inc.
| Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||
| Remitly, Inc. | DE | ||||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of Remitly Global, Inc. of our report dated April 1, 2021 relating to the financial statements and financial statement schedule of Remitly Global, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
| /s/ PricewaterhouseCoopers LLP | ||
| Seattle, Washington | ||
| August 30, 2021 | ||