UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number: 001-40256
ACV Auctions Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
47-2415221 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
640 Ellicott Street, #321 Buffalo, New York |
14203 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (800) 553-4070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Class A common stock, par value $0.001 per share |
|
ACVA |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2023, there were 135,092,930 shares of the registrant's Class A common stock, and 25,664,828 shares of Class B common stock, each with a par value of $0.001, outstanding.
Table of Contents
|
|
Page |
PART I. |
|
|
Item 1. |
|
|
|
3 |
|
|
4 |
|
|
5 |
|
|
Condensed Consolidated Statements of Changes in Stockholders’ Equity |
6 |
|
8 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
38 |
|
Item 4. |
38 |
|
|
|
|
PART II. |
39 |
|
Item 1. |
39 |
|
Item 1A. |
39 |
|
Item 2. |
39 |
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Item 3. |
39 |
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Item 4. |
39 |
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Item 5. |
39 |
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Item 6. |
41 |
|
43 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the header “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
1
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
Unless the context otherwise indicates, references in this report to the terms “ACV Auctions,” “ACV,” “the Company,” “we,” “our” and “us” refer to ACV Auctions Inc. and its subsidiaries.
We may announce material business and financial information to our investors using our investor relations website (www.investors.acvauto.com). We therefore encourage investors and others interested in ACV to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission (the "SEC"), webcasts, press releases and conference calls.
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
ACV AUCTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share data)
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service revenue |
$ |
109,360 |
|
|
$ |
97,752 |
|
|
$ |
214,223 |
|
|
$ |
186,099 |
|
Customer assurance revenue |
|
14,857 |
|
|
|
17,320 |
|
|
|
29,620 |
|
|
|
32,038 |
|
Total revenue |
|
124,217 |
|
|
|
115,072 |
|
|
|
243,843 |
|
|
|
218,137 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service cost of revenue (excluding |
|
50,229 |
|
|
|
49,893 |
|
|
|
97,804 |
|
|
|
97,145 |
|
Customer assurance cost of revenue (excluding |
|
13,474 |
|
|
|
14,575 |
|
|
|
25,617 |
|
|
|
28,211 |
|
Operations and technology |
|
35,303 |
|
|
|
36,720 |
|
|
|
71,048 |
|
|
|
69,549 |
|
Selling, general, and administrative |
|
41,180 |
|
|
|
36,144 |
|
|
|
82,892 |
|
|
|
72,196 |
|
Depreciation and amortization |
|
3,821 |
|
|
|
2,479 |
|
|
|
7,106 |
|
|
|
4,864 |
|
Total operating expenses |
|
144,007 |
|
|
|
139,811 |
|
|
|
284,467 |
|
|
|
271,965 |
|
Loss from operations |
|
(19,790 |
) |
|
|
(24,739 |
) |
|
|
(40,624 |
) |
|
|
(53,828 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
4,720 |
|
|
|
638 |
|
|
|
8,016 |
|
|
|
682 |
|
Interest expense |
|
(451 |
) |
|
|
(238 |
) |
|
|
(766 |
) |
|
|
(448 |
) |
Total other income (expense) |
|
4,269 |
|
|
|
400 |
|
|
|
7,250 |
|
|
|
234 |
|
Loss before income taxes |
|
(15,521 |
) |
|
|
(24,339 |
) |
|
|
(33,374 |
) |
|
|
(53,594 |
) |
Provision for income taxes |
|
61 |
|
|
|
176 |
|
|
|
408 |
|
|
|
416 |
|
Net loss |
$ |
(15,582 |
) |
|
$ |
(24,515 |
) |
|
$ |
(33,782 |
) |
|
$ |
(54,010 |
) |
Weighted-average shares - basic and diluted |
|
159,463,851 |
|
|
|
156,703,734 |
|
|
|
159,090,377 |
|
|
|
156,484,903 |
|
Net loss per share - basic and diluted |
$ |
(0.10 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.35 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ACV AUCTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net loss |
$ |
(15,582 |
) |
|
$ |
(24,515 |
) |
|
$ |
(33,782 |
) |
|
$ |
(54,010 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
||||
Net unrealized gains (losses) on available-for-sale securities |
|
(972 |
) |
|
|
(1,037 |
) |
|
|
28 |
|
|
|
(1,110 |
) |
Foreign currency translation (loss) gain |
|
19 |
|
|
|
(1,540 |
) |
|
|
263 |
|
|
|
(1,509 |
) |
Comprehensive loss |
$ |
(16,535 |
) |
|
$ |
(27,092 |
) |
|
$ |
(33,491 |
) |
|
$ |
(56,629 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ACV AUCTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
|
|
June 30, |
|
|
December 31, |
|
||
Assets |
|
|
|
|
|
|
||
Current Assets : |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
271,947 |
|
|
$ |
280,752 |
|
Marketable securities |
|
|
228,381 |
|
|
|
215,926 |
|
Trade receivables (net of allowance of $3,629 and $4,860) |
|
|
144,036 |
|
|
|
168,732 |
|
Finance receivables (net of allowance of $3,048 and $2,275) |
|
|
97,784 |
|
|
|
78,047 |
|
Other current assets |
|
|
9,509 |
|
|
|
11,317 |
|
Total current assets |
|
|
751,657 |
|
|
|
754,774 |
|
Property and equipment (net of accumulated depreciation of $5,538 and $6,986) |
|
|
5,518 |
|
|
|
5,710 |
|
Goodwill |
|
|
96,847 |
|
|
|
91,755 |
|
Acquired intangible assets (net of amortization of $14,486 and $11,990) |
|
|
22,846 |
|
|
|
19,291 |
|
Capitalized software (net of amortization of $9,967 and $6,930) |
|
|
48,465 |
|
|
|
36,992 |
|
Other assets |
|
|
11,084 |
|
|
|
6,400 |
|
Total assets |
|
|
936,417 |
|
|
|
914,922 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current Liabilities : |
|
|
|
|
|
|
||
Accounts payable |
|
|
319,766 |
|
|
|
323,661 |
|
Accrued payroll |
|
|
11,356 |
|
|
|
10,052 |
|
Accrued other liabilities |
|
|
13,393 |
|
|
|
14,504 |
|
Total current liabilities |
|
|
344,515 |
|
|
|
348,217 |
|
Long-term debt |
|
|
105,000 |
|
|
|
75,500 |
|
Other long-term liabilities |
|
|
10,733 |
|
|
|
5,481 |
|
Total liabilities |
|
$ |
460,248 |
|
|
$ |
429,198 |
|
Commitments and Contingencies (Note 5) |
|
|
|
|
|
|
||
Stockholders' Equity : |
|
|
|
|
|
|
||
Preferred Stock; $0.001 par value; 20,000,000 shares authorized; |
|
|
- |
|
|
|
- |
|
Common Stock - Class A; $0.001 par value; 2,000,000,000 shares authorized; |
|
|
135 |
|
|
|
121 |
|
Common Stock - Class B; $0.001 par value; 160,000,000 shares authorized; |
|
|
26 |
|
|
|
37 |
|
Additional paid-in capital |
|
|
860,628 |
|
|
|
836,695 |
|
Accumulated deficit |
|
|
(381,136 |
) |
|
|
(347,354 |
) |
Accumulated other comprehensive loss |
|
|
(3,484 |
) |
|
|
(3,775 |
) |
Total stockholders' equity |
|
|
476,169 |
|
|
|
485,724 |
|
Total liabilities and stockholders' equity |
|
$ |
936,417 |
|
|
$ |
914,922 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ACV AUCTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share data)
|
|
Three Months Ended June 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Common Stock Class A |
|
|
Common Stock Class B |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||||
|
|
|
|
|
Par |
|
|
|
|
|
Par |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance, March 31, 2023 |
|
|
128,854,443 |
|
|
$ |
129 |
|
|
|
30,275,430 |
|
|
$ |
30 |
|
|
$ |
848,832 |
|
|
$ |
(365,554 |
) |
|
$ |
(2,531 |
) |
|
$ |
480,906 |
|
Conversion of Class B common |
|
|
4,752,818 |
|
|
|
4 |
|
|
|
(4,752,818 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,582 |
) |
|
|
|
|
|
(15,582 |
) |
||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(953 |
) |
|
|
(953 |
) |
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,605 |
|
|
|
|
|
|
|
|
|
11,605 |
|
||||||
Exercise of common stock options |
|
|
655,392 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1,876 |
|
|
|
|
|
|
|
|
|
1,877 |
|
||||
Vested restricted stock units |
|
|
278,711 |
|
|
|
1 |
|
|
|
88,031 |
|
|
|
- |
|
|
|
(3,015 |
) |
|
|
|
|
|
|
|
|
(3,014 |
) |
||
Issuance of shares for employee |
|
|
175,927 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
1,330 |
|
|
|
|
|
|
|
|
|
1,330 |
|
||||
Balance as of June 30, 2023 |
|
|
134,717,291 |
|
|
$ |
135 |
|
|
|
25,610,643 |
|
|
$ |
26 |
|
|
$ |
860,628 |
|
|
$ |
(381,136 |
) |
|
$ |
(3,484 |
) |
|
$ |
476,169 |
|
|
|
Six Months Ended June 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Common Stock Class A |
|
|
Common Stock Class B |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||||
|
|
|
|
|
Par |
|
|
|
|
|
Par |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance, December 31, 2022 |
|
|
121,214,275 |
|
|
$ |
121 |
|
|
|
37,241,952 |
|
|
|
37 |
|
|
$ |
836,695 |
|
|
$ |
(347,354 |
) |
|
$ |
(3,775 |
) |
|
$ |
485,724 |
|
Conversion of Class B common |
|
|
11,794,939 |
|
|
|
11 |
|
|
|
(11,794,939 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,782 |
) |
|
|
|
|
|
(33,782 |
) |
||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291 |
|
|
|
291 |
|
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,464 |
|
|
|
|
|
|
|
|
|
26,464 |
|
||||||
Exercise of common stock options |
|
|
836,676 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
2,774 |
|
|
|
|
|
|
|
|
|
2,775 |
|
||||
Vested restricted stock units |
|
|
695,474 |
|
|
|
1 |
|
|
|
163,630 |
|
|
|
- |
|
|
|
(6,635 |
) |
|
|
|
|
|
|
|
|
(6,634 |
) |
||
Issuance of shares for employee |
|
|
175,927 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1,330 |
|
|
|
|
|
|
|
|
|
1,331 |
|
||||
Balance as of June 30, 2023 |
|
|
134,717,291 |
|
|
$ |
135 |
|
|
|
25,610,643 |
|
|
$ |
26 |
|
|
$ |
860,628 |
|
|
$ |
(381,136 |
) |
|
$ |
(3,484 |
) |
|
$ |
476,169 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||||||||||||||||||
|
|
Common Stock Class A |
|
|
Common Stock Class B |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||||
|
|
|
|
|
Par |
|
|
|
|
|
Par |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance, March 31, 2022 |
|
|
111,040,170 |
|
|
$ |
111 |
|
|
|
46,010,678 |
|
|
$ |
46 |
|
|
$ |
808,203 |
|
|
$ |
(274,656 |
) |
|
$ |
(82 |
) |
|
$ |
533,622 |
|
Conversion of Class B common |
|
|
3,397,095 |
|
|
|
4 |
|
|
|
(3,397,095 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,515 |
) |
|
|
|
|
|
(24,515 |
) |
||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,577 |
) |
|
|
(2,577 |
) |
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,119 |
|
|
|
|
|
|
|
|
|
9,119 |
|
||||||
Exercise of common stock options |
|
|
243,895 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
348 |
|
|
|
|
|
|
|
|
|
348 |
|
||||
Vested restricted stock units |
|
|
124,339 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
(1,262 |
) |
|
|
|
|
|
|
|
|
(1,262 |
) |
||||
Issuance of shares for employee |
|
|
128,176 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
930 |
|
|
|
|
|
|
|
|
|
930 |
|
||||
Balance as of June 30, 2022 |
|
|
114,933,675 |
|
|
$ |
115 |
|
|
|
42,613,583 |
|
|
$ |
42 |
|
|
$ |
817,338 |
|
|
$ |
(299,171 |
) |
|
$ |
(2,659 |
) |
|
$ |
515,665 |
|
|
|
Six Months Ended June 30, 2022 |
|
|||||||||||||||||||||||||||||
|
|
Common Stock Class A |
|
|
Common Stock Class B |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||||
|
|
|
|
|
Par |
|
|
|
|
|
Par |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance, December 31, 2021 |
|
|
106,420,843 |
|
|
$ |
106 |
|
|
|
49,661,126 |
|
|
|
50 |
|
|
$ |
801,142 |
|
|
$ |
(245,161 |
) |
|
$ |
(40 |
) |
|
$ |
556,097 |
|
Conversion of Class B common |
|
|
7,047,543 |
|
|
|
8 |
|
|
|
(7,047,543 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,010 |
) |
|
|
|
|
|
(54,010 |
) |
||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,619 |
) |
|
|
(2,619 |
) |
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,043 |
|
|
|
|
|
|
|
|
|
17,043 |
|
||||||
Exercise of common stock options |
|
|
441,422 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
759 |
|
|
|
|
|
|
|
|
|
759 |
|
||||
Vested restricted stock units |
|
|
274,814 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
(2,535 |
) |
|
|
|
|
|
|
|
|
(2,535 |
) |
||||
Escrowed shares |
|
|
620,877 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
- |
|
||||
Issuance of shares for employee |
|
|
128,176 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
930 |
|
|
|
|
|
|
|
|
|
930 |
|
||||
Balance as of June 30, 2022 |
|
|
114,933,675 |
|
|
$ |
115 |
|
|
|
42,613,583 |
|
|
$ |
42 |
|
|
$ |
817,338 |
|
|
$ |
(299,171 |
) |
|
$ |
(2,659 |
) |
|
$ |
515,665 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ACV AUCTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
|
|
Six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
(33,782 |
) |
|
$ |
(54,010 |
) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
7,320 |
|
|
|
5,101 |
|
Stock-based compensation expense, net of amounts capitalized |
|
|
23,407 |
|
|
|
16,293 |
|
Provision for bad debt |
|
|
5,807 |
|
|
|
4,100 |
|
Other non-cash, net |
|
|
(575 |
) |
|
|
406 |
|
Changes in operating assets and liabilities, net of effects from purchases of |
|
|
|
|
|
|
||
Trade receivables |
|
|
27,102 |
|
|
|
(6,154 |
) |
Other operating assets |
|
|
1,622 |
|
|
|
(343 |
) |
Accounts payable |
|
|
(9,075 |
) |
|
|
(39,475 |
) |
Other operating liabilities |
|
|
1,530 |
|
|
|
1,530 |
|
Net cash provided by (used in) operating activities |
|
|
23,356 |
|
|
|
(72,552 |
) |
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Net increase in finance receivables |
|
|
(22,265 |
) |
|
|
(33,892 |
) |
Purchases of property and equipment |
|
|
(880 |
) |
|
|
(1,809 |
) |
Capitalization of software costs |
|
|
(12,826 |
) |
|
|
(8,689 |
) |
Purchases of marketable securities |
|
|
(88,058 |
) |
|
|
(197,312 |
) |
Maturities and redemptions of marketable securities |
|
|
74,490 |
|
|
|
2,000 |
|
Sales of marketable securities |
|
|
2,402 |
|
|
|
- |
|
Acquisition of businesses (net of cash acquired) |
|
|
(12,000 |
) |
|
|
(18,913 |
) |
Net cash provided by (used in) investing activities |
|
|
(59,137 |
) |
|
|
(258,615 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Proceeds from long term debt |
|
|
200,000 |
|
|
|
130,000 |
|
Payments towards long term debt |
|
|
(170,500 |
) |
|
|
(60,000 |
) |
Proceeds from exercise of stock options |
|
|
2,774 |
|
|
|
759 |
|
Payment of RSU tax withholdings in exchange for common shares |
|
|
(6,635 |
) |
|
|
(2,556 |
) |
Proceeds from employee stock purchase plan |
|
|
1,330 |
|
|
|
930 |
|
Net cash provided by (used in) financing activities |
|
|
26,969 |
|
|
|
69,133 |
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
|
7 |
|
|
|
(18 |
) |
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
(8,805 |
) |
|
|
(262,052 |
) |
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
280,752 |
|
|
|
565,994 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
271,947 |
|
|
$ |
303,942 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Stock-based compensation included in capitalized software development |
|
$ |
1,483 |
|
|
$ |
750 |
|
Purchase of property and equipment and internal use software in accounts |
|
$ |
1,880 |
|
|
$ |
288 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements
8
ACV AUCTIONS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nature of Business – The Company operates in one industry segment, providing a digital wholesale auction marketplace (the “Marketplace”) to facilitate business-to-business used vehicle sales between a selling dealership (“Seller”) and a buying dealership (“Buyer”). Customers using the Marketplace are licensed automotive dealerships or other commercial automotive enterprises. At the election of the customer purchasing a vehicle, the Company can arrange third-party transportation services for the delivery of the purchased vehicle through its wholly owned subsidiary, ACV Transportation LLC. The Company can also provide the customer financing for the purchased vehicle through its wholly owned subsidiary, ACV Capital LLC. ACV also provides data services that offer insights into the condition and value of used vehicles for transactions both on and off the Company's Marketplace, which help dealerships, their end customers, and commercial partners make more informed decisions to transact with confidence and efficiency. Customers using data services are licensed automotive dealerships or other commercial automotive enterprises. All services are provided in the United States and certain data services are also provided internationally. Services are supported by the Company’s operations which are in the United States, Canada and France.
Basis of Consolidation – The condensed consolidated financial statements include the accounts of ACV Auctions Inc. and all of its controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Basis of Preparation – The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These financial statements have been prepared on the same basis as the Company's annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company's financial information. The unaudited interim condensed consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023 (the "Annual Report"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Seasonality – The volume of vehicles sold through the Marketplace generally fluctuates from quarter to quarter. This seasonality is caused by several factors, including holidays, weather, the seasonality of the retail market for used vehicles and the timing of federal tax returns, which affects the demand side of the automotive industry. As a result, revenue and operating expenses related to volume fluctuate accordingly on a quarterly basis. In the fourth quarter, we typically experience lower used vehicle volume on our Marketplace as well as additional costs associated with the holidays. Seasonally depressed used vehicle volume on our Marketplace typically continues during the winter months through the first quarter. Typical seasonality trends may not be observed in periods where other external factors more significantly impact the industry.
The following is a summary of available-for-sale financial instruments, as of June 30, 2023 and December 31, 2022, respectively (in thousands):
9
|
June 30, 2023 |
|
|||||||||||||
|
Amortized Cost |
|
|
Unrealized Gain |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities (1) |
$ |
176,858 |
|
|
$ |
1 |
|
|
$ |
(2,221 |
) |
|
$ |
174,638 |
|
U.S. treasury and agency securities |
|
53,960 |
|
|
|
4 |
|
|
|
(221 |
) |
|
|
53,743 |
|
Total Marketable securities |
$ |
230,818 |
|
|
$ |
5 |
|
|
$ |
(2,442 |
) |
|
$ |
228,381 |
|
(1) Comprised primarily of corporate bonds and commercial paper |
|
|
|
|
|
|
|
10
|
December 31, 2022 |
|
|||||||||||||
|
Amortized Cost |
|
|
Unrealized Gain |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities (1) |
$ |
184,321 |
|
|
$ |
75 |
|
|
$ |
(2,344 |
) |
|
$ |
182,052 |
|
U.S. treasury and agency securities |
|
34,071 |
|
|
|
3 |
|
|
|
(200 |
) |
|
|
33,874 |
|
Total Marketable securities |
$ |
218,392 |
|
|
$ |
78 |
|
|
$ |
(2,544 |
) |
|
$ |
215,926 |
|
(1) Comprised primarily of corporate bonds and commercial paper |
|
|
|
|
|
|
|
As of June 30, 2023, the fair values of available-for-sale financial instruments, by remaining contractual maturity, were as follows (in thousands):
Due within one year |
|
|
|
|
|
$ |
143,556 |
|
Due in one to five years |
|
|
|
|
|
|
84,825 |
|
Total |
|
|
|
|
|
$ |
228,381 |
|
The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio.
The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. The Company does not intend to sell the instruments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. Unrealized gain and losses on marketable securities are presented net of tax.
Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis (at least annually). Fair value is defined as 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.
Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1: Observable inputs such as quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
Level 3: Unobservable inputs in which there is little or no market data which require the Company to develop its own assumptions.
The Company’s financial instruments that are not measured at fair value on a recurring basis include trade and finance accounts receivable and accounts payable whose carrying values approximate fair value due to the short-term nature of those instruments.
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
11
|
|
June 30, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
128,667 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
128,667 |
|
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities |
|
|
- |
|
|
|
174,638 |
|
|
|
- |
|
|
|
174,638 |
|
U.S. treasury and agency securities |
|
|
41,793 |
|
|
|
11,950 |
|
|
|
- |
|
|
|
53,743 |
|
Total financial assets |
|
$ |
170,460 |
|
|
$ |
186,588 |
|
|
$ |
— |
|
|
$ |
357,048 |
|
|
|
December 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
36,679 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
36,679 |
|
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities |
|
|
- |
|
|
|
182,052 |
|
|
|
- |
|
|
|
182,052 |
|
U.S. treasury and agency securities |
|
|
26,006 |
|
|
|
7,868 |
|
|
|
- |
|
|
|
33,874 |
|
Total financial assets |
|
$ |
62,685 |
|
|
$ |
189,920 |
|
|
$ |
- |
|
|
$ |
252,605 |
|
The Company classifies its highly liquid money market funds and U.S treasury securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its corporate securities, and U.S. agency securities within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.
The Company maintains an allowance for doubtful receivables that in management’s judgment reflects losses inherent in the portfolio. A provision for doubtful receivables is recorded to adjust the level of the allowance in accordance with GAAP.
Changes in the allowance for doubtful trade receivables for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
|
$ |
4,371 |
|
|
$ |
3,528 |
|
|
$ |
4,860 |
|
|
$ |
3,724 |
|
Provision for bad debt |
|
|
2,251 |
|
|
|
1,833 |
|
|
|
3,279 |
|
|
|
3,219 |
|
Net write-offs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Write-offs |
|
|
(4,225 |
) |
|
|
(3,198 |
) |
|
|
(8,188 |
) |
|
|
(5,658 |
) |
Recoveries |
|
|
1,232 |
|
|
|
2,103 |
|
|
|
3,678 |
|
|
|
2,981 |
|
Net write-offs |
|
|
(2,993 |
) |
|
|
(1,095 |
) |
|
|
(4,510 |
) |
|
|
(2,677 |
) |
Ending balance |
|
$ |
3,629 |
|
|
$ |
4,266 |
|
|
$ |
3,629 |
|
|
$ |
4,266 |
|
Changes in the allowance for doubtful finance receivables for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
|
$ |
2,256 |
|
|
$ |
704 |
|
|
$ |
2,275 |
|
|
$ |
636 |
|
Provision for bad debt |
|
|
1,380 |
|
|
|
474 |
|
|
|
2,528 |
|
|
|
881 |
|
Net write-offs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Write-offs |
|
|
(771 |
) |
|
|
(207 |
) |
|
|
(2,152 |
) |
|
|
(577 |
) |
Recoveries |
|
|
183 |
|
|
|
- |
|
|
|
397 |
|
|
|
30 |
|
Net write-offs |
|
|
(588 |
) |
|
|
(207 |
) |
|
|
(1,755 |
) |
|
|
(546 |
) |
Ending balance |
|
$ |
3,048 |
|
|
$ |
971 |
|
|
$ |
3,048 |
|
|
$ |
971 |
|
12
The Company provides certain guarantees to Sellers in the Marketplace in the ordinary course of business, which are accounted for under ASC 460 as a general guarantee.
Vehicle Condition Guarantees – Sellers must attach a vehicle condition report in the Marketplace for every auction; this vehicle condition report is used by Buyers to inform bid decisions. The Company offers guarantees to Sellers in qualifying situations where the Company performed a vehicle inspection and prepared the vehicle condition report. Sellers must pay an additional fee in exchange for this guarantee. The guarantee provides Sellers protection from paying remedies to Buyers related to a Buyer’s claim that the vehicle condition report did not accurately portray the condition of the vehicle purchased on the Marketplace. The guarantee provides the Company with the right to retain proceeds from the subsequent liquidation of the vehicle covered under the guarantee. The guarantee is typically provided for 10 days after the successful sale of the vehicle on the Marketplace. The fair value of vehicle condition guarantees issued is estimated based on historical results and other qualitative factors. The vehicle condition guarantee revenue is recognized on the earlier of the guarantee expiration date or the guarantee settlement date. The maximum potential payment is the sale price of the vehicle. The total sale price of vehicles for which there was an outstanding guarantee was $222.9 million and $160.3 million at June 30, 2023 and December 31, 2022, respectively. The carrying amount of the liability presented in accrued other liabilities was $1.5 million and $1.2 million at June 30, 2023 and December 31, 2022, respectively.
The recognized probable loss contingency, in excess of vehicle condition guarantees recognized, presented in accrued other liabilities was $1.4 million at June 30, 2023 and December 31, 2022.
Other Price Guarantees – The Company provides Sellers with a price guarantee for vehicles to be sold on the Marketplace from time to time. If a vehicle sells below the guaranteed price, the Company is responsible for paying the Seller the difference between the guaranteed price and the final sale price. The term of the guarantee is typically less than one week. No material unsettled price guarantees existed at June 30, 2023 and December 31, 2022.
Litigation – The Company and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company's liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its condensed consolidated financial statements. To the extent pending or threatened litigation could result in exposure in excess of the recorded liability, the amount of such excess is not currently estimable.
2019 Revolver
On December 20, 2019, the Company entered into a revolving credit facility (the “2019 Revolver”). On June 26, 2023, the Company entered into an agreement to extinguish the 2019 Revolver. As of June 30, 2023, there was no outstanding balance under the 2019 Revolver. As of December 31, 2022, $0.5 million was outstanding under the 2019 Revolver.
2021 Revolver
On August 24, 2021, the Company entered into a revolving credit facility (the “2021 Revolver”). The 2021 Revolver was established to provide general financing to the Company. The 2021 Revolver is secured by substantially all of the Company's assets except for ACV Capital receivables. The maximum borrowing principal amount of the 2021 Revolver is $160.0 million and includes a sub facility that provides for the issuance of letters of credit up to $20.0 million outstanding at any time. On June 1, 2023, the Company entered into Amendment No. 1 ("The First Amendment"), which modified the rate to which interest payments are indexed to the Secured Overnight Financing Rate, or SOFR. The interest rate applicable to the 2021 Revolver is, at our option, either (a) SOFR (or a replacement rate established in accordance with the terms of the credit agreement for the 2021 Revolver) (subject to a 0.00% SOFR floor), plus a margin of 2.75% per annum plus an additional credit spread adjustment of 0.11% for daily and one-month terms, 0.26% for three-month terms and 0.43% for six-month terms or (b) the Alternate Base Rate plus a margin of 1.75% per annum. The Alternate Base Rate is the highest of (a) the Wall Street Journal prime rate, (b) the NYFRB rate plus 0.5% and (c)(i) 1.00% plus (ii) the adjusted SOFR rate for a one-month interest period. The First Amendment maintains a maximum borrowing principal amount of $160.0 million.
13
Refer to Note 9 contained in our Annual Report on Form 10-K for the year ended December 31, 2022 for further details regarding our revolving credit facilities and their key terms.
As of June 30, 2023 and December 31, 2022, outstanding borrowings under the 2021 Revolver were $105.0 million and $75.0 million, respectively, and there was an outstanding letter of credit issued under the 2021 Revolver in the amount of $1.6 million, decreasing the availability under the 2021 Revolver by a corresponding amount. As of June 30, 2023, the interest rate on the outstanding borrowing was 10.0%.
As of June 30, 2023, the Company was in compliance with all of its financial covenants and non-financial covenants.
The following table summarizes the primary components of revenue; this level of disaggregation takes into consideration how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors (in thousands):
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Auction marketplace revenue |
$ |
54,519 |
|
|
$ |
48,081 |
|
|
$ |
108,521 |
|
|
$ |
92,042 |
|
Other marketplace revenue |
|
46,548 |
|
|
|
41,451 |
|
|
|
89,239 |
|
|
|
77,792 |
|
Data services revenue |
|
8,293 |
|
|
|
8,219 |
|
|
|
16,463 |
|
|
|
16,266 |
|
Marketplace and service revenue |
$ |
109,360 |
|
|
$ |
97,752 |
|
|
$ |
214,223 |
|
|
$ |
186,099 |
|
Contract liabilities represent consideration collected prior to satisfying performance obligations. The Company had $4.0 million and $3.8 million of contract liabilities included in Accrued other liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively. Revenue recognized for the three months ended June 30, 2023 from amounts included in deferred revenue as of March 31, 2023 was $4.4 million. Revenue recognized for the six months ended June 30, 2023 from amounts included in deferred revenue as of December 31, 2022 was $3.8 million. All the remaining performance obligations for contracts are expected to be recognized within one year.
Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, 2022 for further details regarding our equity plans.
The following table summarizes the stock option activity for the six months ended June 30, 2023 (in thousands, except for share and per share amounts):
|
|
Number of |
|
|
Weighted- |
|
|
Intrinsic |
|
|
Weighted- |
|
||||
Outstanding, December 31, 2022 |
|
|
7,801,650 |
|
|
$ |
2.67 |
|
|
$ |
43,185 |
|
|
|
6.0 |
|
Exercised |
|
|
(836,676 |
) |
|
|
3.32 |
|
|
|
|
|
|
|
||
Forfeited |
|
|
(110,113 |
) |
|
|
7.31 |
|
|
|
|
|
|
|
||
Expired |
|
|
(12,302 |
) |
|
|
4.53 |
|
|
|
|
|
|
|
||
Outstanding, June 30, 2023 |
|
|
6,842,559 |
|
|
$ |
2.52 |
|
|
$ |
100,944 |
|
|
|
5.4 |
|
Exercisable, June 30, 2023 |
|
|
6,093,265 |
|
|
$ |
2.12 |
|
|
$ |
92,339 |
|
|
|
5.1 |
|
The following table summarizes the restricted stock unit activity for the six months ended June 30, 2023 (in thousands, except for share and per share amounts):
14
|
|
Number of RSUs |
|
|
Weighted- |
|
||
Outstanding, December 31, 2022 |
|
|
5,978,564 |
|
|
$ |
14.57 |
|
Granted |
|
|
2,878,818 |
|
|
$ |
12.41 |
|
Vested |
|
|
(1,451,870 |
) |
|
$ |
14.49 |
|
Forfeited |
|
|
(298,526 |
) |
|
$ |
13.40 |
|
Outstanding, June 30, 2023 |
|
|
7,106,986 |
|
|
$ |
13.76 |
|
As of June 30, 2023 there was approximately $91.5 million of compensation expense related to the unvested portion of common stock options and restricted stock units that will be recorded as compensation expense over a weighted-average period of 2.5 years.
During the first quarter of 2022, the Company entered into an escrow agreement (the "Escrow Agreement") for certain compensatory share-based service awards. The Escrow Agreement authorized 620,877 shares of common stock to be issued and held in escrow. Shares will be released and distributed equally on a six-month schedule to the employee award recipients with the final vesting date on February 22, 2025. At June 30, 2023, there was approximately $4.3 million of compensation expense related to the unvested portion of escrow shares that will be recorded over 1.7 years.
The Company had an effective tax rate of approximately 0% and (1)% for the three months ended June 30, 2023 and 2022, and (1)% for the six months ended June 30, 2023 and 2022. The principal differences between the federal statutory rate and the effective tax rate is related to foreign taxes and the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.
The numerators and denominators of the basic and diluted net income (loss) per share computations for the Company's common stock are calculated as follows for the three and six months ended June 30, 2023 and 2022 (in thousands, except share data):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net loss attributable to |
|
$ |
(12,798 |
) |
|
$ |
(2,784 |
) |
|
$ |
(17,682 |
) |
|
$ |
(6,833 |
) |
|
$ |
(27,233 |
) |
|
$ |
(6,549 |
) |
|
$ |
(38,189 |
) |
|
$ |
(15,821 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares |
|
|
130,969,040 |
|
|
|
28,494,811 |
|
|
|
113,027,404 |
|
|
|
43,676,330 |
|
|
|
128,249,720 |
|
|
|
30,840,657 |
|
|
|
110,645,832 |
|
|
|
45,839,070 |
|
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.35 |
) |
|
$ |
(0.35 |
) |
The following table presents the total weighted-average number of potentially dilutive shares that were excluded from the computation of diluted net loss per share attributable to common shareholders because their effect would have been anti-dilutive for the period presented:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Unvested RSUs and other awards |
|
|
2,276,673 |
|
|
|
681,577 |
|
|
|
1,803,979 |
|
|
|
527,072 |
|
Stock options |
|
|
5,564,549 |
|
|
|
5,153,279 |
|
|
|
5,470,883 |
|
|
|
5,616,566 |
|
Shares subject to the employee stock purchase plan |
|
|
118,414 |
|
|
|
179,218 |
|
|
|
151,174 |
|
|
|
135,489 |
|
15
On April 24, 2023, the Company completed its acquisition of all of the outstanding shares of Dealers Auto Auction of Oklahoma City, LLC (“DAA OKC”) for total consideration of $12.0 million. The aggregate purchase price was preliminarily allocated to $4.9 million of goodwill, $5.9 million of intangible assets and $1.2 million of net assets assumed. The purchase price allocations are subject to adjustments as they are finalized over the 12 month measurement period. Goodwill acquired in connection with this acquisition will be deductible for tax purposes in the United States and will be amortized on a straight-line basis over 15 years.
DAA OKC offers wholesale car auction services and the investment into DAA OKC enabled the Company to expand its range of offerings to dealers and commercial partners. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company's results of operations from the acquisition date.
On February 22, 2022, the Company completed its acquisition of Monk SAS for total consideration of $18.6 million, net of cash acquired and working capital adjustments. The total purchase price was paid in cash. In aggregate, $13.5 million was attributed to goodwill, $6.4 million to intangible assets and $1.1 million to net liabilities assumed. Goodwill acquired in connection with this acquisition will be deductible for tax purposes in the United States and amortized on a straight-line basis over 15 years.
Monk SAS is an AI company delivering state of the art visual processing capabilities for the automotive, insurance and mobility markets. The acquisition of Monk enables the Company to enhance its service offerings and inspection capabilities for dealers and commercial partners. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company's results of operations from the acquisition date.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" relating to our financial condition and results of operations for the year ended December 31, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 1, 2023, or the Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our financial condition or results of operations, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Form 10-Q. You should review the “Risk Factors” section of our Annual Report for a discussion of important factors that could cause our 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
Our mission is to build and enable the most trusted and efficient digital marketplace for buying and selling used vehicles with transparency and comprehensive data that was previously unimaginable.
We provide a highly efficient and vibrant digital marketplace for wholesale vehicle transactions and data services that offer transparent and accurate vehicle information to our customers. Our platform leverages data insights and technology to power our digital marketplace and data services, enabling our dealers and commercial partners to buy, sell, and value vehicles with confidence and efficiency. We strive to solve the challenges that the used automotive industry has faced for generations and provide powerful technology-enabled capabilities to our dealers and commercial partners who fulfill a critical role in the automotive ecosystem. We help dealers source and manage inventory and accurately price their vehicles as well as process payments, transfer titles, manage arbitrations, and finance and transport vehicles. Our platform encompasses:
We have historically generated the majority of our revenue from our digital marketplace where we earn auction and ancillary fees from both buyers and sellers in each case only upon a successful auction. Buyer auction fees are variable based on the price of the vehicle, while seller auction fees include a fixed auction fee and an optional fee for the elective condition report associated with the vehicle. We also earn ancillary fees through additional value-added services to buyers and sellers in connection with the auction.
Our customers include participants on our marketplace and purchasers of our data services. Certain dealers and commercial partners purchase data services in connection with vehicle assessments, software subscriptions, and transactions that do not occur on our marketplace. Our dealer customers include a majority of the top 100 used vehicle dealers in the United States.
17
For the three and six months ended June 30, 2023 we had 153,148 and 304,711 Marketplace Units sold on our marketplace representing a total Marketplace Gross Merchandise Value, or Marketplace GMV, of $2.5 billion and $4.9 billion, a decrease of 10% and 5%, respectively, from the same periods in 2022. In the three and six months ended June 30, 2023, we generated revenue of $124.2 million and $243.8 million, an increase of 8% and 12%, respectively from the same periods in 2022, a net loss of $15.6 million and $33.8 million, and adjusted EBITDA of $(3.5) million and $(9.2) million compared to a net loss of $24.5 million and $54.0 million and adjusted EBITDA of $(14.1) million and $(32.0) million for the same periods in 2022. We continue to invest in growth to scale our company responsibly and drive towards sustained profitability. See the section titled “—Key Operating and Financial Metrics” for additional information on Marketplace Units, Marketplace GMV and Adjusted EBITDA.
Key Operating and Financial Metrics
We regularly monitor a number of operating and financial metrics in order to measure our current performance and estimate our future performance. Our business metrics may be calculated in a manner different than similar business metrics used by other companies.
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||
Marketplace Units |
|
|
|
153,148 |
|
|
|
|
148,047 |
|
|
|
|
304,711 |
|
|
|
|
288,172 |
|
Marketplace GMV |
|
$ |
2.5 billion |
|
|
$ |
2.7 billion |
|
|
$ |
4.9 billion |
|
|
$ |
5.1 billion |
|
||||
Adjusted EBITDA |
|
$ |
|
(3.5) million |
|
|
$ |
|
(14.1) million |
|
|
$ |
|
(9.2) million |
|
|
$ |
|
(32.0) million |
|
Marketplace Units
Marketplace Units is a key indicator of our potential for growth in Marketplace GMV and revenue. It demonstrates the overall engagement of our customers on the ACV platform, the vibrancy of our digital marketplace and our market share of wholesale transactions in the United States. We define Marketplace Units as the number of vehicles transacted on our marketplace within the applicable period. Marketplace Units transacted includes any vehicle that successfully reaches sold status, even if the auction is subsequently unwound, meaning the buyer or seller does not complete the transaction. These instances have been immaterial to date. Marketplace Units exclude vehicles that were inspected by ACV, but not sold on our digital marketplace. Since the launch of our platform, Marketplace Units have generally increased as we have expanded our territory coverage, added new Marketplace Buyers and Marketplace Sellers to our platform and increased our share of wholesale transactions from existing customers. Because we only earn auction and ancillary fees in the case of a successful auction, Marketplace Units will remain a critical driver of our revenue growth.
Marketplace GMV
Marketplace GMV is primarily driven by the volume and dollar value of Marketplace Units transacted on our digital marketplace. We believe that Marketplace GMV acts as an indicator of the success of our marketplace, signaling satisfaction of dealers and buyers on our marketplace, and the health, scale, and growth of our business. We define Marketplace GMV as the total dollar value of vehicles transacted through our digital marketplace within the applicable period, excluding any auction and ancillary fees. Because our definition of Marketplace Units does not include vehicles inspected but not sold on our digital marketplace, and because the value of the vehicle sold is not recognized as revenue, GMV does not represent revenue earned by us. We expect that Marketplace GMV will continue to grow as Marketplace Units grow, though at a varying rate within a given applicable period, as Marketplace GMV is also impacted by the value of each vehicle transacted. Due to the historically high values of used automobiles in the current environment, it is possible that as values normalize in the future, Marketplace GMV could decline even as Marketplace Units grow.
Marketplace Buyers
We define Marketplace Buyers as dealers or commercial partners with a unique customer ID that have transacted at least once in the last 12 months as a buyer on our digital marketplace. Marketplace Buyers include independent and franchise dealers buying on our marketplace.
Marketplace Sellers
18
We define Marketplace Sellers as dealers or commercial partners with a unique customer ID that have transacted at least once in the last 12 months as a seller on our digital marketplace. Marketplace Sellers include independent and franchise dealers selling on our marketplace, as well as commercial partners, consisting of commercial leasing companies, rental car companies, bank or other finance companies, who use our marketplace to sell their inventory.
We monitor the growth in both Marketplace Buyers and Marketplace Sellers as they each promote a more vibrant and healthy marketplace. We believe that our growth in Marketplace Sellers and Marketplace Buyers over time has been driven by the value proposition of our offerings, and our sales and marketing success, including our ability to attract new dealers and commercial partners to our digital marketplace. Based on our current position in the market, we believe that we have significant opportunity to continue to increase the number of Marketplace Buyers and Marketplace Sellers.
Adjusted EBITDA
Adjusted EBITDA is a performance measure that we use to assess our operating performance and the operating leverage in our business. We define Adjusted EBITDA as net income (loss), adjusted to exclude: depreciation and amortization, stock-based compensation expense, interest (income) expense, other (income) expense, net, provision for income taxes, and other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses. We monitor Adjusted EBITDA as a non-GAAP financial measure to supplement the financial information we present in accordance with generally accepted accounting principles, or GAAP, to provide investors with additional information regarding our financial results. For further explanation of the uses and limitations of this measure and a reconciliation of our Adjusted EBITDA to the most directly comparable GAAP measure, net income (loss), please see “—Non-GAAP Financial Measures.”
We expect Adjusted EBITDA to fluctuate in the near term as we continue to invest in our business and improve over the long term as we achieve greater scale in our business and efficiencies in our operating expenses.
Factors Affecting Our Performance
We believe that the growth and future success of our business depend on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth, improve our results of operations, and increase profitability.
Increasing Marketplace Units
Increasing Marketplace Units is a key driver of our revenue growth. The transparency, efficiency and vibrancy of our marketplace is critical to our ability to grow our share of wholesale transactions from existing customers and attract new buyers and sellers to our digital marketplace. Failure to increase the number of Marketplace Units would adversely affect our revenue growth, operating results, and the overall health of our marketplace.
Grow Our Share of Wholesale Transactions from Existing Customers
Our success depends in part on our ability to grow our share of wholesale transactions from existing customers, increasing their engagement and spend on our platform. We remain in the early stages of penetrating our Marketplace Buyers and Sellers’ total number of wholesale transactions. As we continue to invest in eliminating key risks of uncertainty related to the auction process through our trusted and efficient digital marketplace, we expect that we will capture an increasing share of transactions from our existing buyers and sellers. Our ability to increase share from existing customers will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing and overall changes in our customers’ engagement levels.
Add New Marketplace Buyers and Marketplace Sellers
We believe we have a significant opportunity to add new marketplace participants. As we expand our presence within our existing territories, we are able to drive increased liquidity and greater vehicle selection, which in turn improves our ability to attract new Marketplace Buyers and Marketplace Sellers. Additionally, we intend to add more commercial consignors to our digital marketplace and capture a greater share of vehicles in the wholesale market that are sold to dealers by commercial consignors through auctions and private sales.
19
Our ability to attract new Marketplace Buyers and Marketplace Sellers will depend on a number of factors including: the ability of our sales team to onboard dealers and commercial consignors onto our platform and ensure their satisfaction, the ability of our territory managers to build awareness of our brand, the ability of our vehicle condition inspectors, or VCIs, to cultivate relationships with our customers in their respective territories, and the effectiveness of our marketing efforts.
Grow Awareness for Our Offerings and Brand
Wholesale vehicle online penetration is in the early stages, lagging the consumer automotive market, and we expect more dealers and commercial partners to source and manage their inventory online. As the digitization of the wholesale automotive market accelerates, we believe that our digital marketplace is well positioned to capture a disproportionate share of that growth. We plan to use targeted sales and marketing efforts to educate potential Marketplace Buyers and Marketplace Sellers as to the benefits of our offerings and drive adoption of our platform. Our ability to grow awareness of our offerings and brand depend on a number of factors, including:
Our future success is dependent on our ability to successfully grow our market presence and market and sell existing and new products to both new and existing customers.
Grow Value-Added and Data Services
We plan to continue to drive customer adoption of our existing value-added and data services and introduce new and complementary products. Our ability to drive higher attachment rates of existing value-added services, such as ACV Transportation and ACV Capital, will help grow our revenue. In 2021, we added MAX Digital's flagship inventory management system to our portfolio of data services offerings. We plan to drive customer adoption of our data services such as our True360 Reports that bring transparency and offer insights into the condition and value of used vehicles as well as our inventory management system which enables dealers to accurately price wholesale and retail inventory while maximizing profit by leveraging predictive analytics informed by machine learning. These data services enable our customers to make more informed inventory management decisions both on and off our digital marketplace. In addition, we will continue to focus on developing new products and services that enhance our platform in areas including new data-powered products. Our ability to drive customer adoption of these products and services is dependent on the pricing of our products, the offerings of our competitors and the effectiveness of our marketing efforts.
Investment in Growth
We are actively investing in our business. In order to support our future growth and expanded product offerings, we expect this investment to continue. We anticipate that our operating expenses will increase as we continue to build our sales and marketing efforts, expand our employee base and invest in our technology development. The investments we make in our platform are designed to grow our revenue opportunity and to improve our operating results in the long term, but these investments could also delay our ability to achieve profitability or reduce our profitability in the near term. Our success is dependent on making value-generative investments that support our future growth.
Used Car Demand
Our success depends in part on sufficient demand for used vehicles. Our recent growth over the last several years has coincided with a rising consumer demand for used vehicles. Since early 2020 demand for cars has outpaced supply. During this period we have seen new car supply have a significant impact on the supply of wholesale vehicles available within our marketplace.
20
More recently, new vehicle supply has begun to increase, although still below 2019 levels. However, this increase in new vehicle supply has been coupled with an increase in interest rates which has made both new and used vehicles more expensive for retail consumers utilizing financing. Used car demand will be in part dependent on the economic health of the retail consumer and their ability to afford a vehicle purchase.
Used vehicle sales are also seasonal. Sales typically peak late in the first quarter and early in the second quarter, with the lowest relative level of industry vehicle sales occurring in the fourth quarter. Due to our growth since launch, our sales patterns to date have not been entirely reflective of the general seasonality of the used vehicle market, but we expect this to normalize as our business matures. Seasonality also impacts used vehicle pricing, with used vehicles depreciating at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year. We may experience seasonal and other fluctuations in our quarterly results of operations, which may not fully reflect the underlying performance of our business. See the section titled “Seasonality” for additional information on the impacts of seasonality on our business.
COVID-19 and Supply Shortages
In March 2020, our business and operations began to experience the effects of the worldwide COVID-19 pandemic. Starting in May 2020, our marketplace activity rebounded strongly to reach levels higher than the months of January and February 2020 prior to the impact of COVID-19. As supply constraints began to ease and the demand and supply for used vehicles reached a better equilibrium in the fourth quarter of 2020, the growth in our transaction volume and revenue normalized. In 2021 and 2022, the supply and demand in our marketplace continued to be impacted by the semiconductor supply shortage and COVID-19-related production disruptions.
The factors described above continue to limit the supply of new vehicles and contribute to short-term volatility in used vehicle sales, including those on our marketplace. New car supply has had a significant impact on the supply of wholesale vehicles available within our marketplace over the period. We are continuing to monitor the effects of these factors on our business and industry. In particular, the extent to which COVID-19 will continue to impact our business, and the broader implications of the pandemic on our sustained results of operations, remain uncertain. We cannot predict how the pandemic will continue to develop, whether and to what extent government regulations or other restrictions may impact our operations or those of our customers, or whether and to what extent the pandemic or the effects thereof may have longer term unanticipated impacts on our business.
Components of Results of Operations
Revenue
Marketplace and Service Revenue
We have historically generated the majority of our revenue from our digital marketplace where we earn auction and ancillary fees from both buyers and sellers, in each case only upon a successful auction. Our marketplace and service revenue consists principally of revenue earned from facilitating auctions and arranging for the transportation of vehicles purchased in such auctions.
We act as an agent when facilitating a vehicle auction through the marketplace. Auction and related fees charged to the buyer and seller are reported as revenue on a net basis, excluding the price of the auctioned vehicle in the transaction.
We act as a principal when arranging for the transportation of vehicles purchased on the marketplace and leverage our network of third-party transportation carriers to secure the arrangement. Transportation fees charged to the buyer are reported on a gross basis.
We also generate data services revenue through our True360 reports and MAX Digital inventory management software subscriptions and offer short-term inventory financing to eligible customers purchasing vehicles through the marketplace.
Customer Assurance Revenue
We also generate revenue by providing our Go Green assurance to sellers on the condition of certain vehicles sold on the marketplace, which is considered a guarantee under GAAP. This assurance option is only available for sellers who have enrolled in the service on qualifying vehicles for which we have prepared the vehicle condition report. Customer assurance revenue also includes revenue from other price guarantee products offered to sellers.
21
Customer assurance revenue is measured based upon the fair value of the Go Green assurance that we provide. We expect the fair value per vehicle assured to decrease over time as we continue to improve the quality of our inspection product, which in turn reduces the costs of satisfying such assurance.
Operating Expenses
Marketplace and Service Cost of Revenue
Marketplace and service cost of revenue consists of third-party transportation carrier costs, titles shipping costs, customer support, website hosting costs, inspection costs related to data services and various other costs. These costs include salaries, benefits, bonuses and related stock-based compensation expenses, which we refer to as personnel expenses. We expect our marketplace and service cost of revenue to continue to increase in absolute dollars as we continue to scale our business and introduce new product and service offerings.
Customer Assurance Cost of Revenue
Customer assurance cost of revenue consists of the costs related to satisfying claims against the vehicle condition guarantees, and other price guarantees. We expect that our customer assurance cost of revenue will increase in absolute dollars as our business grows, particularly as we provide guarantees on an increasing number of vehicles.
Operations and Technology
Operations and technology expense consists of costs for wholesale auction inspections, personnel costs related to payments and titles processing, transportation processing, product and engineering and other general operations and technology expenses. These costs include personnel-related expenses and other allocated facility and office costs. We expect that our operations and technology expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our marketplace, transportation capabilities and other technologies.
Selling, General and Administrative
Selling, general and administrative expense consists of costs resulting from sales, accounting, finance, legal, marketing, human resources, executive, and other administrative activities. These costs include personnel-related expenses, legal and other professional services expenses and other allocated facility and office costs. Also included in selling, general and administrative expense is advertising and marketing costs to promote our services. We expect that our selling, general and administrative expense will increase in absolute dollars as our business grows. However, we expect that our selling, general and administrative expense will decrease as a percentage of our revenue as our revenue grows over the longer term.
Depreciation and Amortization
Depreciation and amortization expense consists of depreciation of fixed assets, and amortization of acquired intangible assets and internal-use software.
Other Income (Expense)
Other income (expense) consists primarily of interest income earned on our marketable securities and cash and cash equivalents. Other income (expense) also includes interest expense on our borrowings.
Provision for Income Taxes
Provision for income taxes consists of U.S. federal, state and foreign income taxes.
22
Results of Operations
The following table sets forth our Condensed Consolidated Statements of Operations data expressed as a percentage of total revenue for the periods presented:
|
|
Three months ended June 30, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
Amount |
|
|
% of |
|
|
Amount |
|
|
% of |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service revenue |
|
$ |
109,360 |
|
|
|
88 |
% |
|
$ |
97,752 |
|
|
|
85 |
% |
Customer assurance revenue |
|
|
14,857 |
|
|
|
12 |
% |
|
|
17,320 |
|
|
|
15 |
% |
Total revenue |
|
|
124,217 |
|
|
|
100 |
% |
|
|
115,072 |
|
|
|
100 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service cost of revenue (excluding |
|
|
50,229 |
|
|
|
40 |
% |
|
|
49,893 |
|
|
|
43 |
% |
Customer assurance cost of revenue (excluding |
|
|
13,474 |
|
|
|
11 |
% |
|
|
14,575 |
|
|
|
13 |
% |
Operations and technology (1) |
|
|
35,303 |
|
|
|
28 |
% |
|
|
36,720 |
|
|
|
32 |
% |
Selling, general, and administrative (1) (3) (5) |
|
|
41,180 |
|
|
|
33 |
% |
|
|
36,144 |
|
|
|
31 |
% |
Depreciation and amortization (2) (4) |
|
|
3,821 |
|
|
|
3 |
% |
|
|
2,479 |
|
|
|
2 |
% |
Total operating expenses |
|
|
144,007 |
|
|
|
|
|
|
139,811 |
|
|
|
|
||
Income (loss) from operations |
|
|
(19,790 |
) |
|
|
|
|
|
(24,739 |
) |
|
|
|
||
Other Income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
4,720 |
|
|
|
|
|
|
638 |
|
|
|
|
||
Interest expense |
|
|
(451 |
) |
|
|
|
|
|
(238 |
) |
|
|
|
||
Total other income (expense) |
|
|
4,269 |
|
|
|
|
|
|
400 |
|
|
|
|
||
Income (loss) before income taxes |
|
|
(15,521 |
) |
|
|
|
|
|
(24,339 |
) |
|
|
|
||
Provision for income taxes |
|
|
61 |
|
|
|
|
|
|
176 |
|
|
|
|
||
Net income (loss) |
|
$ |
(15,582 |
) |
|
|
|
|
$ |
(24,515 |
) |
|
|
|
|
|
Six months ended June 30, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
Amount |
|
|
% of |
|
|
Amount |
|
|
% of |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service revenue |
|
$ |
214,223 |
|
|
|
88 |
% |
|
$ |
186,099 |
|
|
|
85 |
% |
Customer assurance revenue |
|
|
29,620 |
|
|
|
12 |
% |
|
|
32,038 |
|
|
|
15 |
% |
Total revenue |
|
|
243,843 |
|
|
|
100 |
% |
|
|
218,137 |
|
|
|
100 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace and service cost of revenue (excluding |
|
|
97,804 |
|
|
|
40 |
% |
|
|
97,145 |
|
|
|
45 |
% |
Customer assurance cost of revenue (excluding |
|
|
25,617 |
|
|
|
11 |
% |
|
|
28,211 |
|
|
|
13 |
% |
Operations and technology (1) |
|
|
71,048 |
|
|
|
29 |
% |
|
|
69,549 |
|
|
|
32 |
% |
Selling, general, and administrative (1) (3) (5) |
|
|
82,892 |
|
|
|
34 |
% |
|
|
72,196 |
|
|
|
33 |
% |
Depreciation and amortization (2) (4) |
|
|
7,106 |
|
|
|
3 |
% |
|
|
4,864 |
|
|
|
2 |
% |
Total operating expenses |
|
|
284,467 |
|
|
|
|
|
|
271,965 |
|
|
|
|
||
Income (loss) from operations |
|
|
(40,624 |
) |
|
|
|
|
|
(53,828 |
) |
|
|
|
||
Other Income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
8,016 |
|
|
|
|
|
|
682 |
|
|
|
|
||
Interest expense |
|
|
(766 |
) |
|
|
|
|
|
(448 |
) |
|
|
|
||
Total other income (expense) |
|
|
7,250 |
|
|
|
|
|
|
234 |
|
|
|
|
||
Income (loss) before income taxes |
|
|
(33,374 |
) |
|
|
|
|
|
(53,594 |
) |
|
|
|
||
Provision for income taxes |
|
|
408 |
|
|
|
|
|
|
416 |
|
|
|
|
||
Net income (loss) |
|
$ |
(33,782 |
) |
|
|
|
|
$ |
(54,010 |
) |
|
|
|
23
(1) Includes stock-based compensation expense as follows: |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|||||||||||
Marketplace and service cost of revenue (excluding |
|
$ |
199 |
|
|
$ |
143 |
|
|
$ |
402 |
|
|
$ |
278 |
|
|
Operations and technology |
|
|
2,317 |
|
|
|
1,812 |
|
|
|
4,726 |
|
|
|
3,873 |
|
|
Selling, general, and administrative |
|
|
9,386 |
|
|
|
6,414 |
|
|
|
18,279 |
|
|
|
12,142 |
|
|
Stock-based compensation expense |
|
$ |
11,902 |
|
|
$ |
8,369 |
|
|
$ |
23,407 |
|
|
$ |
16,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(2) Includes acquired intangible asset amortization as follows: |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|||||||||||
|
0 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|||||||||||
Depreciation and amortization |
|
$ |
1,268 |
|
|
$ |
1,300 |
|
|
$ |
2,440 |
|
|
$ |
2,529 |
|
|
Acquired intangible asset amortization |
|
$ |
1,268 |
|
|
$ |
1,300 |
|
|
$ |
2,440 |
|
|
$ |
2,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(3) Includes contingent losses (gains) as follows: |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|||||||||||
|
0 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|||||||||||
Selling, general, and administrative |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
200 |
|
|
Contingent losses (gains) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(4) Includes amortization of capitalized stock based compensation as follows: |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|||||||||||
|
0 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|||||||||||
Depreciation and amortization |
|
$ |
248 |
|
|
$ |
164 |
|
|
$ |
525 |
|
|
$ |
164 |
|
|
Amortization of capitalized stock based compensation |
|
$ |
248 |
|
|
$ |
164 |
|
|
$ |
525 |
|
|
$ |
164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(5) Includes acquisition costs as follows: |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|||||||||||
|
0 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|||||||||||
Selling, general, and administrative |
|
$ |
317 |
|
|
$ |
- |
|
|
$ |
523 |
|
|
$ |
- |
|
|
Acquisition costs |
|
$ |
317 |
|
|
$ |
- |
|
|
$ |
523 |
|
|
$ |
- |
|
24
Comparison of the three months ended June 30, 2023 and 2022
Revenue
Marketplace and Service Revenue
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Marketplace and service revenue |
|
$ |
109,360 |
|
|
$ |
97,752 |
|
|
$ |
11,608 |
|
|
|
12 |
% |
The increase was primarily driven by an increase in auction marketplace revenue from our buyers and sellers, as well as increases in revenue earned from arranging for the transportation of vehicles to buyers and data and other service revenue. Revenue increases in the current quarter were primarily volume-driven. Additionally, we raised the buyer fees charged on our marketplace effective in October 2022 that further contributed to the increase in revenue year-over-year. For the three months ended June 30, 2023 compared to the three months ended June 30, 2022, auction marketplace revenue increased to $54.6 million from $48.1 million, other marketplace revenue increased to $46.5 million from $41.5 million, and data services revenue increased to $8.3 million from $8.2 million.
25
Customer Assurance Revenue
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Customer assurance revenue |
|
$ |
14,857 |
|
|
$ |
17,320 |
|
|
$ |
(2,463 |
) |
|
|
(14 |
)% |
The decrease in customer assurance revenue was primarily driven by a decrease in Go Green assurance revenue. For the three months ended June 30, 2023, Go Green assurance revenue decreased to $13.3 million from $15.8 million in the three months ended June 30, 2022 as a result of a lower fair value per guaranteed unit. Other assurance revenue was consistent year over year for the second quarter.
Operating Expenses
Marketplace and Service Cost of Revenue
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Marketplace and service cost of revenue (excluding |
|
$ |
50,229 |
|
|
$ |
49,893 |
|
|
$ |
336 |
|
|
|
1 |
% |
Percentage of revenue |
|
|
40 |
% |
|
|
43 |
% |
|
|
|
|
|
|
The increase primarily consisted of higher costs related to generating auction marketplace revenue partially offset by lower costs attributed to other marketplace cost of revenue. Other marketplace cost of revenues decreased to $35.5 million for the three months ended June 30, 2023, compared to $36.7 million for the three months ended June 30, 2022 as we continued our efforts to effectively manage costs. For the three months ended June 30, 2023 compared to three months ended June 30, 2022, total cost attributed to generating auction marketplace revenue increased to $9.0 million from $7.6 million and the total cost of generating data services revenue increased to $5.7 million from $5.6 million. The increase in auction marketplace cost of revenue is primarily due to increased units sold through our marketplace and physical auction platforms. Marketplace and service costs of revenues as a percentage of revenue decreased during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as we continued to grow revenue and scale our business.
Customer Assurance Cost of Revenue
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Customer assurance cost of revenue (excluding |
|
$ |
13,474 |
|
|
$ |
14,575 |
|
|
$ |
(1,101 |
) |
|
|
(8 |
)% |
Percentage of revenue |
|
|
11 |
% |
|
|
13 |
% |
|
|
|
|
|
|
The decrease primarily consisted of costs attributable to our Go Green assurance offerings and was primarily driven by a decrease in costs incurred to settle guarantees as we continued our efforts to effectively manage our assurance offerings. For the three months ended June 30, 2023, Go Green assurance cost of revenue decreased to $12.0 million from $13.0 million in three months ended June 30, 2022.
26
Operations and Technology Expenses
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Operations and technology |
|
$ |
35,303 |
|
|
$ |
36,720 |
|
|
$ |
(1,417 |
) |
|
|
(4 |
)% |
Percentage of revenue |
|
|
28 |
% |
|
|
32 |
% |
|
|
|
|
|
|
The decrease is primarily due to lower personnel related costs offset by increased software and technology expenses. For the three months ended June 30, 2023 compared to the three months ended June 30, 2022, personnel-related costs decreased to $29.4 million from $32.2 million as a result of a greater proportion of costs qualifying for capitalization. Software and technology expenses increased to $4.2 million from $3.4 million as a result of continued investment in our technology and infrastructure. Operations and technology expense as a percentage of revenue decreased during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as we continued our efforts to effectively manage costs while we continue to invest in future growth.
Selling, General, and Administrative Expenses
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Selling, general, and administrative |
|
$ |
41,180 |
|
|
$ |
36,144 |
|
|
$ |
5,036 |
|
|
|
14 |
% |
Percentage of revenue |
|
|
33 |
% |
|
|
31 |
% |
|
|
|
|
|
|
The increase is primarily due to higher personnel-related costs. For the three months ended June 30, 2023 compared to the three months ended June 30, 2022, personnel related costs increased to $34.3 million from $30.2 million, primarily as a result of increased stock based compensation costs. Other expenses increased to $5.7 million from $4.8 million in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, driven primarily by an increase in bad debt expense. Selling, general, and administrative expenses as a percentage of revenue increased 2% during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as we continue to invest in future growth.
Depreciation and Amortization
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
$ |
3,821 |
|
|
$ |
2,479 |
|
|
$ |
1,342 |
|
|
|
54 |
% |
Percentage of revenue |
|
|
3 |
% |
|
|
2 |
% |
|
|
|
|
|
|
The increase is primarily due to an increase of $1.0 million in amortization of internal-use software costs. The increase in depreciation and amortization as a percentage of revenue is due to the placing of internal-use software projects into service and the subsequent recognition of amortization expense.
27
Interest Income
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Interest income |
|
$ |
4,720 |
|
|
$ |
638 |
|
|
$ |
4,082 |
|
|
|
640 |
% |
The increase was primarily driven by higher interest rates during the three months ended June 30, 2023 compared to three months ended June 30, 2022, as well as higher average balances of marketable securities during the three months June 30, 2023 compared to the three months ended June 30, 2022.
Interest Expense
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Interest expense |
|
$ |
(451 |
) |
|
$ |
(238 |
) |
|
$ |
(213 |
) |
|
|
89 |
% |
The increase was primarily driven by an increase in borrowings during the three months ended June 30, 2023 as compared to the three month ended June 30, 2022.
Provision for Income Taxes
|
|
Three months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Provision for income taxes |
|
$ |
61 |
|
|
$ |
176 |
|
|
$ |
(115 |
) |
|
|
(65 |
)% |
Our effective tax rate was approximately (0)% and (1)% for the three months ended June 30, 2023 and 2022, respectively. The principal differences between the federal statutory rate and the effective tax rate is related to foreign taxes and the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.
28
Comparison of the six months ended June 30, 2023 and 2022
Revenue
Marketplace and Service Revenue
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Marketplace and service revenue |
|
$ |
214,223 |
|
|
$ |
186,099 |
|
|
$ |
28,124 |
|
|
|
15 |
% |
The increase was primarily driven by an increase in auction marketplace revenue from our buyers and sellers, as well as increases in revenue earned from arranging for the transportation of vehicles to buyers and other service revenue. Revenue increases in the current quarter were primarily volume-driven. Additionally, we raised the buyer fees charged on our marketplace effective in October 2022 that further contributed to the increase in revenue year-over-year. For the six months ended June 30, 2023 compared to the six months ended June 30, 2022, auction marketplace revenue increased to $108.5 million from $92.0 million, other marketplace revenue increased to $89.2 million from $77.8 million, and data services revenue increased to $16.5 million from $16.3 million.
29
Customer Assurance Revenue
|
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|||||
|
- |
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Customer assurance revenue |
|
|
$ |
29,620 |
|
|
$ |
32,038 |
|
|
$ |
(2,418 |
) |
|
|
(8 |
)% |
Customer assurance revenue decrease was primarily driven by a decrease in Go Green assurance revenue. For the six months ended June 30, 2023, Go Green assurance revenue decreased to $26.5 million from $29.4million in the six months ended June 30, 2022 as a result of a lower fair value per guaranteed unit. Other assurance revenue increased to $3.2 million for the six months ended June 30, 2023 from $2.6 million for the six months ended June 30, 2022 as a result of increased unit volume of other price guarantees.
Operating Expenses
Marketplace and Service Cost of Revenue
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Marketplace and service cost of revenue (excluding |
|
$ |
97,804 |
|
|
$ |
97,145 |
|
|
$ |
659 |
|
|
|
1 |
% |
Percentage of revenue |
|
|
40 |
% |
|
|
45 |
% |
|
|
|
|
|
|
The increase consisted of higher costs related to generating auction marketplace revenue partially offset by lower costs attributed to other marketplace cost of revenue. Other marketplace cost of revenues decreased to $69.0 million for the six months ended June 30, 2023, compared to $72.0 million for the six months ended June 30, 2022 as we continued our efforts to effectively manage costs. For the six months ended June 30, 2023 compared to six months ended June 30, 2022, total cost attributed to generating auction marketplace revenue increased to $17.4 million from $14.2 million and the total cost of generating data services revenue increased to $11.4 million from $10.9 million. The increase in auction marketplace cost of revenue is primarily due to increased units sold through our marketplace platform. Marketplace and services costs of revenues as a percentage of revenue decreased during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as we continued to grow revenue and scale our business.
Customer Assurance Cost of Revenue
|
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|||||
|
- |
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Customer assurance cost of revenue (excluding |
|
|
$ |
25,617 |
|
|
$ |
28,211 |
|
|
$ |
(2,594 |
) |
|
|
(9 |
)% |
|
Percentage of revenue |
|
|
|
11 |
% |
|
|
13 |
% |
|
|
|
|
|
|
The decrease primarily consisted of costs attributable to our Go Green assurance offerings and was primarily driven by a decrease in costs incurred to settle guarantees as we continued our efforts to effectively manage our assurance offerings. For the six months ended June 30, 2023, Go Green assurance cost of revenue decreased to $23.1 million from $25.6 million in the six months ended June 30, 2022
30
Operations and Technology Expenses
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Operations and technology |
|
$ |
71,048 |
|
|
$ |
69,549 |
|
|
$ |
1,499 |
|
|
|
2 |
% |
Percentage of revenue |
|
|
29 |
% |
|
|
32 |
% |
|
|
|
|
|
|
The increase primarily consisted of higher software and technology expenses offset by lower personnel related costs. For the six months ended June 30, 2023 compared to June 30, 2022, personnel-related costs decreased to $60.1 million from $60.9 million as a result of a greater proportion of costs qualifying for capitalization. Software and technology expenses increased to $7.9 million from $6.5 million as a result of continued investment in our technology and infrastructure. Operations and technology expense as a percentage of revenue decreased during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as we continued our efforts to effectively manage costs while we continue to invest in future growth.
Selling, General, and Administrative Expenses
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Selling, general, and administrative |
|
$ |
82,892 |
|
|
$ |
72,196 |
|
|
$ |
10,696 |
|
|
|
15 |
% |
Percentage of revenue |
|
|
34 |
% |
|
|
33 |
% |
|
|
|
|
|
|
The increase primarily consisted of higher personnel-related costs, partially offset by a decrease in other expenses. For the six months ended June 30, 2023 compared to June 30, 2022, personnel related costs increased to $69.5 million from $58.6 million, primarily as a result of increased stock based compensation costs. Other expenses were consistent in the six months ended June 30, 2023 compared to June 30, 2022. Selling, general, and administrative expenses as a percentage of revenue remained consistent during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as we continue to invest in our business to support future growth.
Depreciation and Amortization
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
$ |
7,106 |
|
|
$ |
4,864 |
|
|
$ |
2,242 |
|
|
|
46 |
% |
Percentage of revenue |
|
|
3 |
% |
|
|
2 |
% |
|
|
|
|
|
|
The increase is primarily due to an increase of $1.8 million in amortization of internal-use software costs. The increase in depreciation and amortization as a percentage of revenue is due to the placing of internal-use software projects into service and the subsequent recognition of amortization expense.
31
Interest Income
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Interest income |
|
$ |
8,016 |
|
|
$ |
682 |
|
|
$ |
7,334 |
|
|
|
1075 |
% |
The increase was primarily driven by higher average balances of marketable securities as well as higher interest rates during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Interest Expense
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Interest expense |
|
$ |
(766 |
) |
|
$ |
(448 |
) |
|
$ |
(318 |
) |
|
|
71 |
% |
The increase was primarily driven by an increase in borrowings during the six months ended June 30, 2023 as compared to six months ended June 30, 2022.
Provision for Income Taxes
|
|
Six months ended June 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|||||||
Provision for income taxes |
|
$ |
408 |
|
|
$ |
416 |
|
|
$ |
(8 |
) |
|
|
(2 |
)% |
Our effective tax rate was approximately (1)% and (1)% for the six months ended June 30, 2023 and 2022, respectively. The principal differences between the federal statutory rate and the effective tax rate is related to foreign taxes and the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.
Non-GAAP Financial Measures
Adjusted EBITDA
We report our financial results in accordance with GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.
Adjusted EBITDA is a financial measure that is not presented in accordance with GAAP. We believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business and evaluating our operating performance, as well as for internal planning and forecasting purposes.
32
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (i) it does not properly reflect capital commitments to be paid in the future; (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (iii) it does not consider the impact of stock-based compensation expense; (iv) it does not reflect other non-operating income and expenses, including interest income and expense; (v) it does not consider the impact of any contingent consideration liability valuation adjustments; and (vi) it does not reflect tax payments that may represent a reduction in cash available to us; and (vii) it does not reflect other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net loss and other results stated in accordance with GAAP.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure stated in accordance with GAAP, for the periods presented:
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Adjusted EBITDA Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
(15,582 |
) |
|
$ |
(24,515 |
) |
|
$ |
(33,782 |
) |
|
$ |
(54,010 |
) |
Depreciation and amortization |
|
3,928 |
|
|
|
2,585 |
|
|
|
7,320 |
|
|
|
5,101 |
|
Stock-based compensation |
|
11,902 |
|
|
|
8,369 |
|
|
|
23,407 |
|
|
|
16,293 |
|
Interest (income) expense |
|
(4,269 |
) |
|
|
(400 |
) |
|
|
(7,250 |
) |
|
|
(234 |
) |
Provision for income taxes |
|
61 |
|
|
|
176 |
|
|
|
408 |
|
|
|
416 |
|
Acquisition-related costs |
|
317 |
|
|
|
- |
|
|
|
523 |
|
|
|
- |
|
Other (income) expense, net |
|
121 |
|
|
|
(292 |
) |
|
|
218 |
|
|
|
399 |
|
Adjusted EBITDA |
$ |
(3,522 |
) |
|
$ |
(14,077 |
) |
|
$ |
(9,156 |
) |
|
$ |
(32,035 |
) |
Non-GAAP Net income (loss)
We report our financial results in accordance with GAAP. However, management believes that Non-GAAP Net income (loss), a financial measure that is not presented in accordance with GAAP, provides investors with additional useful information to measure operating performance and current and future liquidity when taken together with our financial results presented in accordance with GAAP. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations.
In the calculation of Non-GAAP Net income (loss), we exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.
We exclude amortization of acquired intangible assets from the calculation of Non-GAAP Net income (loss). We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the underlying intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.
We exclude contingent consideration liability valuation adjustments associated with the purchase consideration of transactions accounted for as business combinations. We also exclude certain other one-time, non-recurring items of a material nature, when applicable, such as acquisition-related and restructuring expenses, because we do not consider such amounts to be part of our ongoing operations nor are they comparable to prior periods nor predictive of future results.
Non-GAAP Net income (loss) is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of these limitations include that: (i) it does not consider the impact of stock-based compensation expense; (ii) although amortization is a non-cash charge, the underlying assets may need to be replaced and Non-GAAP Net income (loss) does not reflect these capital expenditures; (iii) it does not consider the impact of any contingent consideration liability valuation adjustments; and (iv) it does not consider the impact of other one-time charges, such as acquisition-related and restructuring expenses, which could be material to the results of our operations.
33
In addition, our use of Non-GAAP Net income (loss) may not be comparable to similarly titled measures of other companies because they may not calculate Non-GAAP Net income (loss) in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Non-GAAP Net income (loss) alongside other financial measures, including our net loss and other results stated in accordance with GAAP.
The following table presents a reconciliation of Non-GAAP Net income (loss) to net loss, the most directly comparable financial measure stated in accordance with GAAP, for the periods presented:
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
$ |
(15,582 |
) |
|
$ |
(24,515 |
) |
|
$ |
(33,782 |
) |
|
$ |
(54,010 |
) |
Stock-based compensation |
|
11,902 |
|
|
|
8,369 |
|
|
|
23,407 |
|
|
|
16,293 |
|
Amortization of acquired intangible assets |
|
1,268 |
|
|
|
1,300 |
|
|
|
2,440 |
|
|
|
2,529 |
|
Amortization of capitalized stock based compensation |
|
248 |
|
|
|
164 |
|
|
|
525 |
|
|
|
164 |
|
Acquisition-related costs |
|
317 |
|
|
|
- |
|
|
|
523 |
|
|
|
- |
|
Contingent losses (gains) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
200 |
|
Non-GAAP Net income (loss) |
$ |
(1,847 |
) |
|
$ |
(14,682 |
) |
|
$ |
(6,887 |
) |
|
$ |
(34,824 |
) |
Liquidity and Capital Resources
We have financed operations since our inception primarily through our marketplace revenue and proceeds from sales of equity securities.
As of June 30, 2023, our principal sources of liquidity were cash and cash equivalents totaling $271.9 million, and investments in marketable securities totaling $228.4 million. We believe that our existing cash and cash equivalents and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months and for the long-term. Our future capital requirements over the long-term will depend on many factors, including volume of sales with existing customers, expansion of sales and marketing activities to acquire new customers, timing and extent of spending to support development efforts and introduction of new and enhanced services. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations and financial condition.
As of June 30, 2023, our principal commitments primarily consist of long-term debt and leases for office space. We have $1.2 million of lease obligations due within a year, and an additional $8.5 million of lease obligations due at various dates through 2034. Refer to Note 10 of our consolidated financial statements included in the Annual Report for more information.
In order to compete successfully and sustain operations at current levels over the next 12 months, we will be required to devote a significant amount of operating cash flow to our human capital in the form of salaries and wages. Additionally, we enter into purchase commitments for goods and services made in the ordinary course of business. These purchase commitments include goods and services received and recorded as liabilities as of June 30, 2023 as well as goods and services which have not yet been delivered or performed and have, therefore, not been reflected in our unaudited Condensed Consolidated Balance Sheets and unaudited Condensed Consolidated Statements of Operations. These commitments typically become due after the delivery and completion of such goods or services.
34
We settle transactions among buyers and sellers using the marketplace, and as a result the value of the vehicles passes through our balance sheet. Because our receivables typically have been, on average, settled faster than our payables, our cash position at each balance sheet date has been bolstered by marketplace float. Changes in working capital vary from quarter-to-quarter as a result of GMV and the timing of collections and disbursements of funds related to auctions held near period end.
Our Debt Arrangements
We entered into a revolving credit facility with Credit Suisse AG, New York Branch, or the 2019 Revolver, in December 2019. On June 26, 2023 we entered into an agreement to extinguish the 2019 Revolver. As of June 30, 2023 there was no balance outstanding on the 2019 Revolver.
We also entered into a revolving credit facility with JP Morgan Chase Bank, N.A., or the 2021 Revolver, on August 24, 2021. On June 1, 2023, we entered into an Amendment on the 2021 Revolver which modified the rate at which interest payments are indexed to from LIBOR to SOFR.
The 2021 Revolver, provides for a revolving line of credit in the aggregate principal amount of up to $160.0 million. The 2021 Revolver also includes a sub facility that provides for the issuance of letters of credit up to $20.0 million outstanding at any time. The 2021 Revolver is guaranteed by substantially all of our material domestic subsidiaries and is secured by substantially all of our and such subsidiaries’ assets except for ACV Capital Receivables. The interest rate applicable to the 2021 Revolver is, at our option, either (a) SOFR (or a replacement rate established in accordance with the terms of the credit agreement for the 2021 Revolver) (subject to a 0.00% SOFR floor), plus a margin of 2.75% per annum plus an additional credit spread adjustment of 0.11% for daily and one-month terms, 0.26% for three-month terms and 0.43% for six-month terms or (b) the Alternate Base Rate plus a margin of 1.75% per annum. The Alternate Base Rate is the highest of (a) the Wall Street Journal prime rate, (b) the NYFRB rate plus 0.5% and (c)(i) 1.00% plus (ii) the adjusted SOFR rate for a one-month interest period. The 2021 Revolver has a maturity date of August 24, 2026. The 2021 Revolver contains customary covenants that limit our ability to enter into indebtedness, make distributions and make investments, among other restrictions. The 2021 Revolver also contains financial covenants that require us to maintain a minimum liquidity level and achieve specified trailing four quarter revenue targets.
We were in compliance with all such applicable covenants as of June 30, 2023, and believe we are in compliance as of the date of this Quarterly Report on Form 10-Q. As of June 30, 2023, $105.0 million was drawn under the 2021 Revolver, and there was an outstanding letter of credit issued under the 2021 Revolver in the amount of $1.6 million.
Cash Flows from Operating, Investing, and Financing Activities
The following table shows a summary of our cash flows for the periods presented:
|
|
Six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
23,356 |
|
|
$ |
(72,552 |
) |
Net cash provided by (used in) investing activities |
|
|
(59,137 |
) |
|
|
(258,615 |
) |
Net cash provided by (used in) financing activities |
|
|
26,969 |
|
|
|
69,133 |
|
Effect of exchange rate changes |
|
|
7 |
|
|
|
(18 |
) |
Net increase (decrease) in cash and equivalents |
|
$ |
(8,805 |
) |
|
$ |
(262,052 |
) |
Operating Activities
Our largest source of operating cash is cash collection from fees earned on our marketplace. Our primary uses of cash from operating activities are for personnel expenses, marketing expenses and overhead expenses.
35
In the six months ended June 30, 2023, net cash provided by operating activities of $23.4 million was primarily related to our net cash inflow of $21.2 million due to changes in our operating assets and liabilities and by non-cash charges of $36.0 million, partially offset by our net loss of $33.8 million. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets, and bad debt expense. The change in operating assets and liabilities were the result of a $27.1 million decrease in accounts receivable, a $1.6 million decrease in other current and non-current assets and a $1.5 million increase in other current and non-current liabilities offset by a $9.1 million decrease in accounts payable.
In the six months ended June 30, 2022, net cash used in operating activities of $72.6 million was primarily related to our net loss of $54.0 million, adjusted for net cash outflow of $44.4 million due to changes in our operating assets and liabilities, and for non-cash charges of $25.9 million. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets, and bad debt expense. The change in operating assets and liabilities were the result of a $6.2 million increase in accounts receivable and a $0.3 million increase in other operating assets, a $39.5 million decrease in accounts payable, which were offset by a $1.5 million increase in other current and non-current liabilities.
Investing Activities
In the six months ended June 30, 2023, net cash used in investing activities was $59.1 million and primarily related to $88.1 million in purchases of marketable securities, increase of $22.3 million in financing receivables, $12.8 million in capitalized software development costs to support continued technology innovation, $12.0 million for business acquisitions, partially offset by $76.9 million in sales, maturities, and redemptions of marketable securities.
In the six months ended June 30, 2022, net cash used in investing activities was $258.6 million and primarily related to increases in financing receivables, our acquisition of Monk SAS, purchases of marketable securities, capital expenditures to purchase property and equipment to support field and site operations, and capitalized software development costs to support continued technology innovation.
Financing Activities
In the six months ended June 30, 2023, net cash provided by financing activities was $27.0 million and was primarily the result of $29.5 million in net proceeds from borrowings on the 2021 Revolver, partially offset by $2.5 million in stock transactions related to our stock incentive plans.
In the six months ended June 30, 2022, net cash provided by financing activities was $69.1 million and was primarily the result of proceeds from borrowings on the 2021 Revolver.
Acquisitions
On April 24, 2023, we completed an acquisition of all of the outstanding shares of Dealers Auto Auction of Oklahoma City, LLC (“DAA OKC”) for total consideration of $12.0 million. The aggregate purchase price was preliminarily allocated to $4.9 million of goodwill, $5.9 million of intangible assets and $1.2 million of net assets assumed. The purchase price allocations are subject to adjustments as they are finalized over the 12 month measurement period. Goodwill acquired in connection with this acquisition will be deductible for tax purposes in the United States and will be amortized on a straight-line basis over 15 years.
DAA OKC offers wholesale car auction services and the investment into DAA OKC enabled us to expand our range of offerings to dealers and commercial partners. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in our results of operations from the acquisition date.
Seasonality
The volume of vehicles sold through our auctions generally fluctuates from quarter to quarter. This seasonality is caused by several factors, including holidays, weather, the seasonality of the retail market for used vehicles and the timing of federal tax returns, which affects the demand side of the auction industry. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. In the fourth quarter, we typically experience lower used vehicle auction volume as well as additional costs associated with the holidays. Seasonally depressed used vehicle auction volume typically continues during the winter months through the first quarter.
36
Typical seasonality trends may not be observed in periods where other external factors more significantly impact the industry.
Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe are reasonable under the circumstances, however, our actual results could differ from these estimates.
There have been no material changes to our critical accounting estimates as compared to those disclosed in the Annual Report.
37
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Interest Rate Risk
We had cash and cash equivalents of $271.9 million as of June 30, 2023, which consisted of interest-bearing investments with maturities of three months or less. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We had borrowings from banks of $105.0 million as of June 30, 2023. The interest rate paid on these borrowings is variable, indexed to LIBOR which transitioned on June 30, 2023. A hypothetical 10% change in interest rates would not result in a material impact on our condensed consolidated financial statements.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. The material set forth in Note 5 (pertaining to information regarding legal contingencies) of the Notes of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference..
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in the Annual Report. Refer to the Annual Report for a complete discussion of our potential risks and uncertainties related to our business and on investment in our Class A common stock. The risks and uncertainties described in our Annual Report are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any risks not specified in our Annual Report materialize, our business, financial condition and results of operations could be materially and adversely affected. See also “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional information.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Recent Sales of Unregistered Equity Securities
On February 22, 2022, we issued 620,877 shares of Class A common stock in connection with an acquisition. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.
(b) Use of Proceeds
Not applicable.
(c) Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
On May 24, 2023, Kirsten Castillo Hall, a member of the Board of Directors and Chair of the Nominating and Corporate Governance Committee, terminated a pre-existing “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K) (the “Plan”). The Plan was originally entered into on March 8, 2023 and contemplated the sale of up to 40,000 shares between June 7, 2023 and December 29, 2023, subject to certain volume limitations and excluding specified “No Sale” periods. Prior to its termination, the Plan was scheduled to terminate on December 29, 2023. No shares were sold under the Plan prior to its termination.
39
Other than disclosed above, no other officer or director adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, during the three months ended June 30, 2023.
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Item 6. Exhibits.
Exhibit Number |
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Description |
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File No. |
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Exhibit |
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Filing Date |
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Filed Herewith |
3.1 |
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Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. |
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8-K |
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001-40256 |
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3.1 |
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March 26, 2021 |
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3.2 |
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Amended and Restated Bylaws of the Registrant, as currently in effect. |
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8-K |
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001-40256 |
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3.2 |
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March 26, 2021 |
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10.1 |
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31.1 |
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31.2 |
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32.1* |
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32.2* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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41
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ACV Auctions Inc. |
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Date: Aug 7, 2023 |
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By: |
/s/ George Chamoun |
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George Chamoun |
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Chief Executive Officer and Director |
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Date: Aug 7, 2023 |
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By: |
/s/ William Zerella |
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William Zerella |
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Chief Financial Officer |
43
Execution Version
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (this “Agreement”), dated as of May 24, 2023, is entered into among ACV AUCTIONS INC., a Delaware corporation (the “Borrower”), each other Guarantor party hereto (together with the Borrower, the “Loan Parties”) and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”).
RECITALS
WHEREAS, the Borrower, the Guarantors party thereto, the lenders and issuing banks from time to time party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., as Administrative Agent, are party to the Revolving Credit Agreement, dated as of August 24, 2021 (as amended, modified, extended, restated, replaced, or supplemented from time to time prior to the date hereof, the “Credit Agreement”);
WHEREAS, certain loans, commitments and/or other extensions of credit (the “Loans”) under the Credit Agreement denominated in Dollars incur or are permitted to incur interest, fees or other amounts based on the London Interbank Offered Rate as administered by the ICE Benchmark Administration (“LIBOR”) in accordance with the terms of the Credit Agreement; and
WHEREAS, the Administrative Agent and the Borrower have elected to trigger an Early Opt-in Election and pursuant to Section 2.11(b) of the Credit Agreement, the Administrative Agent and the Borrower have determined in accordance with the Credit Agreement that LIBOR should be replaced with Term SOFR for all purposes under the Credit Agreement and any Loan Document and such changes shall become effective at and after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders (such time, the “Objection Deadline”), so long as the Administrative Agent has not received, by such time, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in the Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Administrative Agent decides as follows:
#96607648v4
2
3
agrees that this Agreement and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Loan Documents, (iv) agrees that the Security Documents continue to be in full force and effect and are not impaired or adversely affected in any manner whatsoever, (v) confirms its grant of security interests pursuant to the Security Documents to which it is a party as Collateral for the Obligations and (vi) acknowledges that all Liens granted (or purported to be granted) pursuant to the Security Documents remain and continue in full force and effect in respect of, and to secure, the Obligations. Each Guarantor hereby reaffirms its obligations under the Guaranty, as applicable, and agrees that its obligation to guarantee the Obligations is in full force and effect as of the date hereof.
4
[remainder of page intentionally left blank]
5
Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.
ADMINISTRATIVE AGENT: JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By: Name: Melissa Bazal
Title: Vice President
[Signature Page to Amendment No. 1]
BORROWER: ACY AUCTION INC.,
as Borrower
By: 5 , ,.
Name: Leanne Fitzgerald
Title: Chief Legal Officer and Secretary
GUARANTORS: ACY TRANSPORTATION LLC TRUE 360 LLC
TRUE PARTNERS USA LLC,
By: ACY AUCTIONS INC., its sole member MAX DIGITAL LLC
By: ACV AUCTIONS INC_, its sole member
CENTRAL AUTO HOLDINGS LLC
By: ACY AUCTIONS INC., its sole member, each, as a Guarantor
By: f--
Name: Leanne Fitzgerald
Title: Chief Legal Officer and Secretary
[Signature Page to Amendment No. l]
Exhibit A
(Attached hereto)
Exhibit A
REVOLVING CREDIT AGREEMENT
dated as of August 24, 2021,
as amended as of June 1, 2023 among
ACV AUCTIONS INC.,
The Lenders Party Hereto and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
JPMORGAN CHASE BANK, N.A.,
as Sole Lead Arranger
JPMORGAN CHASE BANK, N.A., CITIGROUP GLOBAL MARKETS INC.,
GOLDMAN SACHS LENDING PARTNERS LLC,
and
SILICON VALLEY BANK,
as Joint Bookrunners
#96607645v3
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 1
Section 1.01 Defined Terms 1
Section 1.02 Classification of Loans and Borrowings 32 Section 1.03 Terms Generally 32 Section 1.04 Accounting Terms; GAAP. 32 Section 1.05 Interest Rates; Benchmark Notification 33 Section 1.06 Divisions. 33
ARTICLE 2 THE CREDITS 34
Section 2.01 Commitments 34 Section 2.02 Loans and Borrowings 34 Section 2.03 Requests for Borrowings 34 Section 2.04 Funding of Borrowings 35 Section 2.05 Interest Elections 36 Section 2.06 Termination and Reduction of Commitments 37 Section 2.07 Repayment of Loans; Evidence of Debt 37 Section 2.08 Prepayment of Loans 38 Section 2.09 Fees 39
Section 2.10 Interest 40 Section 2.11 Alternate Rate of Interest 41 Section 2.12 Increased Costs 43 Section 2.13 Break Funding Payments 44 Section 2.14 Taxes 44
Section 2.15 Payments Generally; Pro Rata Treatment; Sharing of Set-offs 48 Section 2.16 Mitigation Obligations; Replacement of Lenders 49 Section 2.17 Defaulting Lenders 50 Section 2.18 Incremental Facility 53 Section 2.19 Letters of Credit 54 Section 2.20 Judgment Currency. 59
ARTICLE 3 REPRESENTATIONS AND WARRANTIES 59
Section 3.01 Organization; Powers 59 Section 3.02 Authorization; Enforceability 60 Section 3.03 Governmental Approvals; No Conflicts 60 Section 3.04 Financial Condition; No Material Adverse Change 60 Section 3.05 Properties 61 Section 3.06 Litigation and Environmental Matters 61 Section 3.07 Compliance with Laws and Agreements; No Default 61 Section 3.08 Investment Company Status 61 Section 3.09 Margin Stock 6462
#96607645v3
Section 3.10 Taxes 6562
Section 3.11 ERISA 6562
Section 3.12 Disclosure 6663
Section 3.13 Subsidiaries 6764
Section 3.14 Solvency 6764 Section 3.15 Anti-Terrorism Law 6764 Section 3.16 Anti-Corruption Laws and Sanctions 65 Section 3.17 Security Documents 6866
ARTICLE 4 CONDITIONS 6966
Section 4.01 Effective Date. 6966 Section 4.02 Each Credit Event 7168
ARTICLE 5 AFFIRMATIVE COVENANTS 7269
Section 5.01 Financial Statements; Ratings Change and Other Information 69 Section 5.02 Notices of Material Events 71 Section 5.03 Existence; Conduct of Business 7471 Section 5.04 Payment of Taxes 7471 Section 5.05 Maintenance of Properties; Insurance 72 Section 5.06 Books and Records; Inspection Rights 72 Section 5.07 ERISA Events 7572
Section 5.08 Compliance with Laws and Agreements 72 Section 5.09 Use of Proceeds 7573 Section 5.10 Guarantors; Additional Collateral 73 Section 5.11 Unrestricted Subsidiaries 7774 Section 5.12 Further Assurances 7875 Section 5.13 Cash Management 7875
ARTICLE 6 NEGATIVE COVENANTS 7976
Section 6.01 Indebtedness 7976
Section 6.02 Liens 8178
Section 6.03 Fundamental Changes 8481 Section 6.04 Investments, Loans, Advances, Guarantees and Acquisitions 82 Section 6.05 Restricted Payments 8784 Section 6.06 Restrictive Agreements 85 Section 6.07 Transactions with Affiliates 86 Section 6.08 Use of Proceeds 8986 Section 6.09 Disposition of Property 9087 Section 6.10 Financial Condition Covenants 9188 Section 6.11 Swap Agreements 9289 Section 6.12 Amendments to Other Agreements 89
ARTICLE 7 EVENTS OF DEFAULT 9289
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ARTICLE 8 THE AGENTS 92
Section 8.01 Appointment of Administrative Agent 92 Section 8.02 Powers and Duties 92
Section 8.03 General Immunity 92 Section 8.04 Administrative Agent Entitled to Act as Lender 94 Section 8.05 Lenders’ Representations, Warranties and Acknowledgment 94 Section 8.06 Right to Indemnity 94 Section 8.07 Successor Administrative Agent 95 Section 8.08 Guaranty and Security Documents 95 Section 8.09 Withholding Taxes 96 Section 8.10 Administrative Agent May File Bankruptcy Disclosure and
Proofs of Claim 96 Section 8.11 Erroneous Payments 97 Section 8.12 Certain ERISA Matters. 98
ARTICLE 9 MISCELLANEOUS 100
Section 9.01 Notices 100 Section 9.02 Waivers; Amendments 102 Section 9.03 Expenses; Indemnity; Damage Waiver 103 Section 9.04 Successors and Assigns 105 Section 9.05 Survival. 109 Section 9.06 Counterparts; Integration; Effectiveness 110 Section 9.07 Severability 111 Section 9.08 Right of Setoff 111 Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process 112 Section 9.10 Waiver Of Jury Trial 112 Section 9.11 Headings 113
Section 9.12 Confidentiality 113 Section 9.13 Interest Rate Limitation 114 Section 9.14 No Advisory or Fiduciary Responsibility 115 Section 9.15 USA PATRIOT Act 115
Section 9.16 Releases of Guarantors and Liens 116 Section 9.17 Acknowledgement Regarding Any Supported QFCs 116 Section 9.18 Acknowledgment and Consent to Bail-In of Affected Financial REVOLVING CREDIT AGREEMENT dated as of August 24, 2021 among ACV AUCTIONS INC., as Borrower, the LENDERS party hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
Institutions 117
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The signatories hereto agrees as follows:
ARTICLE 1 DEFINITIONS
Section 1.01 Defined Terms
As used in this Agreement, the following terms have the meanings specified below: “ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
“ACV Capital Entity”: ACV Capital LLC, a Delaware limited liability company, and ACV Capital Funding LLC, a Delaware limited liability company.
“ACV Capital Loan Agreement” means that certain Loan and Security Agreement, dated as of December 20, 2019, by and among ACV Capital Funding LLC as borrower, the conduit lenders from time to time party thereto, the bank branches from time to time party thereto, the managing agents from time to time party thereto and Credit Suisse AG, New York Branch as agent (the “ACV Capital Agent”), as amended, restated, supplemented or otherwise modified from time to time in a manner that is not materially adverse to the interests of the Administrative Agent and the Lenders.
“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (a) the Daily Simple SOFR, plus (b) 0.11448%; provided that if the Adjusted Daily Simple SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted Term SOFR Rate” means, for any Interest Period, an interest rate per annum equal to (a) Term SOFR for such Interest Period, plus
(b) 0.11448% for an Interest Period of one-month’s duration, 0.26161% for an Interest Period of three-months’ duration and 0.42826% for an Interest Period of six-months’ duration; provided that if the Adjusted Term SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder, or any successor administrative agent.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
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“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, 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.
“Agent Fee Letter” means that certain Fee Letter, dated as of June 1, 2021, by and among the Borrower and the Administrative Agent.
“Agent Parties” has the meaning set forth in Section 9.01. “Agents” means the Administrative Agent and the Arrangers.
“Agreement” means this Revolving Credit Agreement, as the same may hereafter be modified, supplemented, extended, amended, restated or amended and restated from time to time.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted Term SOFR Rate for a one month Interest Period as published two U.S. Government Securities Business Days prior to such day (or if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day) plus 1%; provided that for the purpose of this definition, the Adjusted Term SOFR Rate for any day shall be based on the Term SOFR Reference Rate at approximately 5:00 a.m. Chicago time on such day (or any amended publication time for the Term SOFR Reference Rate, as specified by the CME Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted Term SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted Term SOFR Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.11 (for the avoidance of doubt, only until the Benchmark Replacement has been determined pursuant to Section 2.11(b)), then the Alternate Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“Ancillary Document” has the meaning assigned to it in Section 9.06(a).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, as amended.
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“Anti-Terrorism Laws” has the meaning set forth in Section 3.15(a).
“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.
“Applicable Rate” means, for any day, with respect to any Term Benchmark Loan, any ABR Loan or the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth across from the caption “Applicable Rate for Term Benchmark Loans”, “Applicable Rate for ABR Loans” or “Commitment Fee” in the table below, as the case may be.
|
Rate |
Commitment Fee |
0.250% |
Applicable Rate for Term Benchmark Loans |
2.750% |
Applicable Rate for ABR Loans |
1.750% |
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its activities and 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.
“Arranger” means JPMorgan Chase Bank, N.A., in its capacity as sole lead arranger, and any successor thereto.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic records generated by the use of an electronic platform) approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark for Dollars, as applicable, any tenor for such Benchmark (or component thereof) or payment period for interest calculated with reference to such Benchmark (or component thereof), as applicable, that is or may be used for determining the length of an Interest Period for any term rate or otherwise, for determining any frequency of making payments of interest calculated pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to clause (fe) of Section 2.11.
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“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (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, regulation, rule or requirement 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” means Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.
“Benchmark” means, initially, with respect to any Term Benchmark Loan, the Term SOFR Rate; provided that if a Benchmark Transition Event, and the related Benchmark Replacement Date have occurred with respect to the Term SOFR Rate or the then-current Benchmark , then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to clause (b) of Section 2.11.
“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(1) the Adjusted Daily Simple SOFR ;
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displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; provided further that, in the case of clause (3), when such clause is used to determine the Benchmark Replacement in connection with the occurrence of an Other Benchmark Rate Election, the alternate benchmark rate selected by the Administrative Agent and the Borrower shall be the term benchmark rate that is used in lieu of a LIBOR-based rate in the relevant other Dollar-denominated syndicated credit facilities; provided further that, notwithstanding anything to the contrary in this Agreement or in any other Loan Document, upon the occurrence of a Term SOFR Transition Event, and the delivery of a Term SOFR Notice, on the applicable Benchmark Replacement Date the “Benchmark Replacement” shall revert to and shall be deemed to be the sum of (a) Term SOFR and (b) the related Benchmark Replacement Adjustment, as set forth in clause (1) of this definition (subject to the first
If the Benchmark Replacement as determined pursuant to the above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by
(1)for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the :
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“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” means, with respect to any Benchmark, the earliest to occur of the following events with respect to such then-current Benchmark:
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in the case of clause (3) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date;.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to any Benchmark, the occurrence of one or more of the following events with respect to such then-current Benchmark:
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For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means, with respect to any Benchmark, the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.11 and (y) ending at the time that a Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.11.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Bookrunners” means JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., Goldman Sachs Lending Partners LLC and Silicon Valley Bank, in their capacities as joint bookrunners, and any successors thereto.
“Borrower” means ACV Auctions Inc., a Delaware corporation.
“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Term Benchmark Loans, as to which a single Interest Period is in effect.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.
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“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, in addition to the foregoing, a Business Day shall be, in relation to Loans referencing the Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Loans referencing the Adjusted Term SOFR Rate or any other dealings of such Loans referencing the Adjusted Term SOFR Rate, any such day that is only a U.S. Government Securities Business Day.
“Capital Lease Obligations” of any Person means 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 or financing leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Cash Collateralize” means, in respect of an Obligation, to provide and pledge (as a first priority perfected security interest) cash collateral in Dollars, at a location and pursuant to documentation in form and substance satisfactory to the Administrative Agent and the applicable Issuing Bank (and “Cash Collateralization” has a corresponding meaning). “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” means, as at any date of determination, (a) readily marketable securities issued or directly and unconditionally guaranteed or insured as to interest and principal by the U.S. (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the U.S.), in each case maturing within one year from the date of issuance thereof;
(b) readily marketable direct obligations issued by any state of the U.S. or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-2 from Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global (“S&P”) or at least P-2 from Moody’s Investors Service, Inc. (“Moody’s”) (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) and, in each case, repurchase agreements and reverse repurchase agreements relating thereto; (c) commercial paper maturing no more than 270 days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-2 from S&P or at least P-2 from Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency); (d) deposits, money market deposits, time deposit accounts, certificates of deposit or bankers’ acceptances (or similar instruments) maturing within one year after such date and issued or accepted by any Lender or by any bank organized under, or authorized to operate as a bank under, the laws of the U.S., any state thereof or the District of Columbia or any political subdivision thereof or any foreign bank or its branches or agencies and that has a combined capital and surplus and undivided profits of not less than $1,500,000,000 and that issues (or the parent of which issues) commercial paper rated at least A-2 from S&P or P-2 from Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency); (e) shares or other interests of any investment company, money market mutual fund or other money market or enhanced high yield fund that invests 95% or more of its assets in instruments of the types specified in clauses (a) through (d) above (which investment company or fund may also hold cash pending investment or distribution) and (f) investments permitted by the Borrower’s board-approved investment policy as approved from time to time by the Administrative Agent (such approval not to be unreasonably withheld, delayed or conditioned).
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“CFC” has the meaning assigned to it in the definition of “Excluded Subsidiary.” “CFC Holdco” has the meaning assigned to it in the definition of “Excluded
Subsidiary.”
“Change in Control” means (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act and the rules of the Securities and Exchange Commission thereunder), of Equity Interests in the Borrower representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in the Borrower or (ii) a “change of control” or any comparable event as defined in any outstanding Material Indebtedness.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and
(y) 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 be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.
“Charges” has the meaning set forth in Section 9.13.
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as administrator of the forward-looking term Secured Overnight Financing Rate (SOFR) (or a successor administrator).
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to “Collateral” means all property and rights of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.
time.
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“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment as of the Effective Date is set forth on Schedule 2.01. The initial aggregate amount of the Lenders’ Commitments as of the Effective Date is $160,000,000.
“Commitment Fee” has the meaning set forth in Section 2.09(a). “Communications” has the meaning set forth in Section 9.01.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Control” means 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 Account Agreement” means any tri-party agreement by and among a Loan Party, the Administrative Agent and a depositary bank or securities intermediary at which such Loan Party maintains a Controlled Account, in each case in form and substance reasonably satisfactory to the Administrative Agent.
“Controlled Account” has the meaning set forth in Section 5.13.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Covered Entity” means any of the following:
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“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal SOFR for the day (such day “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Day prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.
“Debtor Relief Laws” means 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” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means, subject to Section 2.17(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such 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 good faith determination that one or more conditions precedent to such funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, (ii) fund any portion of its participation in Letters of Credit hereunder within two Business Days of the date when due or (iii) pay to the Administrative Agent, any Issuing Bank or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the Borrower or the Administrative Agent 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 Loan hereunder and states that such position is based on such Lender’s good faith 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 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), (d) has, or has a direct or indirect parent company that has,
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(i) become the subject of a proceeding under any Debtor Relief Law, or (ii) 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, or (e) has become the subject of a Bail-In Action. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under clauses (a) through (e) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.17(b)) upon delivery of written notice of such determination to the Borrower and each Lender.
“Disposition” means, with respect to any property or right, any sale, lease, sale and leaseback, assignment, license, conveyance, transfer or other disposition thereof (in one transaction or in a series of transactions and whether effected pursuant to a Division or otherwise). “Dispose” and “Disposed of” have meanings correlative thereto.
“Disqualified Equity Interests” shall mean, with respect to any Person, any Equity Interests of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely for Qualified Equity), other than as a result of a change of control, asset sale, or similar event, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely for Qualified Equity), other than as a result of a change of control, asset sale, or similar event, in whole or in part, in each case, prior to the Earliest Maturity Date.
“Dividing Person” has the meaning assigned to it in the definition of “Division”. “Division” means the division of the assets, liabilities and/or obligations of a Person
(the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of
division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.
“Dollars”, “dollars” or “$” refers to lawful money of the United States of America. “Domestic Subsidiary” means any Subsidiary that is organized under the laws of
any political subdivision of the United States, excluding (x) any CFC Holdco and (y) any such Subsidiary that is owned (directly or indirectly, in whole or in part) by one or more Subsidiaries that are CFCs.
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“EEA Financial Institution” means (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” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means 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.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the generation, use, handling, transportation, storage, treatment, disposal, management, release or threatened release of any Hazardous Material or to health and safety matters.
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“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of investigation, reclamation or remediation, fines, penalties or indemnities), of or relating to the Borrower or any subsidiary, in each case directly or indirectly resulting from or based upon (a) any Environmental Law, including compliance or noncompliance therewith (b) the generation, use, handling, transportation, storage, treatment, disposal or management of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the presence, release or threatened release of any Hazardous Materials 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.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest; provided that Equity Interests shall not include any debt securities (including Permitted Convertible Indebtedness) that are convertible into or exchangeable for any combination of Equity Interests and/or cash.
“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“ERISA Affiliate” means any person that for purposes of Title I or Title IV of ERISA or Section 412 of the Code would be deemed at any relevant time to be a single employer or otherwise aggregated with the Borrower or a Subsidiary under Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA.
“ERISA Event” means any one or more of the following: (a) any reportable event, as defined in Section 4043 of ERISA, with respect to a Plan, as to which the PBGC has not waived under subsection .22, .23, .25, .26, .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Regulation Section 4043 the requirement of Section 4043(a) of ERISA that it be notified of such event; (b) the termination of any Plan under Section 4041(c) of ERISA; (c) the institution of proceedings by the PBGC under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (d) the failure to make a required contribution to any Plan that would result in the imposition of a lien or other encumbrance or the provision of security under Section 430 of the Code or Section 303 or 4068 of ERISA, or the arising of such a lien or encumbrance; (e) the failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived; or a determination that any Plan is considered an at-risk plan within the meaning of Section 430 of the Code or Section 303 of ERISA; (f) engaging in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA with respect to a Plan; (g) the complete or partial withdrawal of any Borrower, Subsidiary or any ERISA Affiliate from a Multiemployer Plan which results in the imposition of Withdrawal Liability or the insolvency under Title IV of ERISA of any Multiemployer Plan or (h) a determination that any Multiemployer Plan is in endangered or critical status under Section 432 of the Code or Section 305 of ERISA.
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“EU Bail-In Legislation Schedule” means 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” has the meaning set forth in Article 7.
“Excluded Subsidiary” means (a) each Immaterial Subsidiary, (b) any Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957 of the Code (a “CFC”), (c) any Subsidiary substantially all the assets of which consist of Equity Interests (or Equity Interests and debt) of one or more CFCs (a “CFC Holdco”), (d) any Subsidiary of a CFC, (e) any Unrestricted Subsidiary, (f) a special purpose securitization vehicle (or similar entity), (g) a not-for-profit Subsidiary, (h) a Subsidiary with respect to which (i) it is reasonably agreed by the Borrower and the Administrative Agent that the burden or cost of providing a Guarantee shall outweigh the benefits to be obtained by the Lenders therefrom or (ii) the provision of a guarantee by such Subsidiary would result in material tax consequences to the Borrower or any of its Subsidiaries, as reasonably determined by the Borrower in consultation with the Administrative Agent, (i) a captive insurance Subsidiary and (j) any Subsidiary that is prohibited or restricted by any requirement of law or by contractual obligations existing on the Effective Date (or, in the case of any newly acquired Subsidiary, in existence at the time of acquisition but not entered into in contemplation thereof) from guaranteeing the Obligations or if guaranteeing the Obligations would require governmental (including regulatory) consent, approval, license or authorization, unless such consent, approval, license or authorization has been obtained.
“Excluded Swap Obligation” with respect to any Guarantor, (a) any Swap Obligation if, and to the extent that, and only for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, as applicable, 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 to constitute an “eligible contract participant,” as defined in the Commodity Exchange Act and the regulations thereunder, at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap Obligation. If 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 or security interest is or becomes illegal.
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“Excluded Taxes” means any of the following Taxes imposed on or with respect to the Administrative Agent, any Issuing Bank, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Loan Parties hereunder, (a) Taxes imposed on (or measured by) its net income (however denominated), franchise Taxes, and branch profits Taxes, in each case (i) imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (ii) that otherwise are Other Connection Taxes, (b) in the case of a Lender, any U.S. federal withholding Tax that is 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: (x) such Lender acquires such interest in a Loan or Commitment (other than pursuant to an assignment request by Borrower under Section 2.16(b)) or (y) such Lender designates a new lending office, except to the extent that, pursuant to Section 2.14, 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 2.14(f) and (d) any withholding Taxes imposed under FATCA.
“Executive Order” has the meaning set forth in Section 3.15(a).
“Existing Letter of Credit” means any letter of credit previously issued for the account of the Borrower that (a) will remain outstanding on and after the Effective Date and (b) is listed on Schedule 2.19(l).
“FATCA” means 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) and any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any published intergovernmental agreement, treaty or convention among governmental authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions, as determined in such manner as shall be set forth on the NYFRB’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate; provided that if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Fiduciary Account” means (i) any account maintained in the ordinary course of business by the Borrower or any of its Subsidiaries in order to hold, as a fiduciary or on a contractual basis, funds owned by another Person or (ii) any escrow account.
“Financial Officer” means the chief financial officer, principal accounting officer, vice president of finance or corporate controller of the Borrower.
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“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to the Adjusted Term SOFR Rate or the Adjusted Daily Simple SOFR, as applicable. For the avoidance of doubt the initial Floor for each of Adjusted Term SOFR Rate or the Adjusted Daily Simple SOFR shall be 0.00%.
“Foreign IP Subsidiary” means any foreign Subsidiary to which the Borrower or any U.S. Subsidiary transfers intellectual property rights, including pursuant to an investment in accordance with Section 6.04(e) or a Disposition in accordance with Section 6.09(e).
“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Fronting Exposure” means, at any time there is a Defaulting Lender, with respect to any Issuing Bank, such Defaulting Lender’s Applicable Percentage of the outstanding Obligations with respect to Letters of Credit issued by such Issuing Bank other than such Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means the government of the United States of America, any other nation or 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).
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business, or customary indemnification obligations entered into in connection with any acquisition or disposition of assets or of other entities (other than to the extent that the primary obligations that are the subject of such indemnification obligation would be considered Indebtedness hereunder).
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The amount of any Guarantee shall be deemed to be an amount equal to the lesser of (a) the stated or determinable amount of the primary payment obligation in respect of which such Guarantee is made and (b) the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary payment obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of the Guarantee shall be such guaranteeing Person’s maximum reasonably possible liability in respect thereof as reasonably determined by the Borrower in good faith.
“Guarantor” means any Subsidiary of the Borrower that has executed the Guaranty or a joinder agreement to the Guaranty pursuant to Section 5.10 hereof, and, other than with respect to its own Obligations, the Borrower. No Excluded Subsidiary shall be required to be a Guarantor.
“Guaranty” means the Guaranty Agreement, dated as of the Effective Date, between each Guarantor and the Administrative Agent, as amended, supplemented or otherwise modified from time to time, including by each joinder agreement thereto.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, per- and polyfluoroalkyl substances, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“IBA” has the meaning set forth in Section 1.05.
“Immaterial Subsidiary” means any Subsidiary that (a) did not, as of the last day of the fiscal quarter of the Borrower most recently ended for which financials have been delivered pursuant to Section 5.01(a) or (b), have (i) total assets with a value in excess of 5% of the Total Assets of the Borrower and its Subsidiaries, on a consolidated basis in accordance with GAAP, or (ii) revenues representing in excess of 5% of the Total Revenues of the Borrower and its Subsidiaries, on a consolidated basis in accordance with GAAP, for the four fiscal quarters ended as of such date and (b) taken together with all Immaterial Subsidiaries as of the last day of the fiscal quarter of the Borrower most recently ended for which financials have been delivered pursuant to Section 5.01(a) or (b), did not have (i) total assets with a value in excess of 10% of the Total Assets of the Borrower and its Subsidiaries, on a consolidated basis in accordance with GAAP, or (ii) revenues representing in excess of 10% of the Total Revenues of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP for the four fiscal quarters ended as of such date. As of the Effective Date, each Immaterial Subsidiary shall be set forth in Schedule 3.15.
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“Increased Amount Date” has the meaning set forth in Section 2.18. “Incremental Amount” means $100,000,000.
“Indebtedness” of any Person at any date means, 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) trade payables incurred in the ordinary course of such Person’s business, (ii) any earn-out obligation unless either such obligation is not paid after becoming due and payable or such obligation is required to be reflected on the Borrower’s balance sheet in accordance with GAAP and is not disputed in good faith and (iii) accruals for payroll and other liabilities, including deferred compensation arrangements, in each case, accrued in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising 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), (e) all Capital 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 bankers’ acceptances, letters of credit, surety bonds or similar arrangements, (g) all Guarantees of such Person in respect of obligations of the kind referred to in clauses (a) through (f) above, and (h) all obligations of the kind referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; provided that, if such Person has not assumed or otherwise become liable in respect of such Indebtedness, such obligations shall be deemed to be in an amount equal to the lesser of (i) the unpaid amount of such Indebtedness and (ii) fair market value of such property at the time of determination (in the Borrower’s good faith estimate). 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” means (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 (a), Other Taxes.
“Indemnitee” has the meaning set forth in Section 9.03(b).
“Indemnity Agreement” means that certain Indemnity Agreement, dated as of the December 20, 2019, executed by ACV Auctions Inc., as indemnitor, in favor of Credit Suisse AG, New York Branch, as agent, as in effect on the date hereof, as amended, restated, supplemented or otherwise modified from time to time in a manner that is not materially adverse to the interests of the Administrative Agent and the Lenders.
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“Information” has the meaning set forth in Section 9.12(a).
“Intellectual Property” has the meaning set forth in the Security Agreement, as in effect on the Effective Date.
“Interest Election Request” has the meaning set forth in Section 2.05(b). “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and the Maturity Date and (b) with respect to
any Term Benchmark Loan, the last day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Term Benchmark Loan with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period, and the Maturity Date.
“Interest Period” means with respect to any Term Benchmark Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, three or six months thereafter (in each case, subject to the availability for the Benchmark applicable to the relevant Loan or Commitment), as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and
(iii) no tenor that has been removed from this definition pursuant to Section 2.11(fe) shall be available for specification in such Borrowing Request or Interest Election Request. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Interest Rate Determination Date” means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.
“IRS” means the U.S. Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Issuing Bank” means, with respect to a particular Letter of Credit, (a) JPMorgan Chase Bank, N.A.
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in its capacity as the issuer of such Letter of Credit, and its successors in such capacity as provided in Section 2.19(j), (b) such other Lender selected by the Borrower from time to time to issue such Letter of Credit hereunder upon receipt by the Administrative Agent of documentation in form and substance satisfactory to the Administrative Agent pursuant to which such Lender agrees to assume the rights and obligations of an Issuing Bank hereunder (provided that no Lender shall be required to become an Issuing Bank pursuant to this subclause (b) without such Lender’s consent), or any successor in such capacity as provided in Section 2.19(j), or (c) any Lender selected by the Borrower (with the prior consent of the Administrative Agent) to replace a Lender who is a Defaulting Lender at the time of such Lender’s appointment as an Issuing Bank (provided that no Lender shall be required to become an Issuing Bank pursuant to this subclause (d) without such Lender’s consent), or any successor in such capacity as provided in Section 2.19(j). Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate or branch.
“Joinder Agreement” means a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent.
“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.
“LC Sublimit” means the lesser of (a) (i) $20,000,000 (or such greater amount as may be agreed by the applicable Issuing Bank from time to time in its sole discretion) and
(b) the aggregate unused amount of the Commitments then in effect; provided that no Issuing Bank shall be required to issue Letters of Credit in an aggregate amount outstanding at any time in excess of an amount to be agreed by such Issuing Bank in its sole discretion.
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Issuing Banks.
“Letter of Credit” means any letter of credit issued (or deemed to be issued) under and pursuant to this Agreement.
“Letter of Credit Request” means a request by the Borrower for a Letter of Credit in accordance with Section 2.19.
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determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate) that is shorter than the Impacted LIBO Rate Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate) that exceeds the Impacted LIBO Rate Interest Period, in each case, at
shall not be available at such time for such Interest Period (an “Impacted LIBO Rate
Borrowing and for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the
“Lien” means, with respect to any asset or right, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset or right, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset or right.
“LLC” means any Person that is a limited liability company under the laws of its jurisdiction of formation.
“Loan Documents” means this Agreement (including any amendment hereto or waiver hereunder), the Notes (if any), any Joinder Agreement, the Guaranty, any instrument of joinder to the Guaranty or Security Agreement delivered pursuant to Section 5.10 hereof, the Security Documents, the Agent Fee Letter and any other agreement, instrument or document executed after the Effective Date and designated by its terms as a Loan Document.
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“Loan Parties” means the Borrower and the Guarantors.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Material Adverse Effect” means a material adverse effect on (a) the business, property, financial condition or results of operations of the Borrower and Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its payment obligations under this Agreement or any other Loan Document or (c) the rights of or remedies available to the Agents and the Lenders under this Agreement or any other Loan Document.
“Material Indebtedness” means Indebtedness (other than any Indebtedness under the Loan Documents and Letters of Credit hereunder), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in a principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
“Maturity Date” means August 24, 2026.
“Maximum Rate” has the meaning set forth in Section 9.13.
“Measurement Period” means, at any date of determination, the most recently completed four consecutive fiscal quarters of the Borrower ended on or prior to such date.
“Minimum Collateral Amount” means, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the Fronting Exposure of an Issuing Bank with respect to Letters of Credit issued and outstanding at such time and (ii) otherwise, an amount determined by the Administrative Agent and the applicable Issuing Bank in their sole discretion.
“Moody’s” has the meaning assigned to it in the definition of “Cash Equivalents”. “Multiemployer Plan” means any multiemployer plan as defined in
Section 4001(a)(3) of ERISA, which is contributed to by (or to which there is or would be an obligation to contribute of) the Borrower or a Subsidiary or an ERISA Affiliate, and each such plan for the five- year period immediately following the latest date on which the Borrower, or a Subsidiary or an ERISA Affiliate contributed to or had an obligation to contribute to such plan.
“New Commitments” has the meaning set forth in Section 2.18. “New Lender” has the meaning set forth in Section 2.18.
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“New Loans” has the meaning set forth in Section 2.18.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 9.02 and (ii) has been approved by the Required Lenders or a majority of such affected Lenders.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.
“Non-U.S. Plan” means any plan, fund (including, without limitation, any superannuation fund) or other similar program established, contributed to (regardless of whether through direct contributions or through employee withholding) or maintained outside the United States by the Borrower or one or more Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.
“Note” has the meaning set forth in Section 2.07. “NYFRB” means the Federal Reserve Bank of New York.
“NYFRB’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it.
“Obligations” means all amounts owing by any Loan Party to the Administrative Agent, any Issuing Bank or any Lender (or, in the case of (x) Specified Cash Management Agreements, any Affiliate of any Lender and (y) Specified Swap Agreements, any Person that was a Lender or an Affiliate of a Lender at the time the relevant Swap Agreement was entered into) pursuant to the terms of this Agreement or any other Loan Document, including any obligation to provide Cash Collateral, or in respect of any Letter of Credit, any Specified Swap Agreement or any Specified Cash Management Agreement (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of the Borrower or any of its Subsidiaries, whether or not allowed in such case or proceeding); provided that the definition of “Obligations” shall not create or include any guarantee by any Loan Party of any Excluded Swap Obligations of such Loan Party for purposes of determining any obligations of any Loan Party.
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“Other Connection Taxes” means, with respect to the Administrative Agent, any Issuing Bank, any Lender or any other recipient of any payment to be made by or on account of any obligation of a Loan Party hereunder, Taxes imposed as a result of a present or former connection between such Administrative Agent, Issuing Bank, Lender or other recipient and the jurisdiction imposing such Tax (other than connections arising solely from such Administrative Agent, Issuing Bank, Lender or 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, Letter of Credit or Loan Document).
“Other Taxes” means any and all present or future stamp, court or documentary intangible, recording, filing or similar Taxes which 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, this Agreement and the other Loan Documents; excluding, however, such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than such Taxes imposed with respect to an assignment that occurs as a result of the Borrower’s request pursuant to Section 2.16(b)).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight eurodollar transactions denominated in Dollars by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on the NYFRB’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.
“Paid in Full” or “Payment in Full” means, (a) the indefeasible payment in full in cash of all outstanding Loans and LC Disbursements, together with accrued and unpaid interest thereon, (b) the termination, expiration, or cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit, or at the discretion of the Administrative Agent, a backup standby letter of credit satisfactory to the Administrative Agent and the Issuing Bank, in an amount equal to the Minimum Collateral Amount), (c) the indefeasible payment in full in cash of the accrued and unpaid fees, (d) the indefeasible payment in full in cash of all reimbursable expenses and other Obligations (other than Unliquidated Obligations for which no claim has been made and other obligations expressly stated to survive such payment and termination of this Agreement), together with accrued and unpaid interest thereon and (e) the termination of all Commitments.
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“Participant” has the meaning set forth in Section 9.04(c)(i). “Participant Register” has the meaning set forth in Section 9.04(c)(iii). “Payment” has the meaning set forth in Section 8.11(a).
“Payment Notice” has the meaning set forth in Section 8.11(b).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Pension Plan” means any “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA and is maintained in whole or in part by the Borrower, any Subsidiary or any ERISA Affiliate or with respect to which any of the Borrower, any Subsidiary or any ERISA Affiliate has actual or contingent liability.
“Permitted Acquisition” means any acquisition by any Loan Party or Subsidiary in a transaction that satisfies each of the following requirements:
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(e) upon request of the Administrative Agent, the Borrower shall have delivered to the Administrative Agent the final executed material documentation relating to such acquisition within five (5) Business Days after request following the consummation thereof.
“Permitted ACV Capital Dispositions” mean the sale or contribution of Accounts and related assets (including any related security) by the Loan Parties to an ACV Capital Entity from time to time in the ordinary course of the Borrower’s business pursuant to the terms of any document or agreement entered into between a Loan Party or a Subsidiary and an ACV Capital Entity providing for the sale or contribution of such Accounts and related assets to such ACV Capital Entity, in connection with a bona fide financing transaction; provided that such sale or contribution shall be made on an arm’s length basis for an immediate cash payment in full from the ACV Capital Entity to such Loan Party or Subsidiary.
“Permitted Convertible Indebtedness” shall mean unsecured Indebtedness of the Borrower that (a) as of the date of issuance thereof contains terms, conditions, covenants, conversion or exchange rights, redemption rights and offer to repurchase rights, in each case, as are typical and customary for notes of such type (as determined by the Borrower in good faith) and (b) is convertible or exchangeable into shares of common stock of the Borrower (or other securities of a successor Person following merger event, reclassification or other change of the common stock of the Borrower), cash or a combination thereof (such amount of cash determined by reference to the price of the Borrower’s common stock or such other securities or property), and cash in lieu of fractional shares of common stock of the Borrower; provided that (i) such Permitted Convertible Indebtedness shall have a stated final maturity date that is no earlier than the date 91 days after the Maturity Date (the “Earliest Date”), (ii) such Indebtedness shall not be required to be repaid, prepaid, redeemed, repurchased or defeased, whether on one or more fixed dates, upon the occurrence of one or more events or at the option of any holder thereof (except, in each case, upon any conversion of such Indebtedness (whether into cash, shares of common stock in the Borrower or any combination thereof), the occurrence of an event of default or a “fundamental change” or following the Borrower’s election to redeem such notes) prior to the Earliest Date, and (iii) no Subsidiary that is not a Loan Party shall have Guarantee obligations with respect to obligations of the Borrower thereunder.
“Permitted Encumbrances” means:
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“Permitted Equity Derivative Transaction” shall mean any forward purchase, accelerated share repurchase, call option, warrant or other derivative transaction relating to Borrower’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of Borrower) purchased or sold by Borrower in connection with the issuance of any Permitted Convertible Indebtedness and settled in common stock of Borrower (or such other securities or property), cash or a combination thereof, as the same may be amended, restated, supplemented or otherwise modified from time to time; provided that (a) the aggregate net purchase price for such Permitted Equity Derivative Transactions does not exceed the net cash proceeds received by Borrower from the sale of the Permitted Convertible Indebtedness in connection with which such Permitted Equity Derivative Transactions were entered into, and (b) the other terms, conditions and covenants of each such transaction shall be such as are customary for transactions of such type (as determined by Borrower in good faith).
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any “employee benefit plan” as defined in Section 3 of ERISA (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA maintained or contributed to by the Borrower, a Subsidiary or any ERISA Affiliate or to which the Borrower, a Subsidiary or an ERISA Affiliate has or would have an obligation to contribute, and each such plan subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA for the five-year period immediately following the latest date on which the Borrower, a Subsidiary or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan.
“Platform” has the meaning set forth in Section 9.01.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.
“Principal Office” means the office of the Administrative Agent as set forth in Section 9.01, or such other office or office of a third party or sub-agent, as appropriate, as the Administrative Agent may from time to time designate in writing to Borrower and each Lender.
“Purchase Money Indebtedness” means Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital asset to the extent incurred prior to or within 180 days following such acquisition, construction or improvement.
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“Qualified Equity Interests” means, with respect to any Person, the Equity Interests of such Person other than Disqualified Equity of such Person.
“Reference Time” with respect to any setting of the then-current Benchmark, means (1) if such Benchmark is the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two U.S. Government Securities Business Days preceding the date of such setting or (2) if such Benchmark is none of the Term SOFR Rate or Daily Simple SOFR, the time determined by the Administrative Agent in its reasonable discretion.
“Register” has the meaning set forth in Section 9.04(b).
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors," officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Relevant Governmental Body” means, the Federal Reserve Board and/or the NYFRB, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any successor thereto.
“Relevant Rate” means, with respect to any Term Benchmark Borrowing, the Adjusted Term SOFR Rate.
“Required Lenders” means, at any time, at least two unaffiliated Lenders (a) having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments of all Lenders at such time, or (b) at any time after the Commitments of all Lenders shall have been terminated, holding more than 50% of the total Revolving Credit Exposures at such time; provided that, for purposes of this definition of “Required Lenders”, a Lender and its Affiliates shall be deemed to be one Lender. The Revolving Credit Exposure and Commitment of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means any of the President, Chief Executive Officer, Chief Financial Officer and Vice President of Finance of the applicable Loan Party, or any person designated by any such Loan Party in writing to the Administrative Agent from time to time, acting singly.
“Restricted Cash” means, at any time, the cash and Cash Equivalents of the Borrower to the extent (a) classified (or required to be classified) as restricted cash or restricted cash equivalents on the balance sheet of the Borrower in accordance with GAAP or (b) such cash or Cash Equivalents are subject to any Lien (including, without limitation, Liens permitted by Section 6.02(n)) other than Liens in favor of the Secured Parties pursuant to the Security Documents.
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“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interest in the Borrower.
“Reuters” means, as applicable, Thomson Reuters Corp., Refinitiv, or any successor thereto.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans and its LC Exposure at such time.
“S&P” has the meaning assigned to it in the definition of “Cash Equivalents”. “Sanctioned Country” means, at any time, a country, region or territory which is
the subject or target of any Sanctions (and, as of the Effective Date, Crimea, Cuba, Iran, North Korea, and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the United Nations Security Council, the European Union, any EU member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any EU Member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority.
“SEC” means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.
“Secured Parties” has the meaning assigned to such term in the Security Agreement.
“Security Agreement” means the Security Agreement, dated as of the Effective Date, between the Borrower, each other Loan Party and the Administrative Agent for the benefit of the Secured Parties, as amended, supplemented or otherwise modified from time to time, including by each joinder agreement thereto.
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“Security Documents” means the collective reference to the Security Agreement, the Control Account Agreements and all other security documents hereafter delivered to the Administrative Agent by a Loan Party granting or perfecting a Lien on any property or right of any person to secure the obligations and liabilities of any Loan Party under any Loan Document.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the NYFRB’s website, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Determination Date” has the meaning specified in the definition of “Daily Simple SOFR”.
“SOFR Rate Day” has the meaning specified in the definition of “Daily Simple SOFR”.
“Solvent” means, with respect to the Borrower and its Subsidiaries on a particular date, that on such date (a) the fair value of the present assets of the Borrower and its Subsidiaries, taken as a whole, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of the Borrower and its Subsidiaries, taken as a whole, (b) the present fair saleable value of the assets of the Borrower and its Subsidiaries, taken as a whole, is not less than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries, taken as a whole, on their debts as they become absolute and matured, (c) the Borrower and its Subsidiaries, taken as a whole, do not intend to, and do not believe that they will, incur debts or liabilities (including current obligations and contingent liabilities) beyond their ability to pay such debts and liabilities as they mature in the ordinary course of business and (d) the Borrower and its Subsidiaries, taken as a whole, are not engaged in business or a transaction, and are not about to engage in business or a transaction, in relation to which their property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5 (ASC 450)).
“Specified Cash Management Agreement” means any agreement providing for treasury, depositary, purchasing card or cash management services, including in connection with any automated clearing house transfers of funds or any similar transactions between the Borrower or any Subsidiary and any Lender or affiliate thereof, which is in effect as of the Effective Date or which has been designated by such Lender and the Borrower, by notice to the Administrative Agent not later than 90 days after the execution and delivery by the Borrower or such Guarantor, as a “Specified Cash Management Agreement”.
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“Specified Swap Agreement” means any Swap Agreement in respect of interest rates or currency exchange rates entered into by the Borrower or any Subsidiary and any Person that is a Lender or an Affiliate of a Lender at the time such Swap Agreement is entered into; provided that such Swap Agreement is entered into to hedge or mitigate risks, and not for speculative purposes, in the ordinary course of the Borrower or such Guarantor’s business or in order to effectively cap, collar or exchange interest rates (from floating to fixed rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or such Guarantor.
numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans. Such reserve percentage shall include those imposed pursuant to Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve
“Subordinated Indebtedness” of a Person means any unsecured Indebtedness of such Person the payment of which is expressly subordinated in right of payment to the Obligations pursuant to a written subordination agreement that is reasonably acceptable to the Administrative Agent.
“Subsidiary” means any subsidiary of the Borrower; provided, however, that no Unrestricted Subsidiary shall be a “Subsidiary” for any purpose of this Agreement or the other Loan Documents.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent and which is required by GAAP to be consolidated in the consolidated financial statements of the parent.
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“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar 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 Borrower or the Subsidiaries shall be a Swap Agreement.
“Swap Obligation” means 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 1a(47) of the Commodity Exchange Act.
“Taxes” means any and 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.
Reference Time, the forward-looking term rate based on SOFR that has been selected or
“Term Benchmark” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Term SOFR Rate.
“Term SOFR Lenders and the Borrower of the occurrence of a Term SOFR Transition Determination Day” has the meaning assigned to it under the definition of Term SOFR Reference Rate.
“Term SOFR Transition Event” means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the administration of Term SOFR is administratively feasible for the Administrative Agent and (c) a Benchmark Transition Event or an Early Opt-in Election, as applicable (and, for the avoidance of doubt, not in the case of an Other Benchmark Rate Election), has previously occurred resulting in a Benchmark Replacement in accordance Rate” means, with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the applicable Interest Period, as such rate is published by the CME Term SOFR Administrator.
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“Term SOFR Reference Rate” means, for any day and time (such day, the “Term SOFR Determination Day”), with respect to any Term Benchmark Borrowing denominated in Dollars and for any tenor comparable to the applicable Interest Period, the rate per annum published by the CME Term SOFR Administrator and identified by the Administrative Agent as the forward-looking term rate based on SOFR. If by 5:00 pm (New York City time) on such Term SOFR Determination Day, the “Term SOFR Reference Rate” for the applicable tenor has not been published by the CME Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Rate has not occurred, then, so long as such day is otherwise a U.S. Government Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the Term SOFR Reference Rate as published in respect of the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate was published by the CME Term SOFR Administrator, so long as such first preceding U.S. Government Securities Business Day is not more than five (5) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
“Total Assets” means the total assets of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, as shown on the most recent balance sheet of the Borrower delivered pursuant to Section 5.01(a) or (b).
“Total Liquidity” means, at any time, the sum of (a) all cash and Cash Equivalents (except, for the avoidance of doubt, any Restricted Cash) held by the Borrower at such time and (b) the aggregate unused amount of the Commitments then in effect.
“Total Revenues” means the gross revenues of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, as shown on the most recent income statement of the Borrower delivered pursuant to Section 5.01(a) or (b).
“Transactions” means the execution, delivery and performance by the Loan Parties of each Loan Document to which it is a party, the borrowing of Loans and the issuance of Letters of Credit hereunder.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted Term SOFR Rate or the Alternate Base Rate.
“UK Financial Institutions” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from 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.
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“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
“Unliquidated Obligations” means, at any time, any Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Obligation that is: (a) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (b) any other obligation (including any guarantee) that is contingent in nature at such time; or (c) an obligation to provide collateral to secure any of the foregoing types of obligations.
“Unrestricted Account” has the meaning set forth in Section 5.13.
“Unrestricted Subsidiary” shall mean any subsidiary designated as an “Unrestricted Subsidiary” by Borrower on or after the Effective Date in accordance with Section 5.11. As of the Effective Date, the ACV Capital Entities are Unrestricted Subsidiaries.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday,
(ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“USA Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)), as amended from time to time.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Title IV of ERISA.
“Withholding Agent” means any Loan Party and the Administrative Agent.
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“Write-Down and Conversion Powers” means, (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.
Section 1.02 Classification of Loans and Borrowings
For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a “Term Benchmark Loan”). Borrowings also may be classified and referred to by Type (e.g., a “Term Benchmark Borrowing”).
Section 1.03 Terms Generally
The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, amendments and restatements, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) 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, securities, accounts and contract rights and (f) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.
Section 1.04 Accounting Terms; GAAP.
Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.
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Notwithstanding the foregoing, all financial covenants contained herein shall be calculated (1) without giving effect to any election under the Statement of Financial Accounting Standards No. 159 (ASC 825) (or any similar accounting principle) permitting or requiring a Person to value its financial liabilities or Indebtedness at the fair value thereof and (2) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. Notwithstanding the foregoing, any change in accounting for leases pursuant to GAAP resulting from the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases (Topic 842) (“FAS 842”), to the extent such adoption would require treating any lease (or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on December 31, 2015, such lease shall not be considered a capital lease, and all calculations and deliverables under this Agreement or any other Loan Document shall be made or delivered, as applicable, in accordance therewith.
Section 1.05 Interest Rates; LIBORBenchmark Notification
The interest rate on a Loan denominated in Dollars may be derived from an interest rate benchmark that may be discontinued or is, or may in the future become, the subject of regulatory reform. reference rates for some of these interest rate benchmarks and, as a result, such interest rate benchmarks may cease to comply with applicable laws and regulations, may be permanently discontinued, and/or the basis on which they are calculated may change. The London interbank offered rate (“LIBOR”) is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that immediately after December 31, 2021, publication of the 1-week and 2-month U.S. Dollar LIBOR settings will permanently cease; immediately after June 30, 2023, publication of the overnight and 12-month U.S. Dollar LIBOR settings will permanently cease; and immediately after June 30, 2023, the 1-month, 3-month and 6-month U.S. Dollar LIBOR settings will cease to be provided or, subject to the FCA’s consideration of the case, be provided on a synthetic basis and no longer be representative of the underlying market and economic reality they are intended to measure and that representativeness will not be restored. There is no assurance that dates announced by the FCA will not change or that the administrator of LIBOR and/or regulators will not take further action that could impact the availability, composition, or characteristics of LIBOR or the currencies and/or tenors for which LIBOR is published.
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Each party to this Public and private sector industry initiatives are currently underway to identify new or Upon the occurrence of a Benchmark Transition Event, Section 2.11(b) provides a mechanism for determining an alternative rate of interest. The Borrower, pursuant to Section 2.11(e), of any change to the reference rate upon which the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, performance or any other matter related to any interest rate used in this Agreement, or with respect to any alternative or successor rate thereto, or replacement rate thereof
Section 1.06 Divisions.
For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.
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ARTICLE 2 THE CREDITS
Section 2.01 Commitments
Subject to the terms and conditions set forth herein, each Lender severally agrees to make Loans in Dollars to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the sum of the total Revolving Credit Exposures of all Lenders exceeding the total Commitments of all Lenders. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.
Section 2.02 Loans and Borrowings
$1,000,000 and not less than $5,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.19(e). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten Term Benchmark Borrowings outstanding.
Section 2.03 Requests for Borrowings
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To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by submitting a Borrowing Request in substantially the form of Exhibit B-1 attached hereto (a) in the case of a Term Benchmark Borrowing, not later than 11:00 a.m., New York City time, three U.S. Government Securities Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day prior to the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.19(e) may be given not later than 10:00 a.m. New York City time, on the date of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and shall be signed by a Responsible Officer of the Borrower. Each such Borrowing Request shall specify the following information in compliance with Section 2.02:
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Term Benchmark Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing. Request for a Eurodollar Borrowing shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to make a borrowing in accordance therewith. As soon as practicable after 10:00 a.m., New York City time, on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Borrowing for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower and each .
Section 2.04 Funding of Borrowings
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The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account or accounts designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.19(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank.
Section 2.05 Interest Elections
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If any such Interest Election Request requests a Term Benchmark Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
Section 2.06 Termination and Reduction of Commitments
Date.
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Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.08, the aggregate Revolving Credit Exposures would exceed the total Commitments.
Section 2.07 Repayment of Loans; Evidence of Debt
(i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.
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Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
Section 2.08 Prepayment of Loans
Section 2.09 Fees
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Commitment fees accrued through and including the last day of March, June, September and December of each year shall be payable in arrears on the fifteenth day following such last day and on the date on which the Commitments terminate, commencing on the first such date to occur after the Effective Date; provided that any commitment fees accruing after the date on which the Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
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Fees paid shall not be refundable under any circumstances.
Section 2.10 Interest
(i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Term Benchmark Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
Section 2.11 Alternate Rate of Interest
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then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone, telecopy or electronic mail as promptly as practicable thereafter and, until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the relevant Benchmark and
(y) the Borrower delivers a new Interest Election Request in accordance with the terms of Section 2.05 or a new Borrowing Request in accordance with the terms of Section 2.03, any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Term Benchmark Borrowing and any Borrowing Request that requests a Term Benchmark Borrowing shall instead be deemed to be an Interest Election Request or a Borrowing Request, as applicable, for an ABR Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then all other Types of Borrowings shall be permitted. Furthermore, if any Term Benchmark Loan is outstanding on the date of the Borrower’s receipt of the notice from the Administrative Agent referred to in this Section 2.11(a) with respect to a Relevant Rate applicable to such Term Benchmark Loan, then until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, with respect to the relevant Benchmark, then on the last day of the Interest Period applicable to such Loan (or the next succeeding Business Day if such day is not a Business Day), such Loan shall be converted by the Administrative Agent to, and shall constitute, an ABR Loan on such day.
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Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of “Interest Period” for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.
Section 2.12 Increased Costs
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and the result of any of the foregoing shall be to increase the cost to such Lender or Issuing Bank of making, continuing, converting to or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then, upon the request of such Lender or Issuing Bank, the Borrower will pay to such Lender or Issuing Bank such additional amount or amounts as will compensate such Lender or Issuing Bank for such additional costs incurred or reduction suffered.
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Section 2.13 Break Funding Payments
In the event of (a) the payment or prepayment of any principal of any Term Benchmark Loan other than on the last day of an Interest Period applicable thereto (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise), (b) the conversion of any Term Benchmark Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Term Benchmark Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.08(b) and is revoked in accordance therewith), or (d) the assignment of any Term Benchmark Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.16, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for Dollar deposits of a comparable amount and period . A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
Section 2.14 Taxes
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In addition, 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 as required by law or 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. Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Documents shall deliver to the Borrower and the Administrative Agent, at the time or time 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.
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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 sch Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in paragraphs (g)(i)-(iv)) shall not be required if 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.
In addition, each Lender shall deliver any forms required pursuant to Section 2.14(f) or Section 2.14(g) promptly upon the obsolescence or invalidity of any form previously delivered by such Lender or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so. On or prior to the date hereof, the Administrative Agent shall deliver to the Borrower an IRS Form W-9 or appropriate IRS Form W-8, as applicable, as well as any other documentation reasonably necessary to establish that payments by a Loan Party to the Borrower under any Loan Documents are exempt from U.S. federal backup withholding tax.
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(y) nothing in this Section shall require any Lender, any Issuing Bank or the Administrative Agent to disclose any confidential information to a Loan Party (including, without limitation, its tax returns). Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h), 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.
Section 2.15 Payments Generally; Pro Rata Treatment; Sharing of Set-offs
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Section 2.16 Mitigation Obligations; Replacement of Lenders
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A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Section 2.17 Defaulting Lenders
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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 2.17(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
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Section 2.18 Incremental Facility
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Section 2.19 Letters of Credit
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Notwithstanding anything herein to the contrary, (i) the Borrower shall not request, and no Issuing Bank shall issue, any Letter of Credit the proceeds of which would be made to any Person (A) to fund any activity or business of or with any Sanctioned Person, or in any country, region or territory, that at the time of such funding is a Sanctioned Country or (B) in any manner that would result in a violation of any Sanctions by any party to this Agreement, (ii) no Issuing Bank shall have any obligation hereunder to issue any Letter of Credit if the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank now or hereafter in effect applicable to letters of credit generally and (iii) the Borrower shall not request, and no Issuing Bank shall issue, any Letter of Credit if (A) the aggregate outstanding amount of Letters of Credit issued by such Issuing Bank would exceed such amount as has been agreed by such Issuing Bank in its sole discretion or (B) after giving effect to such issuance of a Letter of Credit, (1) any Lender’s Revolving Credit Exposure would exceed such Lender’s Commitment or (2) the aggregate Revolving Credit Exposures of all Lenders would exceed the total Commitments of all Lenders.
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In consideration and in furtherance of the foregoing, each Lender hereby absolutely, unconditionally and irrevocably agrees to pay to the Administrative Agent, for the account of such Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute, unconditional and irrevocable and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
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(i) of Article 7. Such Cash Collateral shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the applicable Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of each Issuing Bank), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.
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Section 2.20 Judgment Currency.
If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due from the Borrower hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which the Administrative Agent could, in accordance with normal banking procedures applicable to arm’s length transactions, purchase the specified currency with such other currency at the Administrative Agent’s Principal Office on the Business Day immediately preceding that on which final, non-appealable judgment is given. The obligations of the Borrower in respect of any sum due to the Administrative Agent, any Issuing Bank or any Lender hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent, such Issuing Bank or such Lender of any sum adjudged to be so due in such other currency, the Administrative Agent, such Issuing Bank or such Lender may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency.
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If the amount of the specified currency so purchased is less than the sum originally due to the Administrative Agent, such Issuing Bank or such Lender in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent, such Issuing Bank or such Lender against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to the Administrative Agent, such Issuing Bank or such Lender in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 2.15(c), the Administrative Agent, such Issuing Bank or such Lender agrees to remit such excess to the Borrower.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that: Section 3.01 Organization; Powers
Each of the Borrower and its Subsidiaries is duly organized, validly existing and (to the extent the concept is applicable in such jurisdiction) in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
Section 3.02 Authorization; Enforceability
The Transactions are within the Borrower’s and each Guarantor’s corporate or other organizational powers and have been duly authorized by all necessary corporate or other organizational and, if required, equity holder action. Each of the Borrower and the Guarantors has duly executed and delivered each of the Loan Documents to which it is party, and each of such Loan Documents constitute its legal, valid and binding obligations, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
Section 3.03 Governmental Approvals; No Conflicts
The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created by the Loan Documents, and (iii) those approvals, consents, registrations, filings or other actions, the failure of which to obtain or make would not reasonably be expected to have a Material Adverse Effect, (b) except as would not reasonably be expected to have a Material Adverse Effect, will not violate any applicable law or regulation or any order of any Governmental Authority applicable to any Loan Party, (c) will not violate any charter, by-laws or other organizational document of the Borrower or any of its Subsidiaries,
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(d) except as would not reasonably be expected to have a Material Adverse Effect, will not violate or result in a default under any indenture, agreement or other instrument (other than the agreements and instruments referred to in clause (c)) binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (e) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries (other than liens arising pursuant to the Security Documents).
Section 3.04 Financial Condition; No Material Adverse Change
Section 3.05 Properties
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Section 3.06 Litigation and Environmental Matters
Except as set forth on Schedule 3.06, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened in writing (including “cease and desist” letters and invitations to take a patent license) against or affecting the Borrower or any of its Subsidiaries (i) that would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement, any other Loan Document or the Transactions.
Section 3.07 Compliance with Laws and Agreements; No Default
Each of the Borrower and its Subsidiaries is in compliance with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property and rights and all indentures, agreements, and other instruments binding upon it or its property and rights, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
Section 3.08 Investment Company Status
None of the Borrower or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.
Section 3.09 Margin Stock
None of the Borrower or any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board), and no proceeds of any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock in violation of Regulation U or Regulation X issued by the Board and all official rulings and interpretations thereunder or thereof.
Section 3.10 Taxes
Except as set forth on Schedule 3.10 or as would not reasonably be expected to result in a Material Adverse Effect, (i) each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed with respect to income, properties or operations of the Borrower and its Subsidiaries, and
(ii) each of the Borrower and its Subsidiaries has paid or caused to be paid all Taxes required to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings and, to the extent required by GAAP, for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP.
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Section 3.11 ERISA
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The Borrower, any Subsidiary, and any ERISA Affiliate have not ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA or ceased making contributions to any Plan subject to Section 4064(a) of ERISA to which it made contributions. None of the Borrower, any Subsidiary or any ERISA Affiliate have incurred or reasonably expect to incur any liability to PBGC except as would not reasonably be expected to result in a Material Adverse Effect, save for any liability for premiums due in the ordinary course or other liability which would not reasonably be expected to result in a Material Adverse Effect, and no lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary or any ERISA Affiliate exists or, to the knowledge of the Borrower, is likely to arise on account of any Plan. None of the Borrower, any Subsidiary or any ERISA Affiliate has engaged in a transaction that would reasonably be expected to be subject to Section 4069 or 4212(c) of ERISA.
Section 3.12 Disclosure
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Section 3.13 Subsidiaries
Schedule 3.13 sets forth as of the Effective Date a list of all Subsidiaries, together with (a) the percentage ownership (directly or indirectly) of the Borrower therein and (b) whether such Subsidiary is a Guarantor or an Excluded Subsidiary. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the shares of capital stock or other ownership interests of all Subsidiaries of the Borrower are fully paid and non-assessable and are owned by the Borrower, directly or indirectly, free and clear of all Liens other than Liens permitted under Section 6.02.
Section 3.14 Solvency
As of the Effective Date, the Borrower and its Subsidiaries, on a consolidated basis, are and after giving effect to the incurrence of any Indebtedness and obligations being incurred in connection herewith will be, Solvent.
Section 3.15 Anti-Terrorism Law
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Section 3.16 Anti-Corruption Laws and Sanctions
Section 3.17 Security Documents
The Security Documents are effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest (subject to Liens permitted by Section 6.02) in the Collateral described therein and proceeds thereof.
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In the case of the Pledged Stock described in the Security Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent (together with a properly completed and signed stock power or endorsement), and in the case of the other Collateral described in the Security Agreement, when financing statements and other filings specified on Schedule 3 to the Security Agreement in appropriate form are filed in the offices specified on Schedule 3 to the Security Agreement, the Security Agreement shall constitute a fully perfected Lien on, and security interest (subject to Liens permitted by Section 6.02) 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 6.02) to the extent that such actions are sufficient to perfect a security interest in the Collateral.
ARTICLE 4 CONDITIONS
Section 4.01 Effective Date.
The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):
(ii) written evidence satisfactory to the Administrative Agent (which may include telecopy or electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.
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2023 and December 31, 2024.
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The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Without limiting the generality of the provisions of Article 8, for purposes of determining compliance with the conditions specified in this Section, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Effective Date specifying its objection thereto.
Section 4.02 Each Credit Event
The obligation of each Lender to make a Loan on the occasion of any Borrowing (provided that a conversion or a continuation shall not constitute a “Borrowing” for purposes of this Section 4.02), and of the applicable Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:
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(x) the representations and warranties contained in Section 3.04(a) shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b) (subject, in the case of unaudited financial statements furnished pursuant to clause (b), to year-end audit adjustments and the absence of footnotes), respectively, of Section 5.01 and (y) the representations and warranties contained in Section 3.14 shall be deemed to refer to the date of any such Borrowing, (ii) to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date and (iii) to the extent that such representations and warranties are already qualified or modified by materiality in the text thereof, they shall be true and correct in all respects; and
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower that the conditions specified in paragraphs (a) and (b) of this Section have been satisfied as of the date thereof.
ARTICLE 5 AFFIRMATIVE COVENANTS
Until the Obligations have been Paid in Full, the Borrower covenants and agrees with the Lenders that:
Section 5.01 Financial Statements; Ratings Change and Other Information
The Borrower will furnish to the Administrative Agent (for distribution to each Lender):
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(b) above, a certificate of a Financial Officer of the Borrower in substantially the form of Exhibit E attached hereto (i) certifying as to whether a Default has occurred and is continuing as of the date thereof and, if a Default has occurred and is continuing as of the date thereof, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) demonstrating compliance with Sections 6.10(a) and (b), (iii) if and to the extent that any change in GAAP that has occurred since the date of the audited financial statements referred to in Section 3.04 had an impact on such financial statements, specifying the effect of such change on the financial statements accompanying such certificate and (iv) setting forth a description of any registered patents, registered trademarks or registered copyrights acquired, exclusively licensed or developed by the Borrower and its Subsidiaries since the Effective Date or the date of the most recent certificate delivered pursuant to this Section 5.01(c) prior to the date thereof, as applicable;
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Information required to be delivered pursuant to Section 5.01(a), Section 5.01(b) or Section 5.01(f) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which such information is posted on the Borrower’s behalf on an Internet or intranet website, if any, to which the Lenders and the Administrative Agent have been granted access (whether a commercial, third-party website or whether sponsored by the Administrative Agent) or (ii) on which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR).
Section 5.02 Notices of Material Events
The Borrower will furnish to the Administrative Agent (for distribution to each Lender) prompt written notice of the following:
Each notice delivered under this Section shall be accompanied by a statement of a Responsible Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 5.03 Existence; Conduct of Business
The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence in its jurisdiction of organization and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that (i) the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 and
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(ii) none of the Borrower or any of its Subsidiaries shall be required to preserve, renew or keep in full force and effect its rights, licenses, permits, privileges or franchises where failure to do so would not reasonably be expected to result in a Material Adverse Effect.
Section 5.04 Payment of Taxes
The Borrower will, and will cause each of its Subsidiaries to, pay all Tax liabilities, including all Taxes imposed upon it or upon its income or profits or upon any properties belonging to it that, if not paid, would reasonably be expected to result in a Material Adverse Effect, before the same shall become delinquent or in default, and all lawful claims other than Tax liabilities that, if unpaid, would become a Lien upon any properties of the Borrower or any of its Subsidiaries not otherwise permitted under Section 6.02, in both cases except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings and (b) to the extent required by GAAP, the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP.
Section 5.05 Maintenance of Properties; Insurance
The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property used in the conduct of its business in good working order and condition, ordinary wear and tear and casualty events excepted, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect, and (b) maintain insurance with financially sound and reputable insurance companies in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.
Section 5.06 Books and Records; Inspection Rights
The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which entries full, true and correct in all material respects are made and are sufficient to prepare financial statements in accordance with GAAP. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender (pursuant to the request made through the Administrative Agent), upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records to the extent reasonably necessary, and to discuss its affairs, finances and condition with its officers and independent accountants (provided that the Borrower or such Subsidiary shall be afforded the opportunity to participate in any discussions with such independent accountants), all at such reasonable times and as often as reasonably requested (but no more than once annually if no Event of Default exists). Notwithstanding anything to the contrary in this Section, none of the Borrower or any of its Subsidiaries shall be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives) is prohibited by applicable law or any third party contract legally binding on the Borrower or its Subsidiaries or (iii) is subject to attorney, client or similar privilege or constitutes attorney work-product.
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Section 5.07 ERISA Events
The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in a Material Adverse Effect.
Section 5.08 Compliance with Laws and Agreements
The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property and rights and all indentures, agreements, and other instruments binding upon it or its property and rights, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws, Anti-Terrorism Laws and applicable Sanctions.
Section 5.09 Use of Proceeds
The proceeds of the Loans and Letters of Credit will be used only for working capital and general corporate purposes, including, without limitation, for stock repurchases under stock repurchase programs approved by the Borrower and for acquisitions not prohibited hereunder. No part of the proceeds of any Loan or Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.
Section 5.10 Guarantors; Additional Collateral
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(i) enter into a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent to the Guaranty and (ii) (A) enter into a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent to the Security Agreement and (B) take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest (subject to Liens permitted by Section 6.02) in the Collateral described in the Security Agreement with respect to such Domestic Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions, filings with the United States Copyright Office and filings with the United States Patent and Trademark Office, as may be required by the Security Agreement or by law or as may be requested by the Administrative Agent, (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions consistent with the legal opinions delivered on the Effective Date, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent and (iv) deliver to the Administrative Agent, at least two (2) Business Days prior to the effectiveness of the joinder agreements required under clauses (i) and (ii)(A) above, all documentation and other information in respect of such Domestic Subsidiary required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the USA Patriot Act with respect to such Domestic Subsidiary; provided that the Borrower and its Subsidiaries shall not be required to take any action under this Section 5.10(a) if prior to the end of such 30 day period (or such longer period of time as the Administrative Agent may agree in its sole discretion) such Person ceases to be a Domestic Subsidiary as a result of a transfer of assets from such Person to the Borrower in a transaction or transactions permitted under this Agreement.
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Section 5.11 Unrestricted Subsidiaries
Borrower may designate any Unrestricted Subsidiary (or redesignate any Unrestricted Subsidiary as a Subsidiary) only in accordance with the following:
Section 5.12 Further Assurances
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Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, the Borrower will (a) correct any error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and
(b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) perfect and maintain the validity, effectiveness and priority of any of the Security Documents and any of the Liens created thereunder and (ii) assure, preserve, protect and confirm more effectively unto the Lenders, or the Administrative Agent for the benefit of the Lenders, the rights granted to the Lenders, or the Administrative Agent for the benefit of the Lenders, under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party.
Section 5.13 Cash Management
The Borrower shall, and shall cause each Guarantor to, within 120 days after the Closing Date (or such later date as the Administrative Agent may reasonably agree), enter into a Control Account Agreement with the Administrative Agent and any bank or other financial institution with which the Borrower or any Guarantor maintains a deposit account or securities account (other than (i) any account in which the aggregate average daily maximum balance over a 30-day period does not at any time exceed $250,000, provided that the aggregate average daily maximum balance over a 30-day period of all such accounts described in this clause (i) shall not at any time exceed $3,000,000, (ii) zero-balance accounts solely for the purpose of managing local disbursements, payroll and withholding, (iii) Fiduciary Accounts and (iv) accounts solely holding cash collateral that is subject of a deposit or pledge constituting a Lien permitted hereunder (collectively, the “Unrestricted Accounts”)) (each, a “Controlled Account”). In addition, the Borrower shall enter into a Control Account Agreement with respect to any new deposit account or securities account (other than any Unrestricted Account), in each case within 120 days (or such longer period as the Administrative Agent may reasonably agree) after such account is established. Each Controlled Account shall be a cash collateral account, with all cash, Cash Equivalents, checks and other similar items of payment in such account securing payment of the Obligations, in which the applicable Loan Party shall have granted a first priority Lien to the Administrative Agent, on behalf of the Secured Parties. If any Default or Event of Default has occurred and is continuing, the Administrative Agent may in its reasonable discretion, and is hereby authorized to, cause the applicable depositary bank or securities intermediary to honor the instructions of the Administrative Agent with respect to any Controlled Account in accordance with the terms of the applicable Control Account Agreement.
ARTICLE 6 NEGATIVE COVENANTS
Until the Obligations have been Paid in Full, the Borrower covenants and agrees with the Lenders that:
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Section 6.01 Indebtedness
The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness other than:
(d) shall not exceed the greater of (i) $25,000,000 and (ii) 2.5% of the Total Assets of the Borrower and its Subsidiaries at any time outstanding;
provided that such Indebtedness shall be permitted only to the extent subordinated in right of priority and security to the Obligations on customary terms reasonably satisfactory to the Administrative Agent;
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$25,000,000 at any time outstanding; Indebtedness in connection with corporate credit cards issued to the Borrower and its Subsidiaries;
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$500,000,000; provided that (i) such unsecured Indebtedness shall have a stated final maturity date that is no earlier than the Earliest Date and (ii) no Subsidiary that is not a Loan Party shall have Guarantee obligations with respect to obligations of the Borrower thereunder; and
Section 6.02 Liens
The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it except:
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(iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and any refinancing, extension, renewal or replacement thereof that does not increase the outstanding principal amount thereof except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing, extensions, renewals or replacements;
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$50,000,000 and (ii) 5.0% of the Total Assets of the Borrower and its Subsidiaries at any time outstanding;
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(aa) purported Liens evidenced by the filing of precautionary UCC financing statements, including those relating to operating leases or consignment or bailee arrangements entered into in the ordinary course of business.
Section 6.03 Fundamental Changes
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provided that any such any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.
Section 6.04 Investments, Loans, Advances, Guarantees and Acquisitions
The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of Indebtedness or Equity Interests of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (each, an “Investment”), except:
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6.09;
bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
The Borrower will not, and will not permit any of its Subsidiaries to, declare or make any Restricted Payments with respect to the Borrower or any of its Subsidiaries, except:
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(ii) any payment (including payment of any premium) or delivery with respect to, or early unwind or settlement or termination of, any Permitted Equity Derivative Transaction;
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$300,000,000, in an amount not to exceed $25,000,000 in the aggregate for any fiscal year of the Borrower.
Section 6.06 Restrictive Agreements
The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure the Obligations, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or of any Subsidiary to Guarantee Indebtedness of the Borrower or any other Subsidiary under the Loan Documents; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the Effective Date identified on Schedule 6.06 (and shall apply to any extension or renewal of, or any amendment or modification materially expanding the scope of, any such restrictions or conditions taken as a whole), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets of the Borrower or any Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets to be sold and such sale is not prohibited hereunder, (iv) the foregoing shall not apply to any agreement or restriction or condition in effect at the time any Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower, (v) the foregoing shall not apply to customary provisions in joint venture agreements and other similar agreements applicable to joint ventures, (vi) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (vii) clause (a) of the foregoing shall not apply to customary provisions in leases, licenses, subleases and sublicenses and other contracts restricting the assignment thereof, (viii) the foregoing shall not apply to restrictions or conditions set forth in any agreement governing Indebtedness not prohibited by Section 6.01; provided that such restrictions and conditions are customary for such Indebtedness (as determined in good faith by Borrower), and (ix) the foregoing shall not apply to restrictions on cash or other deposits (including escrowed funds) imposed under contracts entered into in the ordinary course of business.
Section 6.07 Transactions with Affiliates
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The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates (other than between or among the Borrower and its Subsidiaries and not involving any other Affiliate except as otherwise permitted hereunder), except (a) on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) payment of customary directors’ fees, reasonable out-of-pocket expense reimbursement, indemnities (including the provision of directors and officers insurance) and compensation arrangements for members of the board of directors, officers or other employees of the Borrower or any of its Subsidiaries, (c) transactions approved by a majority of the disinterested directors of the Borrower’s board of directors, (d) any transaction involving amounts less than
$5,000,000 in the aggregate for any fiscal year of the Borrower, (e) any Restricted Payment permitted by Section 6.05, and (f) any Investment permitted by Section 6.01(c) and (d).
Section 6.08 Use of Proceeds
The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or
Section 6.09 Disposition of Property
The Borrower will not, and will not permit any of its Subsidiaries to, Dispose of any of its property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Equity Interests to any Person, except:
6.04;
the ordinary course of business, and (ii) licenses of intellectual property that may be exclusive only as to territory, provided that such territory only includes discrete geographical areas outside of the United States, provided that such licenses described herein do not interfere in any material respect with the business of the Loan Parties and their Subsidiaries;
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Section 6.10 Financial Condition Covenants The Borrower will not, and will not permit any of its Subsidiaries to:
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Date of Determination |
Minimum Revenue |
September 30, 2021 |
$280,000,000 |
December 31, 2021 |
$284,000,000 |
March 31, 2022 |
$280,000,000 |
June 30, 2022 |
$259,000,000 |
September 30, 2022 |
$280,000,000 |
December 31, 2022 |
$305,000,000 |
March 31, 2023 |
$331,000,000 |
June 30, 2023 |
$358,000,000 |
September 30, 2023 |
$385,000,000 |
December 31, 2023 |
$411,000,000 |
March 31, 2024 |
$442,000,000 |
June 30, 2024 |
$477,000,000 |
September 30, 2024 |
$515,000,000 |
December 31, 2024 |
$552,000,000 |
March 31, 2025 |
$597,000,000 |
June 30, 2025 |
$644,000,000 |
September 30, 2025 |
$692,000,000 |
December 31, 2025 |
$739,000,000 |
March 31, 2026 |
$786,000,000 |
June 30, 2026 |
$834,000,000 |
Section 6.11 Swap Agreements
Neither the Borrower nor any other Guarantor will enter into any Swap Agreement for speculative purposes.
Section 6.12 Amendments to Other Agreements.
The Borrower will not, and will not permit any of its subsidiaries (including, for the avoidance of doubt, any ACV Capital Entity) to, amend, restate, supplement or otherwise modify, waive or consent to any departure from the ACV Capital Loan Agreement or any other Loan Document (as defined therein) or the Indemnity Agreement, in each case, in a manner materially adverse, individually or in the aggregate, to the interests of the Lenders without the prior written consent of the Administrative Agent and Lenders.
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ARTICLE 7 EVENTS OF DEFAULT
If any of the following events (each, an “Event of Default”) shall occur:
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any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both, but with all applicable grace periods in respect of such event or condition under the documentation representing such Material Indebtedness having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to (i) any requirement to, or any offer, to repurchase, prepay or redeem Indebtedness of a Person acquired in an acquisition permitted hereunder, to the extent such offer is required as a result of, or in connection with, such acquisition, so long as such requirement is satisfied at the time of such acquisition, (ii) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, (iii) any event that permits or causes redemption, repurchase, conversion or settlement with respect to any convertible debt instrument (including Permitted Convertible Indebtedness) pursuant to its terms (including any termination of any related Swap Agreement) unless such redemption, repurchase, conversion or settlement results from a default thereunder or an event of the type that constitutes an Event of Default, (iv) an early payment requirement, unwinding or termination with respect to any Swap Agreement except (x) an early payment, unwinding or termination that results from a default or non-compliance thereunder by the Borrower or any Subsidiary, or another event of the type that would constitute an Event of Default or (y) an early termination of such Swap Agreement by the counterparty thereto or (v) any early payment requirement or unwinding or termination with respect to any Permitted Equity Derivative Transaction, or satisfaction of any condition giving rise to or permitting the foregoing, in accordance with the terms thereof, so long as, in any such case, the Borrower and its Subsidiaries are not the “defaulting party” or otherwise in breach under the terms of such Permitted Equity Derivative Transaction;
(v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
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then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, (ii) cash collateralize any outstanding Letters of Credit in accordance with Section 2.19(i) and (iii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE 8 THE AGENTS
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Section 8.01 Appointment of Administrative Agent JPMorgan Chase Bank, N.A. is hereby appointed Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes JPMorgan Chase Bank, N.A. to act as Administrative Agent in accordance with the terms hereof and the other Loan Documents. Each Agent hereby agrees to act in its capacity as such upon the express conditions contained herein and the other Loan Documents, as applicable. The provisions of this Article 8 are solely for the benefit of the Agents and Lenders and no Loan Party shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower or any of its Subsidiaries. As of the Effective Date, none of the Arranger or Bookrunners in such capacities shall have any obligations but shall be entitled to all benefits of this Article 8. The Arranger or any Bookrunner may resign from such role at any time, with immediate effect, by giving prior written notice thereof to the Administrative Agent and the Borrower.
Section 8.02 Powers and Duties
Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Loan Documents, a fiduciary relationship in respect of any Lender or any other Person; and nothing herein or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Loan Documents except as expressly set forth herein or therein.
Section 8.03 General Immunity
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(i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Borrower and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Loan Documents in accordance with the instructions of Required Lenders (or such other Lenders as may be required to give such instructions under Section 9.02).
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Notwithstanding anything herein to the contrary, with respect to each sub-agent appointed by the Administrative Agent, (i) such sub-agent shall be a third party beneficiary under this Agreement with respect to all such rights, benefits and privileges (including exculpatory rights and rights to indemnification) and shall have all of the rights and benefits of a third party beneficiary, including an independent right of action to enforce such rights, benefits and privileges (including exculpatory rights and rights to indemnification) directly, without the consent or joinder of any other Person, against any or all of Loan Parties and the Lenders, (ii) such rights, benefits and privileges (including exculpatory rights and rights to indemnification) shall not be modified or amended without the consent of such sub-agent, and (iii) such sub-agent shall only have obligations to the Administrative Agent and not to any Loan Party, Lender or any other Person and no Loan Party, Lender or any other Person shall have any rights, directly or indirectly, as a third party beneficiary or otherwise, against such sub-agent.
Section 8.04 Administrative Agent Entitled to Act as Lender
The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection herewith and otherwise without having to account for the same to Lenders.
Section 8.05 Lenders’ Representations, Warranties and Acknowledgment
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Section 8.06 Right to Indemnity
Each Lender, in proportion to its Applicable Percentage, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by any Loan Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as such Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct, as determined by a final, non-appealable judgment of a court of competent jurisdiction. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender’s Applicable Percentage thereof; and provided further, this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence.
Section 8.07 Successor Administrative Agent
The Administrative Agent shall have the right to resign at any time by giving prior written notice thereof to Lenders and the Borrower. The Administrative Agent shall have the right to appoint a financial institution to act as the Administrative Agent hereunder, subject to the reasonable satisfaction of the Borrower and the Required Lenders, and the Administrative Agent’s resignation shall become effective on the earliest of (i) 30 days after delivery of the notice of resignation (regardless of whether a successor has been appointed or not), (ii) the acceptance of such successor Administrative Agent by the Borrower and the Required Lenders or (iii) such other date, if any, agreed to by the Required Lenders. Upon any such notice of resignation, if a successor Administrative Agent has not already been appointed by the retiring Administrative Agent, Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor Administrative Agent. If neither the Required Lenders nor the Administrative Agent have appointed a successor Administrative Agent, the Required Lenders shall be deemed to have succeeded to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall promptly (i) transfer to such successor Administrative Agent all sums held under the Loan Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent under the Loan Documents, and (ii) take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Administrative Agent of the Loan Documents, whereupon such retiring Administrative Agent shall be discharged from its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Article).
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After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article 8 and Section 9.03 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder.
Section 8.08 Guaranty and Security Documents
Section 8.09 Withholding Taxes
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To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, or if the Administrative Agent reasonably determines that a payment was made to a Lender pursuant to this Agreement without deduction of applicable withholding tax from such payment, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred.
Section 8.10 Administrative Agent May File Bankruptcy Disclosure and Proofs of Claim
In case of the pendency of any proceeding under any Debtor Relief Laws relative to any Loan Party, The Administrative Agent (irrespective of whether the principal of any Loan or Obligation under a 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:
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due to the Administrative Agent under Sections
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2.09 and 9.03. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Administrative Agent, its agents and counsel, and any other amounts due to the Administrative Agent under Sections 2.09 and 9.03 out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Lenders or the Issuing Banks may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise.
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 or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 8.11 Erroneous Payments
8.11 shall be conclusive, absent manifest error.
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Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
Section 8.12 Certain ERISA Matters.
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(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or
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ARTICLE 9 MISCELLANEOUS
Section 9.01 Notices
ACV Auctions Inc. 640 Ellicott Street
Suite 321
Buffalo, NY 14203
JPMorgan Chase Bank, N.A. 10 South Dearborn, Floor L2S Chicago, Illinois 60603-2300 Attn: Alexander Pope
Email: alexander.pope@chase.com and jpm.agency.cri@jpmorgan.com
JPMorgan Chase Bank, N.A. 237 Park Avenue
New York, New York 10017 Attn: Grace Mahood
Email: grace.mahood@jpmorgan.com
JPMorgan Chase Bank, N.A. 10 South Dearborn, Floor L2S Chicago, Illinois 60603-2300
Attn: LC Trade Execution Team With respect to any other Issuing Bank, at its address provided by notice to the other parties hereto.
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Email: cb.trade.execution.team@chase.com
Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).
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In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) be responsible or liable for damages arising from the unauthorized use by others of information or other materials obtained through internet, electronic, telecommunications or other information transmission, except to the extent that such damages have resulted from the willful misconduct or gross negligence of such Agent Party (as determined in a final, non-appealable judgment by a court of competent jurisdiction).
Section 9.02 Waivers; Amendments
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Notwithstanding anything to the contrary herein, no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or any Issuing Bank hereunder without the prior written consent of the Administrative Agent or such Issuing Bank, as the case may be.
Section 9.03 Expenses; Indemnity; Damage Waiver
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Section 9.04 Successors and Assigns
(i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. 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 (c) of this Section) and, to the extent expressly contemplated hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), the Related Parties of each of the Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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(y) acquire (and fund as appropriate) its full pro rata share of all Loans in accordance with its Applicable 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.
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(C) the Borrower, the Administrative Agent, the Issuing Banks 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.
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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 described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15(c) as though it were a Lender.
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Section 9.05 Survival.
All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding or subject to any pending draw and so long as the Commitments have not expired or terminated. The provisions of Section 2.12, Section 2.13, Section 2.14 and Section 9.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments, the resignation of the Administrative Agent, the replacement of any Lender, or the termination of this Agreement or any provision hereof.
Section 9.06 Counterparts; Integration; Effectiveness
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Without limiting the generality of the foregoing, the Borrower and each Loan Party hereby (A) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders, the Borrower and the Loan Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any other Loan Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, (B) the Administrative Agent and each of the Lenders may, at its option, create one or more copies of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (C) waives any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement, such other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and (D) waives any claim against any Lender or any of its Related Parties for any liabilities arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page, including any liabilities arising as a result of the failure of the Borrower and/or any Loan Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.
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Section 9.07 Severability
Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, then such provisions shall be deemed to be in effect only to the extent not so limited.
Section 9.08 Right of Setoff
If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held by, and other obligations (in whatever currency) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided that in the event that any Defaulting Lender 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 2.17 and, pending such payment, shall be segregated by such Defaulting Lender 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 as to which it exercised such right of setoff. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application. Notwithstanding the foregoing, to the extent prohibited by applicable law as described in the definition of “Excluded Swap Obligation,” no amounts received from, or set off with respect to, any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor.
Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process
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Section 9.10 Waiver Of Jury Trial
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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Section 9.11 Headings
Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
Section 9.12 Confidentiality
(A) becomes publicly available other than as a result of a breach of this Section,
(B) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower or (C) is independently developed by the Administrative Agent, an Issuing Bank or a Lender or (ix) for purposes of establishing a “due diligence” defense. In addition, the Administrative Agent, the Issuing Banks and the Lenders may 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, the Issuing Banks and the Lenders in connection with the administration of this Agreement, the other Loan Documents, the Letters of Credit and the Loans. For the purposes of this Section, “Information” means all memoranda or other information received from or on behalf of the Borrower relating to the Borrower or its business that is clearly identified by the Borrower as confidential, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower.
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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.
Section 9.13 Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
Section 9.14 No Advisory or Fiduciary Responsibility
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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 acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that: (a) (i) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arranger, the Bookrunners, the Issuing Banks and the Lenders are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Arranger, the Bookrunners, the Issuing Banks and the Lenders, on the other hand, (ii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the Transactions contemplated hereby and by the other Loan Documents; (b) (i) each of the Administrative Agent, the Arranger, the Bookrunners, the Issuing Banks and the Lenders 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 the Borrower or any of its Subsidiaries, or any other Person and (ii) neither the Administrative Agent, the Arranger, any Bookrunner, any Issuing Bank, nor any Lender has any obligation to the Borrower or any of its Affiliates with respect to the Transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (c) the Administrative Agent, the Arranger, the Bookrunners, the Issuing Banks and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent, the Arranger, any Bookrunners, any Issuing Bank, nor any Lender has any obligation to disclose any of such interests to the Borrower or its Affiliates. The Borrower, on behalf of itself and each of its Subsidiaries, agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Administrative Agent, the Arrangers, any Bookrunners, any Issuing Bank or any Lender, on the one hand, and the Borrower, any of its Subsidiaries, or their respective stockholders or affiliates, on the other.
Section 9.15 USA PATRIOT Act
Each Lender and each Issuing Bank that is subject to the requirements of the USA Patriot Act hereby notifies the Borrower and each Guarantor that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Borrower and each Guarantor, which information includes the name and address of the Borrower and each Guarantor and other information that will allow such Lender or such Issuing Bank to identify the Borrower and each Guarantor in accordance with the USA Patriot Act. The Borrower and each Guarantor shall, promptly following a request by the Administrative Agent, any Issuing Bank or any Lender, provide all documentation and other information that the Administrative Agent, such Issuing Bank or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act.
Section 9.16 Releases of Guarantors and Liens
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In the event that all the Equity Interests in any Guarantor are sold, transferred or otherwise disposed of to a Person other than the Borrower or its Subsidiaries in a transaction permitted under this Agreement or in the event that a Guarantor ceases to be a Subsidiary as a result of a transaction permitted hereunder, the Administrative Agent shall, at the Borrower’s expense, promptly take such action and execute such documents as the Borrower may reasonably request to terminate the guarantee of such Guarantor and to release the Collateral owned by such Guarantor from the Liens created by the Security Documents.
Section 9.17 Acknowledgement 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):
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.
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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. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
Section 9.18 Acknowledgment and Consent to Bail-In of Affected Financial Institutions
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
[Remainder of page intentionally left blank; signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
ACV AUCTIONS INC.,
as Borrower
By:
Name: Title:
[Signature Page to Revolving Credit Agreement]
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JPMORGAN CHASE BANK, N.A.,
as Administrative Agent, an Issuing Bank and a Lender
By:
Name: Title:
[Signature Page to Revolving Credit Agreement]
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[ ],
as a Lender
By:
Name: Title:
[Signature Page to Revolving Credit Agreement]
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Exhibit 31.1
CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, George Chamoun, certify that:
Date: Aug 7, 2023 |
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By: |
/s/ George Chamoun |
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George Chamoun |
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Chief Executive Officer and Director (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Zerella, certify that:
Date: Aug 7, 2023 |
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By: |
/s/ William Zerella |
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William Zerella |
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Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ACV Auctions Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: Aug 7, 2023 |
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By: |
/s/ George Chamoun |
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|
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George Chamoun |
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Chief Executive Officer (Principal Executive Officer) |
This certification accompanies the Quarterly Report, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of ACV Auctions Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ACV Auctions Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: Aug 7, 2023 |
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By: |
/s/ William Zerella |
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William Zerella |
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|
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Chief Financial Officer (Principal Financial Officer) |
This certification accompanies the Quarterly Report, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of ACV Auctions Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.