Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-K
__________________________________________________
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
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: 001-37893
FLUENT, INC.
(Exact name of registrant as specified in its charter)
Delaware
77-0688094
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
300 Vesey Street, 9th Floor
New York, New York 10282
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (646) 669-7272
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0005 par value per share
FLNT
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒
On June 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-
voting equity held by non-affiliates of the registrant was approximately $27.8 million based upon the closing price of the registrant's common stock of
$3.61 on The Nasdaq Capital Market as of that date.
The number of shares outstanding of the registrant’s common stock, as of March 27, 2025, was 20,643,660
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement relating to its 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission
("SEC") within 120 days after the end of the fiscal year ended December 31, 2024 are incorporated herein by reference in Part III of this Annual Report on
Form 10-K.
Table of Contents
FLUENT, INC.
TABLE OF CONTENTS FOR FORM 10-K
PART I
1
Item 1.
Business.
1
Item 1A.
Risk Factors.
6
Item 1B.
Unresolved Staff Comments.
19
Item 1C.
Cybersecurity.
19
Item 2.
Properties.
19
Item 3.
Legal Proceedings.
20
Item 4.
Mine Safety Disclosures.
20
PART II
21
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
21
Item 6.
[Reserved].
21
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
22
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
35
Item 8.
Financial Statements and Supplementary Data.
35
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
35
Item 9A.
Controls and Procedures.
35
Item 9B.
Other Information.
35
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
35
PART III
36
Item 10.
Directors, Executive Officers and Corporate Governance.
36
Item 11.
Executive Compensation.
36
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
36
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
36
Item 14.
Principal Accounting Fees and Services.
36
PART IV
37
Item 15.
Exhibits, Financial Statement Schedules.
37
Item 16.
Form 10-K Summary
39
SIGNATURES
40
i
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended December 31, 2024 contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product
development and commercialization efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters. These
forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to
uncertainties, risks and changes in circumstances that are difficult to predict. These statements may be identified by words such as "expects," "plans,"
"projects," "will," "may," "anticipates," "believes," "should," "intends," "estimates," "will likely result," "could," and other words of similar meaning.
Actual results could differ materially from those contained in forward-looking statements. Many factors could cause actual results to differ materially from
those in forward-looking statements, including those matters discussed below, as well as those listed in Item 1A. Risk Factors.
Other unknown or unpredictable factors that could also adversely affect our business, financial condition, and results of operations may arise from time to
time. Given these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not
place undue reliance on these forward-looking statements, which only reflect the views of Fluent’s management as of the date of this report. We undertake
no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future
operating results or expectations, except as required by law.
RISK FACTOR SUMMARY
Investing in our common stock involves a high degree of risk. The following summary identifies certain material risks and uncertainties facing our
business, many of which are beyond our control. A more complete discussion of each these and other risks and uncertainties is set forth below. Our
business, financial condition, results of operations, and cash flows may be impacted by a number of factors, including those set forth below and elsewhere
in this 2024 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.
Risks Related to Our Business
Risks Related to Our Financial Position
●
There is substantial doubt about our ability to continue as a going concern.
●
Covenants in our SLR Credit Agreement (as defined herein) impose restrictions that may limit our operating and financial flexibility.
Risks Related to Our Industry
●
We operate in a competitive, rapidly changing industry, which makes it difficult to evaluate our business and prospects.
●
A material percentage of our consolidated revenue is derived from gaming (apps) advertisers, so we are exposed to risks associated with the
gaming industry in general.
●
Unfavorable publicity and negative public perception about our industry or us may damage our reputation, which could harm our business,
financial condition, and results of operations.
●
A sudden reduction in online marketing spend by our clients, a loss of clients or lower advertising yields may seriously harm our business.
●
We are exposed to credit risk from our clients, and we may not be able to collect on amounts owed to us.
Risks Related to Our Commerce Media Solutions Business
●
We are a relatively new entrant to the post-transaction commerce media business, which is currently dominated by a major player.
●
We will need to continue to invest in technology for our Commerce Media Solutions business.
Risks Related to Our Owned and Operated Media Properties
●
We are at a competitive disadvantage to other rewards sites because we are more selective in our traffic sources.
●
A decline in the supply of media available to us through third parties or an increase in the price of this media could increase the cost of
attracting consumers and reduce our profitability.
●
More people are accessing content on their mobile devices through mobile applications, and we have not successfully deployed mobile app
versions of our O&O Sites (as defined herein), which hinders our ability to remain.
●
Our use of CRM may be hindered, which in turn could harm our business.
ii
Table of Contents
Risks Related to Our Call Solutions Business
●
We have become increasingly reliant upon inbound calls, particularly in the Health Plan (as defined herein) vertical, which we may be unable
to obtain cost effectively obtain in the future.
Other Business Risks
●
It may be difficult to effectively manage any future growth and scale our infrastructure and products quickly enough to meet the needs of our
business while maintaining profitability.
●
Economic or political instability could adversely affect our business, financial condition, and results of operations.
●
Our international operations subject us to increased challenges and risks.
●
Our evaluation of strategic alternatives could complicate operations, or could result in other harmful consequences that may adversely
impact our business and results of operations.
●
Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our business.
●
We are dependent upon third-party service providers in our operations and may be adversely affected if any of their platforms malfunction.
Risks Relating to Legal and Regulatory Matters
●
The regulatory landscape in which we and our clients operate is constantly evolving and subject to significant change.
●
Our use of email marketing is subject to laws and rules in each of the jurisdictions in which we operate.
●
The outcome of litigation, inquiries, investigations, examinations, or other legal proceedings in which we are or may become involved, or in
which our clients or competitors are involved, could distract management, increase our expenses, or subject us to significant monetary
damages or restrictions on our ability to do business.
●
Our business and the businesses of our advertiser clients may be subject to sales and use taxes and other taxes.
Risks Relating to Data Security and Intellectual Property
●
Our actual or perceived failure to safeguard any personal information or user privacy could damage our reputation and results of operations.
●
If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
●
As a creator and a distributor of digital media content, we face liability and expenses for legal claims based on the nature and content of the
materials that we create or distribute, including materials provided by third parties.
●
Laws and regulations regarding privacy, data protection, and the handling of personal information are complex and continuously evolving,
and could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Financial Matters
●
We may require additional capital in the future to pursue our business objectives and respond to business opportunities, challenges, or
unforeseen circumstances, and such capital may not be available to us on acceptable terms, or at all.
●
We have written down all of our goodwill from our prior acquisitions and could experience significant charges to our intangible assets, which
may affect our results of operations in the future.
Risks Related to Our Common Stock and the Securities Markets
●
We are currently listed on The Nasdaq Capital Market (“Nasdaq”). If we are unable to maintain listing of our securities on Nasdaq or any
stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be
impaired and it may be more difficult for our stockholders to sell their securities.
●
Our stock price has been and may be volatile in the future, and as a result, investors in our securities could incur substantial losses.
●
The concentration of our stock ownership presents risks, including lack of liquidity in the trading market for our common stock and
limitations on any individual stockholder's ability to influence corporate matters.
●
Future issuances of shares of our common stock could have a dilutive effect on your investment in us.
●
We do not intend to pay cash dividends for the foreseeable future.
●
We are a smaller reporting company and a non-accelerated filer, and we benefit from certain reduced governance and disclosure
requirements, but we cannot be certain if the reduced disclosure requirements make our common stock less attractive to investors.
Table of Contents
PART I
Item 1. Business.
This business description should be read in conjunction with our audited consolidated financial statements and accompanying notes thereto appearing
elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"), which are incorporated herein by this
reference.
Company Overview
Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged
consumers. Leveraging diverse ad inventory, robust first-party data, and proprietary machine learning, Fluent unlocks additional revenue streams for
partners and empowers advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating
highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), and our owned and operated digital
media properties ("O&O Sites"). Since the beginning of 2024, we have delivered data and performance-based customer acquisition services for over 500
consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products &
Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
We operate our Commerce Media Solutions on partner sites and mobile apps where we embed our proprietary ad-serving technology to identify and
acquire consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and
improve conversion. For example, our post-transaction solution connects our advertisers to consumers on e-commerce websites and apps after a purchase
or similar transaction. These syndicated Commerce Media Solutions generate meaningful income for our media partners, while driving high-quality
customer acquisition for our advertiser clients. We sign agreements with our media partners with one to five year terms, typically remunerating them on a
revenue share and/or impression basis.
We also attract consumers at scale to our O&O Sites primarily through promotional offerings, through which consumers are rewarded for completing
activities on our sites. When registering on our sites, consumers provide their name, contact information, and opt-in permission for telemarketing and email
marketing. Approximately 90% of these users engage with our media on their mobile devices or tablets.
Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and
other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters. Based on these insights, we
serve users targeted, relevant offers on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the
enrichment of our database expands our addressable advertiser client base and improves the effectiveness of our performance-based campaigns.
Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our
users' consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging. We then
leverage their self-declared data in our array of performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to
users based on the information they provide when they engage on our O&O Sites or other partner sites through our commerce media marketplace and (2) to
provide our clients with users' contact information so that such clients may communicate with them directly. We may also leverage our existing technology
and database to drive new revenue streams, including utilization-based models (e.g., programmatic advertising).
Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help
clients increase engagement. In some cases, we have sold products and services directly on behalf of our clients. The Call Solutions business serves clients
across an array of industries but has had a heavy focus on the health insurance sector.
We generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our
ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the
money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paid on a negotiated or market-
driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. For our O&O Sites and Call
Solutions business, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls,
app downloads, or customers for our clients. Our Commerce Media Solutions business does not bear media inventory risk.
Through AdParlor, LLC ("AdParlor"), our wholly-owned subsidiary, we conduct our non-core business which offers advertiser clients a managed service
for creator marketing and media buying on different social platforms.
Market Opportunity
According to eMarketer reports, digital ad spending in the US is expected to grow 12.5% to $347.8 billion in 2025, and will reach $460.5 billion by 2028,
surpassing $1 trillion globally. The landscape is undergoing a major shift with the rise of commerce media, which leverages e-commerce transactions and
first-party customer data to enable smarter ad placements across retailers' e-commerce platforms and broader retail media networks ("RMNs"). Through
commerce media, retailers can deliver a unified, data-driven approach to advertising that spans on-site, off-site, and in-store touchpoints.
According to McKinsey & Company (“McKinsey”), commerce media is expected to generate more than $1.3 trillion in enterprise value in the U.S. by
2026, with over $100 billion in advertising spend on RMNs alone. By 2027, PubMatic expects global commerce media advertising spend to reach $220
billion, representing more than 20% of global advertising revenues.
The industry is undergoing further transformations as publishers increasingly invest in proprietary media networks (i.e., a collection of digital channels
owned by a retail company), foster direct engagements with brands, and emphasize the value of their first-party data. This shift is particularly noteworthy
considering growing concerns about data privacy. As the use of cookies continues to become more limited, marketers and businesses must realign their
operations with this evolving landscape.
1
Table of Contents
Commerce media meets advertiser demand for a scalable, measurable, and brand-safe channel to connect with engaged consumers. It also offers an
opportunity for non-endemic brands (i.e. those that do not sell their products through a retailer’s platform) to tap into a retailer’s first-party data to reach
highly targeted audiences at the top or middle of the purchase funnel. According to eMarketer, 53% of US brands have taken advantage of data or a retail
media network offering at a retailer where they are not an endemic brand, highlighting growing interest from non-retail advertisers to maximize the
potential of this channel.
Key Challenges Facing our Clients
In today’s rapidly evolving digital landscape, advertisers face mounting challenges in proving return on investment ("ROI"), adapting to artificial
intelligence ("AI") advancements, and keeping pace with shifting consumer behaviors — all while navigating economic uncertainty. According to
McKinsey, with global digital ad spending continuing to climb, brands must contend with increasingly fragmented customer journeys that complicate
attribution, while rising ad costs and privacy restrictions limit data-driven insights. At the same time, according to PwC, AI-driven automation is reshaping
media strategies, requiring constant adaptation to stay competitive. According to Deloitte, as consumer expectations evolve, brands must strike a delicate
balance—delivering highly personalized, yet privacy-conscious experiences that align with shifting media consumption habits.
ROI & Attribution – Proving ad effectiveness is harder than ever with fragmented customer journeys and privacy restrictions limiting data
tracking. According to eMarketer, 45% of marketing professionals worldwide say the decline in the ability to measure campaign effectiveness on tech
platforms and the open web is their largest area of concern for media and marketing initiatives.
Keeping Up with AI & Technology – Rapid advancements in AI-driven automation and analytics require constant adaptation to stay
competitive. According to an October 2024 eMarketer survey, attribution and measurement (47%) and AI technologies (29%) are the two leading
investment priorities for US brand and agency marketers in 2025. To keep up with the evolution, marketers are leveraging AI to enhance campaign
optimizations (43%), audience targeting (41%), and data analysis (30%).
Economic Uncertainty – Rising ad costs and shifting budgets force advertisers to maximize efficiency while balancing short-term and long-term goals. For
several years, growth in the retail industry has been stagnant (with a compound annual growth rate of 1.5% to 3.5%, depending on the sector), and margins
have been squeezed by competition and consumer demands for convenient omnichannel experiences. According to Deloitte's Industry Outlook, digital
adoption costs are creating an urgency for innovative ways to address efficiency, build partnerships, and develop alternative revenue streams to compete in
the immediate future.
Evolving Consumer Behavior – Users demand personalized yet non-intrusive ads, while shifting media habits require brands to rethink engagement
strategies. According to McKinsey, 71% of consumers expect companies to deliver personalized interactions, and 76% get frustrated when this does not
happen. This needs to be balanced with changing consumption of media and privacy awareness due to continued data privacy concerns.
Our Offerings and Solutions to Clients
We primarily provide performance marketing solutions to our clients based on their desired outcomes, or specific actions in their marketing funnels,
including a completed transaction, the submission of a registration form, or an app installation. Our commerce media platform is integrated into dozens of
top retailers and digital media sites, including Bath & Body Works, Fanatics, Belk, Vivid Seats, Life360 and PCH. We believe our solutions are well-
aligned with the needs and objectives of our clients, notably due to our ability to provide them with ROAS, scalability, and flexibility within our O&O Sites
and Commerce Media Solutions. By using the consumer data in our proprietary first-party database, our advertiser clients are able to reach the precise
audiences they are targeting through the modes of contact these consumers prefer and at the times they are most receptive to being contacted.
• Performance Campaigns
For clients who seek the completion of certain actions by consumers, such as a trial subscription of a good or service, the submission of a
registration form, or the installation of a mobile app, we provide performance campaigns that meet the criteria specified by the client.
We bear the cost of paying some media partners in our commerce media platform and media sources to generate consumer traffic to our owned and
operated digital media properties, without the assurance of a subsequent revenue-generating event from such activity. By leveraging the scale of our
media network and expertise in acquiring consumer traffic, we work with our clients to define billable events and pricing tolerances that meet both
our and our clients' profitability objectives.
• Consumer Data
Through our O&O Sites, we generate revenue by providing clients with qualifying data of consumers who have opted to be marketed to directly via
means such as direct mail, email, telephone, messaging, and other channels. Our clients then use this customer data to conduct their own marketing
campaigns.
The data records we provide contain varying depths of user profiles depending on what consumers self-declare to us, ranging from basic contact
information to detailed preferences and behaviors. Because consumers directly provide us with their information, we believe the scale and depth of
information captured on our websites and reflected in our data profiles is a competitive advantage within the industry. Many other providers of
consumer data offer data or information that is inferred from a consumer’s behavior but not directly observed or provided by a consumer. We believe
our first-party data is more reliable and reflective of consumers' current interests and preferences.
• Programmatic Data Offerings
Since 2018, we have been offering modeled data sets pertaining to certain audience segments in programmatic environments, thereby enabling
advertisers, such as those in the healthcare industry, to leverage the modeled data in an anonymized, privacy-minded manner to target high-intent
prospects for their offerings. The programmatic data offering has grown considerably since its inception. Although representing a small percentage
of our overall revenue, we believe it represents a strategically significant and incremental revenue stream.
2
Table of Contents
• Call Solutions Marketplace
Through our Call Solutions service, we maintain a call center operation and a marketplace for call-ready data records, which serves as a marketplace
to connect consumers we have sourced with our advertising clients. We offer clients a high-value source of live call transfers of phone verified
prospective customers for their businesses or in some cases direct sales transactions. Through this capability, we provide a positive and high-quality
consumer experience enabling us to capture greater value from the leads we initially source.
•
Social Media Campaigns
Through AdParlor, we conduct our non-core business which offers advertiser clients a managed service for creator marketing and media buying on
different social platforms.
Our Competitive Strengths
We believe our competitive strengths will continue to enable us to provide a compelling value proposition to our clients and drive differentiation of our
offerings in the marketplace.
•Proprietary and Innovative Technology Platform - Our internally developed technology platforms are unique in the industry, having been purpose-built
for performance marketing and developed with a mobile-first user experience in mind. Our platforms use our robust consumer data and proprietary
machine-learning capabilities to optimize the performance of our digital marketing campaigns for our advertisers.
•Database of First-Party Consumer Information - We attract hundreds of thousands of consumers to our O&O Sites on a daily basis and collect
demographic, behavioral and other data as they engage with our direct marketing experiences. This data is generated in real-time, as consumers
respond to dynamically populated survey questions, thereby enabling targeted ads to be served in response. This consumer data is also stored and
analyzed and can be further enhanced as consumers return to our sites and declare and exhibit preferences and behaviors through additional surveying,
allowing for the development of deeper insights and additional monetization opportunities. For example, this enhanced data is used by our Commerce
Media platform to optimize ad serving when a Commerce Media consumer is in our database.
• Scale and Experience in Purchasing Media and Creating Content - Our ability to effectively access, at scale, channels and sources of media that
supply consumer traffic and build meaningful experiences and relationships with those consumers has been critical to our growth. Since our inception,
we have deployed more than $2 billion in media spend to our O&O Sites and those of our clients. Our team has gained significant knowledge and
experience in creating content that allows us to generate higher levels of profitability from given media sources, thereby enabling us to acquire media
more competitively than others. This capability allows us to run thousands of campaigns simultaneously and cost-effectively for our clients, at
acceptable media costs and margins to us.
Our Growth Strategy
We believe that the performance marketing industry has significant opportunities for growth. Elements of our strategy include:
• Expanding our Network through Development of Commerce Media Solutions. Our commerce media platform utilizes our existing technology to
extend our ad network for our clients. Commerce Media Solutions affords our advertiser clients exposure to a pool of users with strong buying power
who, having just completed a transaction, are in "purchase mode". We deploy our 'ad modals', which are overlay ad units delivered
electronically primarily on the transaction confirmation page of the e-commerce and digital media websites that display a series of curated offers to
consumers. We compensate our media partners by either sharing revenue proceeds or by remunerating them on an impression basis. Commerce Media
Solutions has been operating since the first quarter of 2023, with year-over-year growth in every quarter in 2024. We intend to continue to invest into
the growth of this network in 2025 and beyond.
• Increasing Monetization of Our Media Network. By presenting consumers with a broad array of offers curated to their preferences, as informed by
their responses to our surveys and our platform’s ad serving logic, we seek to facilitate transactions that are beneficial for the advertiser, the consumer,
and our media partners. As we continue to improve consumer engagement on our platforms, we will continue to strengthen our relationships with
existing advertisers and build relationships with new advertisers. We continuously seek to enhance our product offerings for consumers and targeting
capabilities for advertisers to ensure we are optimizing the value of our network.
• Higher Quality Traffic to Our O&O Sites. As our business has grown, we have attracted larger and more sophisticated clients to our platform. To
further increase our value proposition to clients and to fortify our leadership position in relation to the evolving regulatory landscape of our industry,
we implemented a Traffic Quality Initiative ("TQI") in 2020 to remove lower quality consumer traffic, including traffic that did not consistently meet
regulatory standards from our marketplaces. By improving the quality of consumer traffic sourced to our media properties, we have increased user
participation and conversion rates, ultimately, increased revenue from more "name brand" advertiser clients and created a more sustainable foundation
for our business.
In an effort to source more high-quality traffic, we have also built out an influencer marketing platform. This platform allows us to diversify our
current media buys on social media platforms and capture available scale in the influencer market. According to eMarketer, marketing spend in the
sector is rising quickly year-over-year. It is expected that influencer marketing spending in the US will reach $9.3 billion in 2025, up 14.2% year-over-
year, outpacing both digital and social’s ad spend growth in the US. By operating our own influencer marketing platform, we can ensure compliant
operations, effectively manage our media spend by eliminating middlemen, and offer our clients direct access to our network of influencers.
• Developing and Enhancing Products to Increase the Quality of Our Solutions. Our product development efforts are intended to attract consumers,
increase monetization and increase media partner opportunities. For example, our product development team is currently focused on designing new
consumer-facing creative concepts, enhancing site experiences, developing mobile app products to expand our media footprint beyond our mobile web
presence, and improving the reputation of our domains.
In connection to our Commerce Media solutions, we are working with a third-party data provider to make significant enhancements to our proprietary
identity graph. Additionally, we are upgrading our ranking and bidding system to more accurately predict conversion, supported by a more efficient
and dynamic system backed by machine learning.
3
Table of Contents
Sales and Marketing
We generate new client and media partner sales primarily through our in-house sales team. We service established clients and partners through our in-house
account directors and managers, who seek to optimize results for and expand our business with these clients and partners.
Our Competition
Our competitors to the owned and operated business have been digital marketing and database marketing services providers, online and traditional media
companies, and advertising agencies. Within commerce media, we compete against an array of ad technology companies that provide non-endemic
advertising offerings. Specifically, we compete against one private US company for post transaction e-commerce inventory. Some of our competitors have
substantially greater financial, technical, sales and marketing resources, better name recognition and a larger customer base than us. While we believe the
competitive landscape is changing and becoming more complex, we believe our data and our ad serving and customer acquisition technologies enable our
clients to better target, engage, qualify, and communicate with relevant consumers, in a more measurable and profitable manner than our competitors.
Client Concentration
We have an extensive list of clients across a wide range of industries. For the year ended December 31, 2024, there was no individual advertiser client of
the Company that accounted for more than 10% of the consolidated revenue or net accounts receivable. For the year ended December 31, 2023, a single
long-standing advertiser client of the Company accounted for 18.1% of consolidated revenue.
Intellectual Property
We rely on trade secrets, trademark and copyright law, confidentiality agreements, and technical measures to protect our intellectual property rights. We
maintain a portfolio of perpetual common law and federally registered trademark rights across several brands and domains relating to our business units,
products, services, and solutions. We claim copyright protection in our original content that is published on our websites and included in our
marketing materials.
Regulatory Matters
Our business is subject to a significant number of federal, state, local and international laws, rules, and regulations applicable to online or digital
advertising, commercial email marketing, telemarketing, and text messaging. We are also subject to laws, rules, and regulations regarding data collection,
privacy and data security, intellectual property ownership and infringement, and promotions and taxation, among others. Some of our clients operate in
regulated industries, such as financial services, credit repair, gambling, consumer and mortgage lending, secondary education, healthcare and medical
services, and health insurance including Medicare Advantage and related Medicare insurance plans (collectively, "Health Plans") and Affordable Care Act
("ACA") plans. To the extent applicable, we must comply with the laws, rules, and regulations applicable to marketing activities in those industries.
Outside of the United States, we own and operate consumer facing websites in the United Kingdom (the "UK"), Canada, and Australia and are subject to
the laws, rules, and regulations of those countries as they impact our operations.
These laws, rules, and regulations are generally designed to regulate and prevent deceptive practices in advertising, online marketing, and telemarketing,
protect individual privacy rights and prevent the misuse and unauthorized disclosure of personal information. They are complex, change frequently and
have tended to become more stringent over time. This trend may have begun to reverse with the change in presidential administration. Recently, for
example, the Federal Communications Commission ("FCC") proposed more stringent rules (the "Proposed FCC Rules") on obtaining prior express written
consent for purposes of the Telephone Consumer Protection Act ("TCPA"). The Proposed FCC Rules would have limited the use of a user’s consent to only
one seller ("one-to-one consent"). The Proposed FCC Rules were set to take effect on January 25, 2025, but the FCC delayed their implementation until at
least January 26, 2026. In addition, recently appointed chairpersons and senior staff of the Federal Trade Commission ("FTC") and the FCC seem to have
been taking a more pro-business approach to some of the more stringent rules affecting our business. In contrast, the marketing rules applicable to Health
Plans promulgated by the Centers for Medicare & Medicaid Services ("CMS Rules"), which also contained the one-to-one consent rule included in of the
Proposed FCC Rules, have yet to be changed so there are two sets of telemarketing consent rules: one applicable to Health Plans and another applicable to
marketing non-Health Plans.
We were involved in investigations with federal and state regulators over our practices including the FTC and the Pennsylvania Office of the Attorney
General ("PAAG"). These investigations and claims have all been settled as of December 31, 2023. As part of the FTC settlement, we have made and
continue to make additional changes to our business practices that have adversely affected our results of operations for the years ended December 31, 2024
and 2023. See Item 1A. Risk Factors - Risks Relating to Legal and Regulatory Matters and Item 3. Legal Proceedings for further discussion of the impacts
of these proceedings and various laws, rules, and regulations on our business.
4
Table of Contents
Human Capital
Fluent is dedicated to certain core principles and values which include continuous learning, efficiency, collaboration, and high performance. Fluent is
committed to providing our employees with opportunities to grow and develop in their careers, supported by competitive compensation and comprehensive
medical and wellness benefits. We embrace challenges and welcome opportunities to make improvements in our corporate culture and employee benefits.
We are proud to have been the recipients of many awards for our corporate culture including regularly being listed on Crain’s Best Places to Work.
As of December 31, 2024, we had 210 employees, of which 208 were full-time employees. This represents a decrease of 24% over the number of
employees as of December 31, 2023. None of our employees are represented by a labor organization, and none are party to any collective bargaining
agreement with us. We have not experienced any work stoppages and strive to maintain a positive relationship with our team. In 2020, we transitioned to a
work-from-home model, and we continue to operate under a hybrid strategy based around flexibility and collaboration.
Competition in the recruitment of top talent within our industry remains constant and our future success will depend in part on our continued ability to hire,
motivate, and retain exceptional colleagues across the business. As the business evolves, we continue to source talent to complement the existing team with
different strengths, experience, and ideas. See Item 1A. Risk Factors –— "Our failure to recruit or the loss of management and highly trained and qualified
personnel could adversely affect our business." for further information about the risks of our hybrid work model.
Investing in our People
As a performance-based organization, Fluent offers competitive salaries and bonus/commission plans to both attract, reward, and retain our employees. We
match up to 4% of employees’ contributions in their 401(k) to help our employees plan for their futures. We also prioritize the health and well-being of our
employees, offering multiple health insurance plan options, and various mental health resources. To ensure our people take time to recharge, we offer
discretionary time off that provides vacation days throughout the year in addition to our 13 paid company holidays. Our goal is to create a flexible work
environment that fuels creativity and results.
We encourage curiosity and provide our people with the tools and resources to learn and grow. From internal Fluent University courses to company-wide
workshops and memberships to corporate networking organizations, such as She Runs It, we offer continuous opportunities for personal and professional
development. In 2024, we created approximately 1,000 hours of learning for our employees through these courses. Additionally, over the past few years,
we have worked to support internal mobility for those who have excelled in their roles and are looking to gain new experience in other areas of the business
that align with their individual career goals. We reward positive performance and celebrate our employees for their persistent drive to succeed.
We are constantly striving to make Fluent a more inclusive and compassionate place to work. We make a concerted effort to post roles and source top
candidates to present a diverse candidate slate for our hiring teams, and our dedicated Diversity, Equity, & Inclusion ("DEI") team is designed to create
opportunities for connection, education, and service. Fluent continues to invest in our colleagues by providing DEI trainings and creating opportunities to
connect to discuss current events. In 2024, we held our third year of the mentorship program with healthy participation and are planning to continue this
program in 2025. We are proud to foster a learning and coaching culture to support the development and growth for all of our employees.
Available Information
Fluent’s principal executive offices are located at 300 Vesey Street, 9th Floor, New York, New York 10282, and our telephone number is (646) 669-7272.
Our internet website is www.fluentco.com. The website address provided in this 2024 Form 10-K is not intended to function as a hyperlink and information
obtained on the website is not and should not be considered part of this 2024 Form 10-K and is not incorporated by reference in this 2024 Form 10-K or
any filing with SEC. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed
or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor
Relations website at investors.fluentco.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our
periodic reports are filed or furnished electronically with the SEC under SEC File Number 001-37893 and can be accessed at the SEC’s website at
www.sec.gov, and specifically at www.sec.gov/edgar/browse/?CIK=1460329.
5
Table of Contents
Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information in this
Annual Report on Form 10-K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the
following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur,
our business, financial condition and results of operations could be materially adversely affected. In such case, the value and trading price of our common
stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Business
Risks Related to Our Financial Position
There is substantial doubt about our ability to continue as a going concern.
We have experienced a continued decline in the number of users who register on our O&O Sites starting in 2020 when we initiated the traffic quality
initiative ("TQI") which eliminated a large portion of our third-party affiliate traffic. In 2023, the FTC Consent Order (as defined herein) imposed more
rigorous standards and vetting of our third-party publishers, many of whom elected not to work with us, which also negatively impacted the registration
volume on our O&O Sites. These issues, coupled with intermittent difficulties sourcing traffic from social media sites have resulted in declining revenue
and profitability.
As of
December 31, 2024, we were not in compliance with our financial covenants under the SLR Credit Agreement (as defined below), which we had to
report by January 31, 2025, and which would have resulted in an event of default. However, we entered into two letter agreements pursuant to which SLR
extended the deadline for delivery of the compliance certificate required for the fiscal month ended
December 31, 2024, and the related notice of event of
default to March 10, 2025.
On March 10, 2025, we entered into the Fourth Amendment to the SLR Credit Agreement (as defined below), which required us to raise at least
$5.0 million of additional capital, net, by March 20, 2025. In addition, the Fourth Amendment waived non-compliance with the financial covenants as of
December 31, 2024, extended the duration of the call protection applicable to the loans, and modified the financial covenants, among other things. On
March 20, 2025, we raised $5.0 million in aggregate net proceeds from the sale of pre-funded warrants, satisfying the capital raising conditions of the
Fourth Amendment. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital
Resources – Sales of securities.
The financial covenants under the SLR Credit Agreement (as defined below) were reset based on our twelve month projections. However, we have not met
our projections for certain recent quarters and are currently trending below our 2025 first quarter projections. If during any fiscal quarter, we do not comply
with any of our financial covenants, such non-compliance would result in an event of default that would give SLR (as defined below) the right to accelerate
maturities. In such case, we would not have sufficient funds to repay the SLR Term Loan (as defined below) under the SLR Credit Agreement and any
outstanding balance on the SLR Revolver (as defined below). Furthermore, even with the additional capital raise completed in March 2025, there
is no assurance that the available cash, plus borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months and we
expect to raise additional capital. We will consider implementing cost-saving measures, but there is no guarantee that such plans would be successfully
executed or have the expected benefits. Based upon the foregoing, management concluded that there exists a substantial doubt about our ability to continue
as a going concern, and our independent registered public accounting firm included in its opinion for the year ended
December 31, 2024 an explanatory
paragraph expressing substantial doubt in our ability to continue as a going concern. Our financial statements as of
December 31, 2024 did not include any
adjustments that might result from the outcome of this uncertainty.
If our current plans are not successful, we may need to consider other strategic alternatives, including restructuring or refinancing our debt, seeking
additional equity or debt financing, reducing or delaying our business activities and strategic initiatives, selling assets, and other strategic transactions
and/or other measures. We have relied upon financing provided by our officers, directors and largest stockholders, and such holders may be unwilling or
unable to continue providing financing should additional financing be required. Other financing sources may be unwilling to provide such funding to us on
commercially reasonable terms, or at all. If we seek additional financing to fund our operations and there remains substantial doubt about our ability to
continue as a going concern, we may find it especially difficult to raise funds on commercially reasonable terms, or at all. Furthermore, the perception that
we may not be able to continue as a going concern may cause publishers, vendors, advertisers and other clients (current and potential) to review their
business relationships and terms with us. The reaction of investors to the inclusion of a going concern statement in the accompanying financial statement,
and our potential inability to continue as a going concern, could materially adversely affect our share price, which could negatively impact our ability to
obtain stock-based financing or enter into strategic transactions.
Covenants in our SLR Credit Agreement impose restrictions that may limit our operating and financial flexibility.
On April 2, 2024 Fluent, LLC, as Borrower, entered into a credit agreement (as amended, the "SLR Credit Agreement") with the Company and certain
subsidiaries of the Borrower as guarantors, Crystal Financial LLC D/B/A SLR Credit Solutions, as administrative agent, lead arranger and
bookrunner ("SLR"), and the lenders from time to time party thereto. The SLR Credit Agreement provides for a $20.0 million term loan (the "SLR Term
Loan") and a revolving credit facility of up to $30.0 million (the "SLR Revolver" and, together with the SLR Term Loan, the "SLR Credit Facility"). For
further information on the SLR Credit Agreement, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Liquidity and Capital Resources – SLR Credit Agreement.
The SLR Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including, but not limited
to, limitations on the amount of additional debt we are able to incur and our ability to make certain investments or to pay dividends or other restricted
payments. The SLR Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to grace
periods, among others, payment default, covenant default and judgment default. These covenants limit our operating and financial flexibility, and to the
extent we are not able to comply with them, SLR can declare an event of default and that would give SLR the right to accelerate maturities. In such case,
we would not have sufficient funds to repay the $20 million term loan under the SLR Credit Agreement and the additional amount on the SLR Revolver,
and SLR could foreclose on all of the assets securing the SLR Credit Facility, which in turn could lead to our inability to able to continue as a going
concern and a total loss of investment for holders of our common stock. See also risk factor "There is substantial doubt about our ability to continue as a
going concern" above.
6
Table of Contents
Risks Related to Our Industry
We operate in a competitive, rapidly changing industry, which makes it difficult to evaluate our business and prospects.
We derive substantially all of our revenue from digital marketing services, which is an intensely competitive industry characterized by rapidly evolving
industry standards, user and client demands, laws and regulations, and technology.
We compete for advertiser clients against other digital marketing companies and online and traditional media companies based on many factors, including
ROAS, price, and client service. Our clients may curtail their advertising spend with us or stop using our services altogether if we fail to meet their
expectations in terms of their ROAS or the quality and convertibility of leads we provide or otherwise fail to compete effectively against other online
marketing and advertising companies. Conversion rates for leads can be impacted by factors outside our control, such as competition in our clients'
industries and our clients' sales practices. Lower conversion rates could be even more likely as we expand our services and relationships with our clients by
moving our conversion point further "down the funnel," closer to where our clients are able to monetize the users we provide. To the extent we cannot meet
the challenges from existing or new competitors or develop new product offerings to meet client preferences or needs, our revenues and profitability could
be materially and adversely affected.
Recent changes to the regulatory landscape have resulted in substantial changes and thus subjected our industry to added uncertainty. Our future success
depends on our ability to effectively respond to the constant changes in our industry and our ability to develop new products and strategies to navigate the
changing regulatory landscape so we can remain competitive. See risk factor "The regulatory landscape in which we and our clients operate is constantly
evolving and subject to significant change" within Risks Relating to Legal and Regulatory Matters for additional information.
In response to declining results of our owned and operated business, we launched Commerce Media Solutions in the first quarter of 2023. While Commerce
Media Solutions has already become an important part of our future strategy, this is a relatively new business for Fluent. There are many established
dominant players in commerce media and entry into the commerce media business has its own challenges and risks as further discussed below.
We have also invested in developing new products, markets, and services to enable us to upgrade our systems. However, based on our experience, new
websites, systems, products, and services may be less predictable and have lower margins than more established websites, products and services and may
be more prone to technological instability or failure. If we are unsuccessful in enhancing and upgrading our websites, products, services, and back-end
systems, we may fail to maintain our profitability, attract new clients, or grow our revenue, or we may suffer service disruptions.
Additionally, we have begun introducing some new technologies, including AI and machine learning. We have also transitioned to cloud-based technology
and migrated our database to a new environment. These new technologies may contain design or performance defects that are not readily apparent. If the
new proprietary technologies we implement fail to achieve their intended purpose or are less effective than technologies used by our competitors, our
business could be harmed.
A material percentage of our consolidated revenue is derived from gaming (apps) advertisers, so we are exposed to risks associated with the gaming
industry in general.
Approximately 35% and 38% of our consolidated revenue was derived from gaming advertisers in 2024 and 2023, respectively. This revenue derives from
app installations and app-related user actions. The stability and potential growth of this client base depends in part on the state of the app-based gaming
industry, which is subject to numerous risks including:
●
the relative availability and popularity of other gaming apps and forms of entertainment compared to those offered by our advertisers;
●
changes in consumer demographics, tastes, spending habits, and preferences;
●
social perceptions of gaming, especially those related to the impact of gaming on health and social development; and
●
the introduction of legislation or other regulatory restrictions on gaming, such as restrictions addressing violence in video games and
addiction to video games.
7
Table of Contents
One of our gaming advertiser clients, which accounted for 7.1% of consolidated revenue in 2024, experienced a steep decline from 18.1% of consolidated
revenue in 2023. There is no expectation that we will be able to regain the pricing and performance levels that we had with this client prior to this shift but
if the pricing and performance across all of our gaming clients were to degrade, our results of operations may be adversely affected.
Unfavorable publicity and negative public perception about our industry or us may damage our reputation, which could harm our business, financial
condition, and results of operations.
With the growth of online advertising and e-commerce, there is increasing awareness and concern regarding online marketing, advertising, and
telecommunications, particularly as they relate to individual privacy interests. Our ability to attract potential users, and thereby clients, depends in part on
users trusting us enough to provide self-declared registration data and other personal information. If we fail to maintain the quality and user acceptance and
expectations of our O&O Sites and Commerce Media Solutions, our reputation could be harmed, damaging our ability to attract and retain users, media
partners, and advertiser clients, which could adversely affect our business, financial condition, and results of operations.
An increasing regulatory burden relating to data privacy may lead to general distrust of our industry, consumer reluctance to share and permit use of
personal data and increased consumer opt-out rates, any of which could negatively influence, change, or reduce our current and prospective clients' demand
for our products and services. There can be no assurance that we will be able to maintain or enhance our reputation, and failure to do so would harm our
business growth prospects and operating results.
A sudden reduction in online marketing spend by our clients, a loss of clients or lower advertising yields may seriously harm our business.
Because the majority of our advertiser clients can unilaterally terminate their agreements with us, pause their campaigns, demand changes to the campaign
pricing or terms or materially reduce the amount of business they conduct with us at any time, with little or no prior notice, there is no guarantee that we
will be able to retain or renew existing agreements with any of our advertisers on acceptable terms, or at all.
Additionally, because of the performance-based nature of many of our agreements with our owned and operated media partners, our O&O Sites bear the
costs of purchasing media without the assurance of advertising spend by any particular advertiser client. To be profitable, we must be able to generate more
revenue from our users than our costs to acquire such users. Our ability to do so is dependent on many factors, including having the right media sources to
drive users who engage with our O&O Sites and providing content and experiences that retain users' attention.
Conversely, although the majority of our commerce media business operates on a revenue share basis, some media partners have guaranteed minimum
arrangements. There are several factors that determine the performance of a deployment of our commerce media solution that include the e-commerce site
owners we partner with, the placement of our solution on their post-transaction confirmation page and their users’ receptivity to the offers we select to
deploy. If we are unable to achieve the optimal mix of these and other factors, we may not be able to generate sufficient revenue to achieve profitability
from our Commerce Media Solutions business.
Our results are also subject to fluctuation from seasonality and cyclicality in ours and our clients' businesses. For example, most of our Commerce Media
Solutions media partners operate e-commerce websites that experience the heaviest consumer traffic during the fourth quarter holiday season. Our Call
Solutions business experiences greater demand for Health Plans during open enrollment periods ("OEPs"), which are typically during the first and fourth
quarters, when the costs to acquire media are higher. We can provide no assurance that our Call Solutions business will be able to buy media effectively
during the Health Plan OEPs, which would adversely affect our operations for Call Solutions.
We are exposed to credit risk from our clients, and we may not be able to collect on amounts owed to us.
We regularly extend payment terms to our clients, which exposes us to risk of bad debt. Some of our clients are thinly capitalized and pose credit risks, and
some of our clients may challenge the determination of amounts we believe they owe or may refuse to pay because of performance-related or other claims.
In these circumstances, we may have difficulty collecting on amounts we believe are owed to us. Many of our advertising agency and broker clients are not
required to pay us unless and until they are paid by the underlying client. We are particularly exposed in certain verticals where there is a risk of tightening
regulations or restrictions on sourcing consumer traffic. For example, if new regulations affect our clients such that their businesses are no longer viable,
our clients may become insolvent or otherwise unable to pay amounts owed to us. In such circumstances, we may be exposed to risks of significant bad
debt, which could have a material adverse effect on our results of operations.
8
Table of Contents
Risks Related to Commerce Media Solutions Business
We are a relatively new entrant to the post-transaction commerce media business, which is currently dominated by a major player.
We have been in the commerce media business for about two and a half years and have developed our own proprietary ad serving technology. We have
invested substantial financial and human capital into this business and plan to continue to do so, but there may be technological, implementation, and
acceptance challenges on both our part and the part of prospective media partners. While we have gained a foothold in the U.S. and are starting to expand
internationally, this space is highly competitive, with new entrants entering the field and existing e-commerce site owners building their own commerce
media solutions. Rokt, the established player in the post-transaction sector of the industry, has been in the commerce media business for over a decade and
has a large market share both in the U.S. and internationally, particularly with respect to its e-commerce post-transaction solution (Rokt places their ad unit
on the page that is displayed after the user completes their purchase). As we expand our service offerings, we expect there to be challenges to our continued
growth and profitability as new services tend to be less reliable and less profitable initially.
While we plan to use our technology and experience as a long-term player in the digital marketing space and leverage our stable of world-class advertisers
and our established database of unique users to grow our commerce media business, there can be no assurance that we will be able to effectively compete
with our competitors and continue to grow our business profitably. We may find it difficult to compete with companies with greater resources, more
developed technology and those with a built-in stable of e-commerce media partners on which to deploy their solutions.
We will need to continue to invest in technology for our Commerce Media Solutions business.
The performance of Commerce Media Solutions is typically measured on a revenue per session or on an impression basis, both of which are dependent on
access to user information and the performance of our ad serving technology. We have invested in developing our solutions and plan to continue to invest in
our technology to maintain and grow our business. We use a combination of internal and third parties to do this and will need sufficient capital and
resources to develop the capabilities, reliability, and enhancements the market demands to remain competitive.
We attract hundreds of thousands of consumers to our O&O Sites on a daily basis and have over 8 billion pieces of user information, which we believe
differentiates us from our competitors. This database, coupled with user information from our media partners and third-party data sources, enables us to
provide robust user profiles to our AI-enabled technology to enhance our solutions’ performance. However, there are other factors, some of which are
outside of our control, that can impact performance, such as the types and preferences of users of our media partners, how and when they interact with our
solution, how quickly our solution is displayed, and how to display the right mix of offers to users. There can be no assurance that we will have the
resources and be able to invest sufficient capital to continue developing and improving our technology to meet our partners' or advertiser clients' demand
or keep pace with our competitors.
Given that we will need to rely on internal and external developers to continue to develop our technology, we will need to have sufficient cash resources to
fund our continued investment in technology at desired levels. Many of our competitors have greater resources and may be part of larger organizations
through which they could deploy their solutions across affiliated media properties. There can be no assurance that we will have the resources to be able to
invest sufficient capital to continue to further develop and improve our technology to keep pace with our competitors. Should we fail to do so, our
competitive position could suffer and our results of operation could be adversely affected.
9
Table of Contents
Risks Related to Our Owned and Operated Media Properties
We are at a competitive disadvantage to other rewards sites because we are more selective in our traffic sources.
Our O&O Sites have experienced declining user traffic over the last five years. We believe this decline is primarily attributable to our TQI, launched in
2020, which led to the removal of a substantial number of our affiliate traffic sources which we had identified as having unacceptably low quality levels or
a higher incidence of fraud or bot traffic. In addition, the FTC Consent Order (as defined herein) necessitated a heightened level of vigilance in monitoring
our publishers, many of whom opted to discontinue their partnership with us and also reduced registrations.
This decline in traffic volume has negatively impacted our owned and operated business, while other reward site operators with more lenient standards
have seen increased traffic, often sourced from our former publishers. We have not, and do not expect to, increase our registration volume back to levels
prior to 2020 when we first implemented the TQI. Although we have sought to improve the quality and monetization of our users and pursue other traffic
sources to counteract this decline, our owned and operated business may not return to the same level of profitability. These challenges to our owned and
operated business have had, and are expected to continue to have, a material adverse effect on our results of operations and liquidity.
A decline in the supply of media available to us through third parties or an increase in the price of this media could increase the cost of attracting
consumers and reduce our profitability.
Our success depends on our ability to attract users to our O&O Sites and generate revenue from their activities in a cost-effective manner. There is
substantial competition for web traffic among both established media buyers and smaller operators, and we expect this competition to continue to increase,
given the limited barriers to entry into the market. A portion of our revenue on our O&O Sites is from to visitor traffic originating from third-party
publishers, including ad networks, social media platforms, and search engines.
Our ability to maintain the number of users who come to our O&O Sites and our third-party publishers' websites is not entirely within our control. For
example, if a third-party publisher decides not to make media inventory available to us, decides to demand higher pricing or a higher revenue share, or
places significant restrictions on the use of such inventory, we may not be able to find media inventory from other media sources that satisfies our quality
requirements in a timely and cost-effective manner.
We rely more heavily on a "walled garden" social media platforms for users. These platforms change their algorithms and rules on acceptable ads
frequently and without notice. We may lose access to a platform without knowing the reasons for such loss or knowledge how to regain access. The
platforms adjust their pricing based on market demand as well as many other factors, known and unknown, most of which are outside of our control. If we
lose access to a platform or the pricing increases, our results of operations may be adversely affected.
Our media spend on social media platforms, includes the use of affiliates and influencers, many of whom use Instagram, YouTube and TikTok to buy ads or
post content in an effort to drive traffic to our sites. Due to the ongoing regulatory concerns, TikTok continues to face the potential for a U.S. ban unless an
acceptable buyer is found. If TikTok is restricted, influencers may shift to other platforms, but interruptions could reduce traffic to our sites and adversely
affect our operating results.
More people are accessing content on their mobile devices through mobile applications, and we have not successfully deployed mobile app versions of
our O&O Sites, which hinders our ability to remain competitive.
Mobile devices are now the primary means by which people access online content, increasingly through mobile applications rather than mobile browsers.
While our O&O Sites are designed with a "mobile first" approach, we do not currently have mobile applications for our O&O Sites, which could place us at
a competitive disadvantage to competitive rewarded sites that have app versions.
Moreover, the mobile ecosystem is controlled by two operating systems, Apple iOS and Google Android. More than 90% of our users access our O&O
Sites from mobile devices, and we believe a similar percentage access our Commerce Media Solutions from mobile devices as well. The dependence on
two operating systems makes our operations subject to their power over the mobile ecosystem, pricing, and terms which impacts the vast majority our
business including our O&O Sites as well as those of advertisers, app developers, e-commerce sites, mobile carries and others on whom we rely which
poses a significant risk to us and our business. If our advertiser clients or partners experience difficulties developing or promoting their apps, our revenue
and growth may be impaired.
Our use of CRM may be hindered, which in turn could harm our business.
We and our third-party publishers use email, text messages, and telephone calls, among other channels, to reach users for re-engagement and other
marketing purposes. Email service providers ("ESPs") or internet service providers may implement new or more restrictive email or content delivery or
accessibility policies. If ESPs materially limit or halt the delivery of emails advertising our O&O Sites, or if we fail to deliver emails to users in a manner
compatible with email providers' handling or authentication technologies, our ability to contact users through email could be significantly restricted.
Moreover, with a heightened aversion to marketing calls and emails, consumers increasingly screen or block their incoming telephone calls, texts, and
emails, so users may not reliably receive our messaging. If we are unable to contact users effectively by email, telephone, text, or other means, our business,
operating results, and financial condition would be harmed.
Risks Associated with our Call Solutions Business
We have become increasingly reliant upon inbound calls, particularly in the Health Plan vertical, which we may be unable to obtain cost effectively
obtain in the future.
In the past, our Call Solutions business relied on our O&O Sites to provide Telephone Consumer Protection Act ("TCPA")-consented leads obtained from
O&O Site users. As the traffic to our O&O Sites began to decline, Call Solutions looked to third parties to supply TCPA-consented leads and inbound and
outbound dialed call transfers.
10
Table of Contents
Beginning in 2024, many of our call transfer buyers stopped buying outbound dialed calls in anticipation of the implementation of the more stringent rules
on obtaining prior express written consent for purposes of the TCPA proposed by the Federal Communications Commission (the " Proposed FCC Rules")
and the marketing rules applicable to Medicare and Medicare Advantage plans (collectively, the "Health Plans") promulgated by the Centers for Medicare
& Medicaid Services (the "CMS" and such rules, the "CMS Rules"). Because the CMS Rules were not affected by the delay in the implementation of the
Proposed FCC Rules, which delayed the implementation of the Proposed FCC Rules until at least January 26, 2026, the CMS one-to-one rule has and will
continue to apply to Health Plan marketing. Importantly, we cannot use historical leads of users who provided TCPA consent without complying with the
CMS one-to-one rules due to the Proposed FCC Rules and CMS Rules. Accordingly, we pivoted our Health Plan marketing business to focus the vast
majority of our Call Solutions business on transfers of inbound calls. Many of our competitors also transitioned to inbound calls, such that when open
enrollment period ("OEP") began on October 7, 2024, the market for inbound calls tightened. The price of inbound calls rose dramatically to the point
where we were unable to maintain historical profitability levels during the OEP, and the risk of future price increases and/or limited supply remains.
While we have developed strategies for generating leads and calls that comply with the CMS one-to-one consent rules applicable in the Health Plan
vertical, there can be no assurance that we will be able to profitably market Health Plans as we did in the past. Because a substantial majority of our Call
Solutions business is in Health Plan marketing, if we are unable to develop more business in other sectors or cost effectively buy inbound calls for Health
Plans, our Call Solutions business may be adversely affected.
Other Business Risks
It may be difficult to effectively manage any future growth and scale our infrastructure and products quickly enough to meet the needs of our business
while maintaining profitability.
Our future success depends in part on the efficient performance of our ad serving consumer data collection platforms and technology infrastructure used in
our O&O Sites and Commerce Media Solutions. As we shift focus to Commerce Media Solutions, we are adapting our technology infrastructure to meet
the evolving needs of this business. To address the growing volume of data privacy requests, we rearchitected our consumer information database to ensure
compliance with new data privacy and data protection laws. However, unexpected performance issues, such as increased session or user volume or
technical challenges with our systems and infrastructure could lead to latency delivering our solutions and user responses. This may significantly affect
performance, resulting in slower response times or system failures of our O&O Sites or Commerce Media Solutions, potentially affecting our revenue and
profits.
We are continuously upgrading our systems, procedures, processes, and controls to support our future operations as we adjust our business priorities. We
have made significant investments and reallocated valuable management resources to support these upgrades. This includes substantial costs for secure
hosting services, additional technical support, expanding data storage, and upgrading our technology and network infrastructure to accommodate the traffic
on our O&O Sites and the growing user interactions with Commerce Media Solutions. These interactions increase with each new media partner and higher
user session volume. We have also deployed new products, services, and third-party solutions addressing the rising volume of data privacy requests.
However, these upgrades and expansions are both costly and complex and could result in inefficiencies or operational challenges that could damage our
reputation, result in the loss of current and potential users and clients, and/or harm our operating results.
We have now begun to incorporate AI capabilities into our business, either directly or through third-party provided information technology systems or
software. As with many innovations, the use of AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our
business. AI algorithms and training methodologies may be flawed, ineffective or inadequate. AI development or deployment practices by us or third-party
providers could result in incidents that could increase the resources we need to implement cybersecurity measures to protect the security of our data. These
deficiencies and other failures of any potential AI and systems enhancements could subject us to competitive harm, regulatory action, legal liability, and
brand or reputational harm as well adversely affecting the results of our operations.
Economic or political instability could adversely affect our business, financial condition, and results of operations.
Our results of operations could be adversely affected by general conditions in the global economy, including events or factors that are outside of our
control. Such events or factors could include war, terrorism and other international conflicts, public health issues including health epidemics or pandemics,
and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the U.S. or
elsewhere. Additionally, the Federal Reserve may further raise the Federal Funds Rate. These rate increases, coupled with reduced consumer
confidence, result in uncertainty, and may cause our customers and/or clients to be cautious in their ad spending.
Many of our advertisers and media partners are based outside of the U.S., including many app and gaming advertisers based in Israel. While the Israel-
Hamas conflict and Ukraine-Russia conflict have not, of yet, been disruptive to their business or operations, if hostilities resume or intensify, our Ukraine
and/or Israeli partners could be affected, potentially having a negative impact on our operations.
Such events or factors could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or
more of our customers, vendors, and partners to file for bankruptcy, impact expected spending and pricing levels from existing and potential new
customers, or negatively impact our collections of accounts receivable. The full extent to which these factors may negatively affect our business and
operations, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted.
Our international operations subject us to increased challenges and risks.
We currently operate our O&O Sites in the U.S., UK, Canada, and Australia from servers in the Cloud. We plan to expand our Commerce Media Solutions
internationally as well and may need to reassess the locations of our servers to mitigate potential latency issues that could impact the performance of these
solutions. Continued international expansion will require us to invest significant funds and other resources and may subject us to additional risks, including
those related to cross-border data transfers; retooling our consumer facing product offerings to better align with local customs, practices, and consumer
preferences; compliance with anti-bribery laws; recruiting, training, managing, and retaining contractors and service providers in foreign countries;
increased competition from local providers; economic and political instability; and less protective or restrictive intellectual property laws.
11
Table of Contents
Our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to
the challenges of supporting a growing business in an environment of multiple languages, cultures, legal and regulatory systems, taxation regimes, and
commercial infrastructures. If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations,
our business and operating results could suffer, and we may decide to make changes to our business or exit certain countries to mitigate losses. If we are
unable to successfully manage the risks and costs associated with international operations, our business and/or results of operations could be adversely
affected.
Our evaluation of strategic alternatives could complicate operations, or could result in other harmful consequences that may adversely impact our
business and results of operations.
Acquisitions have historically been an important element of our overall corporate strategy and use of capital. However, we have experienced mixed results
from these acquisitions and have recently divested a few underperforming assets, while considering divesting others. In addition, we regularly review and
assess strategic alternatives in the ordinary course of business, including potential acquisitions, investments, or divestitures. These potential strategic
alternatives may result in many strategic transactions that could be material to our financial condition and results of operations.
The process of evaluating strategic alternatives involves a number of risks and uncertainties and may distract management from our other businesses or
result in significant expenses. Moreover, we may invest significant resources towards evaluating and negotiating strategic alternatives that do not ultimately
result in a strategic transaction. The success of our investments will depend in part on our ability to successfully integrate and leverage them to enhance our
existing products and services or develop compelling new ones. It may take longer than expected to realize the full benefits from these transactions, or the
benefits may ultimately be smaller than we expected because of performance and/or market conditions. Our failure to address these risks or other problems
encountered in connection with any strategic alternatives could cause us to incur unanticipated liabilities and harm our business generally.
Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our business.
Our future success depends, in part, on our ability to attract and retain key personnel, including our Chief Executive Officer, Chief Financial Officer, Chief
Strategy Officer, and Chief Customer Officer. It also depends upon our ability to hire and retain highly skilled managerial, technical, and operational
personnel in all areas of our organization, each of whom is important to the management of certain aspects of our business and operations and the
development of our strategic direction and may be difficult to replace. The loss of the services of these key individuals and the process to replace these
individuals could involve significant time and expense and could significantly delay or prevent the achievement of our business objectives.
We are dependent upon third-party service providers in our operations and may be adversely affected if any of their platforms malfunction.
In addition to risks associated with purchasing online media from third-party publishers discussed above, we utilize numerous third-party service providers
in our operations such as cloud-based hosting services, enterprise resource planning systems and other software as a service ("SaaS") platforms and
services. As with all software and web applications and systems, there may be occasional technical malfunctions that arise with some of these third-party
providers. A failure by a third-party service provider could prevent us from operating our websites, connecting our advertiser clients with users,
providing online marketing and advertising services, or tracking the performance and results of our online marketing activities and our operations in
general. Remedying any such situation could require substantial time, resources, and technical knowledge that we may not have or be able to acquire in a
timely fashion. If any of these platforms or applications malfunctions for an extended time period, we may lose clients and/or incur significant costs to
either internalize some of these services or find suitable alternatives, which could have a material adverse effect on our business or results of operations.
12
Table of Contents
Risks Relating to Legal and Regulatory Matters
The regulatory landscape in which we and our clients operate is constantly evolving and subject to significant change.
We, our third-party publishers', and our clients' businesses operate in highly regulated industries, subject to many federal, state, and local laws and
regulations regarding telemarketing and other consumer media channels. In addition to the TCPA and "mini TCPAs" of various states, we are subject to, the
Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) and the California Business and Professions Code Sec.
17529.5, among others. Many of these laws and regulations are frequently changing and can be subject to various interpretations, and the extent and
evolution of future government regulation is uncertain. As discussed above, for example, the future of the Proposed FCC Rules is currently in flux, and that
level of uncertainty makes long-term planning extremely difficult. Keeping our business in compliance with new laws and regulations, therefore, may be
costly, affect our ability to generate revenue and harm our financial results.
We may also face liability for any failure of our third-party publishers, strategic partners, or vendors to comply with legal and regulatory requirements. The
FTC Consent Order (as defined herein) requires us to monitor and discipline our publishers. Users or clients may raise concerns about the content of
publisher ads or the methods used by third-party publishers to deliver ads. These publishers might use unapproved creative or marketing channels, such as
text messaging, to drive users to our sites, potentially exposing us to liability under the TCPA and other laws regulating advertising, telemarketing, and text
messaging. If we are unable to cause our third-party publishers and strategic partners to monitor their affiliates and enforce our clients’ contractual
restrictions on such affiliates, our clients may terminate their relationships with us or decrease their marketing budgets with us.
Many of our contracts also expose us to liability, including indemnification obligations, for the acts of our third-party publishers or vendors. Despite our
efforts to monitor and deter unauthorized or unlawful actions by these third-party publishers, and to contractually limit our liability in such instances, we
may be held responsible for this behavior. As a result, we could be subject to costly litigation and, if we are unsuccessful in defending ourselves, could
incur damages for the unauthorized or unlawful acts of third-party publishers, strategic partners, or vendors.
Our use of email marketing is subject to laws and rules in each of the jurisdictions in which we operate.
We operate internal email campaigns to promote our O&O Sites and utilize third party publishers who use email to generate traffic for our O&O Sites and
to promote our advertisers' products. As discussed above, we are subject to CAN-SPAM and the California Business and Professions Code Sec. 17529.5 on
our domestic email marketing activities. In addition, the FTC Consent Order (as defined herein) required us to obtain "affirmative express consent" for e-
mail marketing, a more stringent level of consent similar to the consent required under the existing TCPA. Our competitors are not subject to this enhanced
consent requirement and we may not be able to cost-effectively generate email data for our clients.
Further, foreign laws and regulations, such as the Canadian Anti-Spam Law, also apply to our business activities in the foreign jurisdictions in which we
operate. If we or any of our third-party publishers fail to comply with any provisions of these laws or regulations, we could be subject to regulatory
investigation, enforcement actions and litigation, as well as indemnification obligations with respect to our clients. Any negative outcomes from such
regulatory actions or litigation, including monetary penalties or damages, could have a material adverse effect on our financial condition, results of
operation and reputation.
The outcome of litigation, inquiries, investigations, examinations, or other legal proceedings in which we are or may become involved, or in which our
clients or competitors are involved, could distract management, increase our expenses, or subject us to significant monetary damages or restrictions on
our ability to do business.
From time to time, we are subject to audits, inquiries, investigations, claims of non-compliance and lawsuits by private litigants or federal and state
governmental agencies, regulatory agencies, attorneys general and other governmental or regulatory bodies, any of whom may allege violations of legal
and regulatory requirements. The scope and outcome of these proceedings is often difficult to assess or quantify. Plaintiffs in lawsuits may seek recovery of
large amounts, and the cost to defend such litigation may be significant.
In the last five years, for example, we have been involved in regulatory actions with the FTC and the PAAG and in numerous litigations and claims. Such
actions have adversely impacted our results of operations and could adversely affect our future results of operations and financial position.
There may also be adverse publicity and uncertainty associated with investigations, litigation, and orders (whether pertaining to us, our clients, or our
competitors) that could impact our ability to buy media and source advertisers and/or diminish consumers' view of our services. Regardless of whether any
current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer
redress, such investigations and claims have been and may continue to be expensive to defend, may divert management's time away from our operations
and may result in changes to our business practices that adversely affect our results of operations.
13
Table of Contents
Our business and the businesses of our advertiser clients may be subject to sales and use taxes and other taxes.
The application of sales and use taxes, business taxes, and gross receipts taxes on our digital marketing/advertising services is complex and
evolving. Because of changes in the state laws governing our business, we are potentially subject to taxes in many more states than was previously the case.
The line between exempt services and enumerated services subject to sales tax is unclear and varies from state to state. While our advertising services are
generally not subject to sales tax, some states, like New York, impose sales tax on information services and some of lead generation services may be
characterized to be sales taxable information services. Further complicating the determination of the sales taxability of services is the need to determine the
source of revenues from the services (i.e., where the service is rendered, where the service is consumed or where the information is accessed).
Changes in tax laws, interpretation, and implementation of regulations, rules, or guidance on taxes may result in our revenues being subject to sales or other
taxes. Were any of these to occur, our overall tax burden could increase, which could have a material adverse impact on our business.
Risks Relating to Data Security and Intellectual Property
Our actual or perceived failure to safeguard any personal information or user privacy could damage our reputation and results of operations.
We maintain data that contain user information such as name, age, personal address, phone number, email address, survey responses and transactional data.
Our ability to protect such information and to provide services using such information without unauthorized disclosure is critical. A breach of the security
measures on our systems or on those of our third-party vendors could result in the misappropriation of either our proprietary information or our users'
personal information, or the interruption or breakdown of our operations. Our owned and operated business is largely dependent on consumer-facing
websites, which could become inaccessible due to service interruptions or attacks. If our websites are unavailable when users attempt to access them, or if
they do not load as quickly as expected, users may not return as often in the future, or at all.
Cybersecurity risks have significantly increased in recent years, in part because of the proliferation of new technologies, the increased use of the internet
and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer
hackers, organized crime, terrorists, and other external parties, including foreign state actors. Although we continue to enhance our physical and cyber
security controls and associated procedures, we may be unable to proactively address these cybersecurity risks or to implement adequate preventative
measures. We have been subject to and are likely to continue to be the target of future cyberattacks.
We, or any of our third-party partners or service providers, could experience compromises to security that result in the decreased performance or
availability of our websites or mobile applications; the loss or unauthorized disclosure, access, acquisition, alteration; or the use of confidential
information. As a result, consumers, publishers, or advertisers may lose trust and confidence in us, and consumers may decrease the use of our websites,
advertisers may stop using our services and/or publishers may stop providing media to us.
Any or all of these issues could adversely affect our ability to attract new users and increase engagement by existing users, cause advertisers to not use our
services or cause publishers to stop providing media, disrupt our business operations or subject us to governmental or third-party lawsuits, investigations,
regulatory fines or other actions or liability, thereby harming our business. Although we are not aware of any material information security incidents to
date, we have detected common types of attempts to attack our information systems and data using means that have included denial of service attacks and
phishing.
See also risk factor "Laws and regulations regarding privacy, data protection and the handling of personal information are complex and continuously
evolving, and could have a material adverse effect on our business, financial condition and results of operations" for additional information.
If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
Our ability to compete effectively depends upon our proprietary systems and technology. We rely on trade secret, trademark and copyright law,
confidentiality agreements, and technical measures to protect our proprietary rights. We enter into confidentiality agreements with our employees,
consultants, advisers, client vendors and publishers. However, these agreements may not effectively prevent unauthorized disclosure of confidential
information or unauthorized parties from copying aspects of our services or obtaining and using our proprietary information. Further, these agreements may
not provide an adequate remedy in the event of unauthorized disclosures or uses, and we cannot guarantee that our rights under such agreements will be
enforceable.
Policing unauthorized use of our proprietary rights can be difficult and costly. Litigation, while it may be necessary to enforce or protect our intellectual
property rights, could result in substantial costs and diversion of resources and management attention, and could adversely affect our business, even if we
are successful on the merits. In addition, others may independently discover trade secrets and proprietary information, and in such cases, we could not
assert any trade secret rights against such parties.
14
Table of Contents
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features, software and functionality or
obtain and use our proprietary information. For example, third party website operators have created look-alike sites of our O&O Sites, some of which
contain links to our terms, privacy policies and/or customer service. These sites divert traffic away from our sites, expose us to regulatory scrutiny as the
look-alike sites often have compliance issues, and create consumer confusion. Despite our efforts to monitor the internet for look-alike sites, there can be
no assurance that we will be able to quickly detect and remove all look-alike sites, which could impair our reputation, expose us to regulatory scrutiny, and
adversely affect our business.
As a creator and a distributor of digital media content, we face liability and expenses for legal claims based on the nature and content of the materials
that we create or distribute, including materials provided by third parties.
We display original and third-party content on our O&O Sites and Commerce Media Solutions and in our marketing messages. As a result, we have faced
and may continue to face potential liability based on a variety of legal theories, including copyright or trademark infringement. We generally rely on the
"fair use" exception for our use of third-party brand names and marks, but these third parties may disagree, and the laws governing the fair use of these
third-party materials are imprecise and adjudicated on a case-by-case basis. We also create content we believe to be original for our websites. While we do
not believe that this content infringes on any third-party copyrights or other intellectual property rights, owners of competitive websites that present similar
content have taken and may take the position that our content infringes on their intellectual property rights.
We are also exposed to risk that content provided by third parties and posted to our websites is inaccurate or misleading. These claims could divert
management's time and attention away from our business and result in significant costs to investigate and defend, regardless of the merit of these claims.
The general liability and cyber insurance we maintain may not cover potential claims of this type or may not be adequate to indemnify us for all liability
that may be imposed. Any imposition of liability that is not covered by insurance, or that exceeds our insurance coverage, could materially adversely affect
our business, financial condition, and results of operations.
Laws and regulations regarding privacy, data protection, and the handling of personal information are complex and continuously evolving, and could
have a material adverse effect on our business, financial condition, and results of operations.
Because we collect, store, process, use and sell data, some of which contains personal information, we are subject to complex and evolving federal, state,
and foreign laws and regulations, as well as contractual requirements, regarding privacy, data protection and the collection, maintenance, protection, use,
transmission, disclosure, and disposal of personal information. These laws and regulations continuously evolve and involve matters central to our business,
including user privacy, data protection, content, intellectual property, electronic contracts and other communications, e-commerce, rewards and other
promotional marketing campaigns, competition, protection of minors, consumer protection, taxation, libel, defamation, internet or data usage, and online
payment services. While we strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data
protection, these obligations may be interpreted and applied in new ways or inconsistently across jurisdictions, and new regulations may be enacted.
The European Union's General Data Protection Regulation ("GDPR") imposed new requirements on entities and granted individuals new rights in
connection with the collection, use and storage of the personal information of European Union residents. Our operations in the UK are subject to the UK-
GDPR, which took effect prior to Brexit and is largely identical to the GDPR. The fines for failing to comply with the GDPR or UK-GDPR are
significant and the potential ways that the regimes could be applied to a business such as ours are uncertain. Similarly, the data privacy laws in Canada and
Australia are becoming more stringent and we must comply with these laws or risk regulatory inquiries, fines, and penalties.
In the U.S., while there is no federal version of GDPR yet, as of March 14, 2025, approximately 20 states have enacted data privacy laws, including the
California Consumer Privacy Act of 2018 ("CCPA"). As of March 14, 2025, similar bills are being considered in approximately a dozen additional states.
Some of the proposed laws include a private right of action to enforce noncompliance, which, if enacted, would expose us to potential litigation and claims.
Because of the variation in these states' laws, it is extremely difficult and expensive to comply with this patchwork of data privacy laws. There can be no
assurance that we will be able to do so or that the costs of compliance will not be prohibitively expensive, either of which could have a material adverse
effect on our business and results of operations.
Due to the high volume of user registrations on our O&O Sites, we receive many requests from users seeking to exercise their data privacy rights. In
response, we implemented a third-party solution to support our systems and processes to handle these requests and have already devoted significant
resources to handling data privacy requests. However, we expect to incur additional costs to maintain compliance with the evolving data privacy and data
protection laws and regulations.
15
Table of Contents
Risks Related to Financial Matters
We may require additional capital in the future to pursue our business objectives and respond to business opportunities, challenges, or unforeseen
circumstances, and such capital may not be available to us on acceptable terms, or at all.
We intend to continue to make investments to support our growth and may require additional capital to pursue our business objectives and respond to
business opportunities, challenges, or unforeseen circumstances. We may seek to raise additional capital through equity, equity-linked, or subordinated debt
financings; however, when we can effect such financings and how much capital we can raise depends on a variety of factors, including, among others,
market conditions, the trading price of our common stock and our determination as to the appropriate sources of funding for our operations. Disruptions in
the global equity and credit markets may also limit our ability to access capital. If we are unable to raise additional capital when required or on acceptable
terms, we may have to significantly delay, scale back or discontinue certain operations. Any of these events could significantly harm our business and
results of operations.
The SLR Credit Agreement generally prohibits additional debt financings without SLR's consent and requires proceeds from equity financings to be used to
prepay indebtedness to SLR. Accordingly, we will not be able to raise capital for uses other than prepayment of SLR indebtedness without SLR's consent.
In addition, the SLR Credit Agreement contains various financial and other covenants, and any non-compliance with those covenants could result in an
acceleration of the repayment of the amounts outstanding thereunder. While we had $18.5 million available under the SLR Revolver as of December 31,
2024, our use of such funds is subject to certain conditions, including borrowing base requirements, as discussed above.
In addition to revenue from business operations and proceeds from the SLR Credit Agreement, the Company's primary source of working capital to date
has been through the sale of equity and subordinated debt securities to officers, directors and a principal stockholder. Equity or debt financings may have a
dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions, or security
interests in our assets. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or
discontinue certain operations. Any of these events could significantly harm our business and results of operations.
We have written down all of our goodwill from our prior acquisitions and could experience significant charges to our intangible assets, which may
affect our results of operations in the future.
As a result of prior acquisitions, we had a substantial amount of goodwill and purchased intangible assets on our consolidated balance sheet. As of
December 31, 2024, all of the goodwill from prior acquisitions was impaired, and the remaining balance of goodwill is $0. Unfavorable changes in the
business climate or competitive environment, our revenue forecasts, our market capitalization, capital structure, capital expenditure levels, operating cash
flows, as well as adverse legal or regulatory actions or developments could cause further material impairments to the carrying value of our intangible assets
or intangible assets we may obtain in future periods.
16
Table of Contents
We will continue to monitor indicators of possible impairment that would cause a triggering event requiring us to complete an interim impairment analysis
and possibly recognize additional impairment charges in the future. Impairment charges to our intangible assets could have a material adverse effect on our
financial condition, and results of operations.
Risks Related to Our Common Stock and the Securities Markets
We are currently listed on The Nasdaq Capital Market (“Nasdaq”). If we are unable to maintain listing of our securities on Nasdaq or any stock
exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be
more difficult for our stockholders to sell their securities.
Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange’s minimum listing requirements or those
of any other national exchange. The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its
exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its
exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which
could have a material adverse effect on our stockholders:
●the liquidity of our common stock;
●the market price of our common stock;
●our ability to obtain financing for the continuation of our operations;
●the number of investors that will consider investing in our common stock;
●the number of market makers in our common stock;
●the availability of information concerning the trading prices and volume of our common stock; and
●the number of broker-dealers willing to execute trades in shares of our common stock.
Our stock price has been and may be volatile in the future, and as a result, investors in our securities could incur substantial losses.
There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those
sold to investors. We may incur rapid and substantial increases or decreases in our stock price in the foreseeable future attributable to various factors
including those discussed in the “Risk Factors" section included in this report. Some factors may be unrelated to our operating performance or prospects or
may be beyond our control. The price for our common stock may be influenced by many factors, including investor reaction to our business strategy; the
success of our services, products, or technologies; compliance with Nasdaq listing standards; variations in our financial results; any major change in our
board or management; or our involvement in regulatory investigations or litigation. In addition, if one or more analysts covering our business downgrade
their evaluations of our common stock or the stock of other companies in our industry, the price of our common stock could decline. If one or more analysts
cease to cover our common stock, we could lose visibility in the market for our common stock, which in turn could cause our stock price to decline.
Since our stock price may continue to be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods
of volatility in the market, securities class-action litigation has often been instituted against companies. Securities litigation and stockholder activism,
including potential proxy contests, could result in substantial costs and divert management's and our Board of Directors' attention and resources from our
business. Such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships
with service providers and make it more difficult to attract and retain qualified personnel. We may be required to incur significant legal fees and other
expenses related to any securities litigation and activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise
be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.
17
Table of Contents
The concentration of our stock ownership presents risks, including lack of liquidity in the trading market for our common stock and limitations on any
individual stockholder's ability to influence corporate matters.
As of March 17, 2025, our executive officers, directors, and holders of 10% or more of our outstanding common stock, in the aggregate, beneficially owned
and have the ability to exercise some voting control over approximately 64.9% of our outstanding shares of common stock. On January 17, 2025, the Board
appointed James P. Geygan to the Board. Mr. Geygan serves as the Interim Chief Executive Officer and President of one of our institutional investors,
Global Value Investment Corporation. As a result, these stockholders could exert significant influence over all matters requiring stockholder approval,
including the election of directors and determination of significant corporate actions. The interests of these stockholders may not always coincide with the
interests of other stockholders, and these stockholders may act in a manner that advances their interests and not necessarily those of other stockholders,
which might affect the trading price of our common stock.
The concentration of stock ownership may also serve to limit the trading volume of our common stock and lead to greater volatility in our stock price. As
of March 17, 2025, our largest stockholder, Dr. Phillip Frost, owned, directly or indirectly, approximately 39.1% of our outstanding common stock. Dr.
Frost has no obligation to provide us with advance notice of any sale or
purchase of our common stock. If the concentration of our common stock
ownership were to significantly shift, via sales of shares currently held by Dr. Frost or otherwise, we cannot predict the impact that any resulting change to
the trading volume might have on our stock price.
Future issuances of shares of our common stock could have a dilutive effect on your investment in us.
Pursuant to our incentive plans, our Board of Directors has granted and may continue to grant stock options, restricted stock units, or other equity awards to
our directors and employees. When these awards vest or are exercised, the issuance of shares of common stock underlying these awards may have a
dilutive effect on our common stock, which could cause our stock price to decline. During 2024 and 2023, we issued 319,933 and 255,406 shares of
common stock, respectively, in connection with prior acquisitions, vesting of awards made under our 2018 Stock Incentive Plans, our 2022 Omnibus
Equity Incentive Plan (the "2022 Plan"), and for other business purposes. As of December 31, 2024, there were an additional 884,851 shares of restricted
stock and options granted under the 2022 Plan, as well as other compensatory arrangements that might vest and be delivered through 2031. When these
awards vest or are exercised, the issuance of shares of common stock underlying these awards may have a dilutive effect on our common stock, which
could cause our stock price to decline.
Additionally, any future equity or debt financing may have a dilutive effect on the holdings of our existing stockholders.
We do not intend to pay cash dividends for the foreseeable future.
We have never declared or paid cash dividends on our common stock and we do not expect to declare or pay any cash dividends in the foreseeable future.
Additionally, our Credit Agreement prohibits us from paying cash dividends on our common stock and contains limitations on our ability to redeem or
repurchase shares of our common stock. As a result, stockholders may only receive a return on their investment in our common stock if the trading price of
their shares increases.
We are a smaller reporting company and a non-accelerated filer, and we benefit from certain reduced governance and disclosure requirements, but we
cannot be certain if the reduced disclosure requirements make our common stock less attractive to investors.
Currently, we are a "smaller reporting company," meaning that our outstanding common stock held by nonaffiliates had a value of less than $250 million at
the end of our most recently completed second fiscal quarter. We are also a non-accelerated filer because we had a public float of less than $75 million as of
the last business day of our most recently completed second quarter. As a non-accelerated filer, we are not required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, meaning our auditors are not required to attest to the effectiveness of our internal control over
financial reporting.
As a result, investors and others may be less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other
deficiencies in internal controls go undetected may increase. In addition, as a smaller reporting company, we take advantage of our ability to provide certain
other less comprehensive disclosures in our SEC filings, including, among other things, providing only two years of audited financial statements in annual
reports and simplified executive compensation disclosures. Consequently, it may be more challenging for investors to analyze our results of operations and
financial prospects, as the information we provide to investors is less robust than the disclosure investors receive from public companies that are not a
smaller reporting company.
18
Table of Contents
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
We have made cybersecurity and the protection of our customers' data a top priority. The critical areas that we consider for our evolving cybersecurity
program include access control; data encryption; SSDLC/change management; BCP/DRP; endpoint security; patch management; vulnerability
assessments; compliance management; data privacy; incident response; monitoring, alerting, and logging; employee training (ingrained in our onboarding
process, and mandatory online and in person training annually); and cyber insurance (coverage areas include ransomware, and business interruption which
are critical to our clients and availability of business operations).
Risk Management & Strategy
Our cyber risk management program is designed to identify, assess, manage, mitigate, and respond to cybersecurity threats. To help protect our company
from a major cybersecurity incident that could have a material impact on operations or our financial results, we have implemented policies, procedures,
programs and controls, including investments in technology that focus on cybersecurity incident prevention, identification and mitigation. These
investments include best practice applications such as CrowdStrike, Okta, Intune and Kandji. These tools also strengthen our overall IT posture as well as
our monitoring and alerting and patching processes. The underlying controls of the cyber risk management program are based on recognized best practices
and standards for cybersecurity and information technology, including the continuous monitoring such as National Institute of Standards and Technology
("NIST"). We execute an NIST 800-53 review annually and use the results of existing cyber risks to prioritize projects designed to address these gaps and
create a go-forward strategy. Our internal and external auditors review our IT and cybersecurity controls annually for design and operating effectiveness.
Governance
Our Cybersecurity Program is governed by the Company's IT, Legal, and Compliance teams. Our Chief Technology Officer
("CTO") has over 20 years of experience in marketing technology and analytics. Our Vice President of IT Governance, Risk and
Compliance ("VP of IT") has over 20 years of experience in IT internal and external audits, IT consulting, and governance, risk,
and compliance. Our General Counsel regularly coordinates with the IT team on data security and compliance issues. The CTO
and General Counsel report directly to the Chief Executive Officer ("CEO"), so any material issues are raised to the CEO, and a
status update of key cybersecurity projects and any material breaches is provided quarterly to the Board's Audit Committee,
which includes both an internal and external audit.
Incident Disclosure and Materiality
Our incident management procedures include identification, evaluation, definition, and escalation based on the determination of materiality. This
determination involves the Company's IT, Legal, and Compliance teams, executive officers, and cyber insurance provider. Breach notifications and
escalation to the Audit Committee would also be based on the materiality determination. The collaboration among IT, Legal, and Compliance helps ensure
and prevent gaps with laws and regulations. Each quarter, the VP of IT provides an update on key cybersecurity projects and any material breaches at the
quarterly Audit Committee meeting, at which both the internal and external auditors are present.
While we did not experience a material cybersecurity incident during the year ended December 31, 2024, the scope and impact of
any future incident cannot be predicted. Notwithstanding the approach we take to cybersecurity, we may not be successful in
preventing or mitigating a cybersecurity incident that could have a material adverse effect on our business, results of operations,
or financial condition. See Item 1A. "Risk Factors" for more information on our cybersecurity-related risks.
Item 2. Properties.
Our headquarters are located at 300 Vesey Street, 9th Floor, New York, NY 10282, where we lease 42,685 square feet of office space under an 84-month
sublease, which is scheduled to terminate on November 7, 2025.
Our AdParlor business operates out of a shared co-working space located at 200 Bay Street, North Tower Suite 1200, Toronto, Ontario M5J 2J2, Canada
under a 12-month lease, effective as of August 1, 2024.
We believe our present facilities are suitable and adequate for our current operating needs.
19
Table of Contents
Item 3. Legal Proceedings.
Other than as disclosed below under "Certain Legal Matters," the Company is not currently a party to any legal proceeding, investigation or claim which, in
the opinion of the management, is likely to have a material adverse effect on our business, financial condition, results of operations or cash flows. Legal
fees associated with such legal proceedings are expensed as incurred. We review legal proceedings and claims on an ongoing basis and follow appropriate
accounting guidance, including FASB Accounting Standards Codification 450 ("ASC 450"), Contingencies, when making accrual and disclosure decisions.
We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount
accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be
misleading. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the degree of probability of
an unfavorable outcome and the ability to make a reasonable estimate of the amount of such loss. We do not accrue liabilities when the likelihood that the
liability has been incurred is probable, but the amount cannot be reasonably estimated.
In addition, we may be involved in litigation from time to time in the ordinary course of business. We do not believe that the ultimate resolution of any such
matters currently pending will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, the results
of such matters cannot be predicted with certainty, and we cannot assure you that the ultimate resolution of any legal or administrative proceeding or
dispute will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
Certain Legal Matters
On January 28, 2020, the Company received a Civil Investigative Demand from the Federal Trade Commission ("FTC") regarding compliance with the
FTC Act and the Telemarketing Sales Rule. On May 26, 2023, the Company agreed to the terms of a Stipulated Order for Permanent Injunction, Monetary
Judgment, Civil Penalty Judgment, and Other Relief (the "FTC Consent Order"). The FTC Consent Order imposed a civil penalty of $2.5 million, required
additional changes to the Company's employment opportunities marketplace and programmatic advertising business, and resulted in the implementation of
compliance measures across the business. On July 17, 2023, the FTC and the Company filed a Joint Motion for Entry of Proposed Stipulated Order in the
United States District Court for the Southern District of Florida. The FTC Consent Order was entered by the Court on August 11, 2023, and the escrow
funds were released on August 15, 2023. On August 12, 2024, the Company filed its required compliance report. The Company maintains insurance
policies that covered a majority of the legal costs incurred related to the FTC inquiry.
The Company was involved in a TCPA class action, Daniel Berman v. Freedom Financial Network, which was originally filed in the Northern District of
California in 2018. On May 31, 2023, the parties entered into an Amended Class Action Settlement Agreement (the "Berman Settlement
Agreement"), which included injunctive provisions and payment to plaintiffs of $9.75 million for legal fees and a consumer redress fund, of which the
Company was responsible for $3.1 million. The final approval of the Berman Settlement Agreement was filed on February 23, 2024. To satisfy its
obligations under the Berman Settlement Agreement, the Company made a cash payment of $1.1 million on March 15, 2024 and issued a junior secured
promissory note in the principal amount of $2.0 million payable to the co-defendant, Freedom Debt Relief, LLC.
Item 4. Mine Safety Disclosures.
Not Applicable.
20
Table of Contents
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
On October 5, 2023, we applied to transfer the listing of our common stock to The Nasdaq Capital Market ("Nasdaq") under the symbol "FLNT." Prior to
such time, our common stock traded on The Nasdaq Global Market under the symbols "FLNT" and "COGT."
Stockholders
As of March 27, 2025, there were 228 record holders of our common stock. The actual number of holders of our common stock is greater than this number
of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.
Recent Sales of Unregistered Securities
None.
Dividend Policy
During our fiscal year ended December 31, 2024, we paid no dividends and made no other distributions in respect of our common stock. We have no plans
to pay any cash dividends or make any other cash distributions in the foreseeable future. Our Credit Agreement prohibits us from paying dividends on our
equity securities, other than dividends on common stock which accrue (but are not paid in cash) or are paid in kind, or dividends on preferred stock which
accrue (but are not paid in cash) or are paid in kind.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved].
21
Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and related notes included in this Annual Report on Form 10-K ("2024 Form 10-K"). This 2024 Form 10-K contains certain forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from any future results expressed or implied by such forward-
looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed in the section titled
"Cautionary Note Regarding Forward-Looking Statements" and in Part I, "Item 1A. Risk Factors" of this 2024 Form 10-K.
Overview
Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged
consumers. Leveraging diverse ad inventory, robust first-party data, and proprietary machine learning, Fluent unlocks additional revenue streams for
partners and empowers advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating
highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), and our owned and operated digital
media properties ("O&O Sites"). Since the beginning of 2024, we have delivered data and performance-based customer acquisition services for over 500
consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products &
Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
We operate our Commerce Media Solutions on partner sites and mobile apps where we embed our proprietary ad-serving technology to identify and
acquire consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and
improve conversion. For example, our post-transaction solution connects our advertisers to consumers on e-commerce websites and apps after a purchase
or similar transaction. These syndicated Commerce Media Solutions generate meaningful income for our media partners, while driving high-quality
customer acquisition for our advertiser clients. We sign agreements with our media partners with one to five year terms, typically remunerating them on a
revenue share and/or impression basis.
We also attract consumers at scale to our O&O Sites primarily through promotional offerings, through which consumers are rewarded for completing
activities on our sites. When registering on our sites, consumers provide their name, contact information, and opt-in permission for telemarketing and email
marketing. Approximately 90% of these users engage with our media on their mobile devices or tablets.
Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and
other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters. Based on these insights, we
serve users targeted, relevant offers on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the
enrichment of our database expands our addressable advertiser client base and improves the effectiveness of our performance-based campaigns.
Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our
users' consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging. We then
leverage their self-declared data in our array of performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to
users based on the information they provide when they engage on our O&O Sites or other partner sites through our commerce media marketplace and (2) to
provide our clients with users' contact information so that such clients may communicate with them directly. We may also leverage our existing technology
and database to drive new revenue streams, including utilization-based models (e.g., programmatic advertising).
Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help
clients increase engagement. In some cases, we have sold products and services directly on behalf of our clients. The Call Solutions business serves clients
across an array of industries but has had a heavy focus on the health insurance sector.
We generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our
ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the
money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paid on a negotiated or market-
driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. For our O&O Sites and Call
Solutions business, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls,
app downloads, or customers for our clients. Our Commerce Media Solutions business does not bear media inventory risk.
Through AdParlor, LLC ("AdParlor"), our wholly owned subsidiary, we conduct our non-core business which offers advertiser clients a managed service
for creator marketing and media buying on different social platforms.
For the years ended December 31, 2024 and 2023, we recorded revenue of $254.6 million and $298.4 million, net loss of $29.3 million and $63.2 million,
and adjusted EBITDA of negative $5.6 million and positive $6.8 million, respectively. Adjusted EBITDA is a non-GAAP financial measure equal to net
income (loss), the most directly comparable financial measure based on U.S. GAAP, adding back income taxes, interest expense, depreciation and
amortization, share-based compensation expense, and other adjustments. See our audited consolidated financial statements and accompanying notes thereto
appearing elsewhere in this 2024 Form 10-K for further discussion and analysis of our results of operations. For a further discussion of adjusted EBITDA,
including a reconciliation from net income (loss), see "Definitions, Use and Reconciliation of Non-GAAP Financial Measures" below.
22
Table of Contents
Trends Affecting our Business
Development, Acquisition and Retention of High-Quality Targeted Media Traffic
Our legacy owned and operated business depends on identifying and accessing high quality media sources and on our ability to attract targeted users to our
offers. As our business grew, we attracted larger and more sophisticated advertiser clients to our marketplaces. To further increase our value proposition to
clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in
2020 and established our Commerce Media Solutions business in 2023 to access more higher value consumers. Sourcing high quality traffic will remain a
focus and part of a broader initiative to improve customer acquisition for our clients.
Starting in 2022, we increased our spend with major digital media platforms, revised our bidding strategies for affiliate traffic, and developed partnerships
to expand traffic from social media platforms, including the growing influencer sector. We have pursued strategic initiatives that enable us to grow revenue
with existing user traffic volume by attracting users to our O&O Sites using email and SMS messages. In addition, we have focused on improved
monetization of consumer traffic through improved customer relationship management that allow us to re-engage consumers who have registered on our
O&O Sites. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.
We believe that significant value has been, and will continue to be, created by improving the quality of traffic and consumers driven to our O&O
Sites. Better quality users lead to increased user participation rates and higher conversion rates for our advertiser clients, resulting in increased
monetization, and ultimately increased revenue and media margin. Media margin, a non-GAAP measure, is the portion of gross profit (exclusive of
depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.
Since 2022, however, we have experienced challenges maintaining traffic volume to our O&O Sites, primarily due to the FTC inquiry and subsequent FTC
Consent Order that mandated that we tighten our standards for media sourcing and put us at a competitive disadvantage to our competitors in the
performance marketing market. Other factors that affected our traffic volume have included the volatility and attrition of affiliate supply sources, changes
in search engine algorithms, and email and text message blocking algorithms. In response to these challenges, we have invested in strategic and internal
efforts to secure additional traffic from the growing influencer sector and to expand our ad network beyond our O&O Sites. However, these efforts have not
fully offset the decrease in volume to our O&O Sites and increasing costs for acquiring that traffic, and as a result we have seen lower revenue and lower
gross profit in our owned and operated business.
In 2023, we launched our Commerce Media Solutions business to access additional high value consumers for our advertiser clients and help media owners
and ecommerce businesses generate additional revenue from their existing consumer traffic. Fluent’s Commerce Media Solutions embeds proprietary ad-
serving technology in the post-action and post-transaction inventory on partner sites and mobile apps across a range of industries, including retail, ticketing
and quick service restaurants. In 2024, we served ads to over 100 million consumers in the post-action and post-transaction moment for top-tier publishers
and brands. These consumers are the highest intent consumers and drive significantly higher ROAS for our advertiser clients than those from our O&O
Sites. The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends and
the regulatory environment.
Trends & Seasonality
We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial
Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment. In 2023, we experienced slowdowns in certain sectors of
the Media & Entertainment, Staffing & Recruitment, and Financial Products & Services industries. Both data and performance-based spend continued to be
challenged in 2024 by general economic uncertainty. In 2024, revenue declined largely due to media supply challenges in our O&O Sites, effects of the
FTC Consent Order on our programmatic extension of the owned and operated business, and declines related to the divestiture of the Company's
subscription business in May 2024. In 2025, we expect that growth of our Commerce Media Solutions business will offset year-over-year revenue decline
related to continued media supply challenges in our O&O Sites.
We continue to work with select advertiser clients to define high performing consumer segments on both our O&O Sites and Commerce Media
Solutions marketplace and strategically price paid conversions accordingly. This initiative has helped clients drive higher ROAS and driven increased
budgets from clients across the Media & Entertainment industry, which represents a large component of our revenue mix.
Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and fluctuations in media sources. Specifically,
our retail specific media partners in our Commerce Media Solutions marketplace are highly seasonal based on fourth quarter consumer spending and our
Call Solutions business that benefits from Medicare open enrollment periods ("OEPs") experiencing increased volume in the first and fourth quarters. Other
factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various client verticals we serve, and
general market conditions.
The first quarter of 2025 has continued to be characterized by tepid economic conditions and media supply uncertainty in the O&O Sites marketplaces and
rising media costs in the Call Solutions business that have depressed gross profit in recent quarters. To confront these headwinds, we are continuing to
invest in securing additional media partners for our Commerce Media Solutions marketplace and by diversifying our client base. We also continue
to develop our "ROAS program" across additional segments of advertisers in an effort to gain additional allocations and pricing increases to further
improve our user monetization.
Business Practices & Compliance
We have continued to be affected by slowed economic conditions and the impacts of the FTC Consent Order (as described in Note 15, Contingencies, in the
Notes to the consolidated financial statements) on our O&O Sites and programmatic advertising business. The industry-leading compliance measures we
implemented on our O&O Sites in response to such FTC Consent Order, in addition to the TQI, continue to negatively impact our revenues and gross
profit.
Current Economic Conditions
We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, and reduced consumer
confidence have caused our clients and their customers to be cautious in their spending. The full impact of these macroeconomic events and the extent to
which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain. Considering the slowed
macro-economic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our
organization through targeted workforce reductions.
23
Table of Contents
Please see "Results of Operations" below, and "Item 1A. Risk Factors — "Economic or political instability could adversely affect our business, financial
condition, and results of operations," and "We are exposed to credit risks from our clients, and we may not be able to collect on amounts owed to us." for
further discussion of current economic conditions.
Definitions, Use and Reconciliation of Non-GAAP Financial Measures
We report the following non-GAAP measures:
Media margin is defined as that portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related
expenses and excluding non-media cost of revenue. Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue
(exclusive of depreciation and amortization). Media margin is also presented as a percentage of revenue.
Adjusted EBITDA is defined as net income (loss), excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) share-based
compensation expense, (5) loss on early extinguishment of debt, (6) accrued compensation expense for Put/Call Consideration, (7) goodwill impairment,
(8) impairment of intangible assets, (9) loss (gain) on disposal of property and equipment, (10) fair value adjustment of Convertible Notes with related
parties, (11) acquisition-related costs, (12) restructuring and other severance costs, and (13) certain litigation and other related costs.
Adjusted net income (loss) is defined as net income (loss), excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt,
(3) accrued compensation expense for Put/Call Consideration, (4) goodwill impairment, (5) impairment of intangible assets, (6) loss (gain) on disposal of
property and equipment, (7) fair value adjustment of Convertible Notes with related parties, (8) acquisition-related costs, (9) restructuring and other
severance costs, and (10) certain litigation and other related costs. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.
Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization), which we believe is the most directly comparable
U.S. GAAP measure:
Year Ended December 31,
(In thousands, except percentages)
2024
2023
Revenue
$
254,623 $
298,399
Less: Cost of revenue (exclusive of depreciation and amortization)
193,821
219,884
Gross Profit (exclusive of depreciation and amortization)
$
60,802 $
78,515
Gross Profit (exclusive of depreciation and amortization) % of revenue
24%
26%
Non-media cost of revenue (1)
11,710
12,785
Media margin
$
72,512 $
91,300
Media margin % of revenue
28.5%
30.6%
(1) Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related
expenses.
Below is a reconciliation of adjusted EBITDA from net income (loss), which we believe is the most directly comparable U.S. GAAP measure:
Year Ended December 31,
(In thousands)
2024
2023
Net loss
$
(29,277) $
(63,218)
Income tax benefit
(1,811)
(116)
Interest expense, net
4,749
3,204
Depreciation and amortization
9,926
10,876
Share-based compensation expense
1,970
3,756
Loss on early extinguishment of debt
1,009
—
Goodwill impairment
1,261
55,405
Impairment of intangible assets
980
—
Fair value adjustment of Convertible Notes, with related parties
1,670
—
Acquisition-related costs (1)
2,083
2,745
Restructuring and certain severance costs
1,821
456
Certain litigation and other related costs
—
(6,311)
Adjusted EBITDA
$
(5,619) $
6,797
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see
Note 14, Variable Interest Entity, in the Notes to the consolidated financial statements). The earn-out expense was $110 and $434 for the years
ended December 31, 2024 and 2023, respectively.
24
Table of Contents
Below is a reconciliation of adjusted net income and adjusted net income per share from net income (loss), which we believe is the most directly
comparable U.S. GAAP measure:
Year Ended December 31,
(In thousands, except share and per share data)
2024
2023
Net loss
$
(29,277) $
(63,218)
Share-based compensation expense
1,970
3,756
Loss on early extinguishment of debt
1,009
—
Goodwill impairment
1,261
55,405
Impairment of intangible assets
980
—
Fair value adjustment of Convertible Notes, with related parties
1,670
—
Acquisition-related costs (1)
2,083
2,745
Restructuring and certain severance costs
1,821
456
Certain litigation and other related costs
—
(6,311)
Adjusted net loss
$
(18,483) $
(7,167)
Adjusted net loss per share
Basic
$
(1.14) $
(0.52)
Diluted
$
(1.14) $
(0.52)
Adjusted weighted average number of shares outstanding:
Basic
16,259,943
13,770,355
Diluted
16,259,943
13,770,355
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see
Note 14, Variable Interest Entity, in the Notes to the consolidated financial statements). The earn-out expense was $110 and $434 for the years
ended December 31, 2024 and 2023, respectively.
We present media margin, media margin as a percentage of revenue, adjusted EBITDA, adjusted net income, and adjusted net income per share as
supplemental measures of our financial and operating performance because we believe they provide useful information to investors. More specifically:
Media margin, as defined above, is a measure of the efficiency of the Company’s operating model. We use media margin and the related measure of
media margin as a percentage of revenue as primary metrics to measure the financial return on our media and related costs, specifically to measure
the degree by which the revenue generated from our digital marketing services exceeds the cost to attract the consumers to whom offers are made
through our services. Media margin is used extensively by our management to manage our operating performance, including evaluating operational
performance against budgeted media margin and understanding the efficiency of our media and related expenditures. We also use media margin for
performance evaluations and compensation decisions regarding certain personnel.
Adjusted EBITDA, as defined above, is another primary metric by which we evaluate the operating performance of our business, on which certain
operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is
compensated. The first three adjustments represent the conventional definition of EBITDA, and the remaining adjustments are items recognized and
recorded under U.S. GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the
periods in which they are so recognized and recorded. These adjustments include certain litigation and other related costs associated with legal
matters outside the ordinary course of business, including costs and accruals related to matters described above under Part I, Item 3 — Legal
Proceedings. We consider items one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are
not expected to recur in the next two years, in accordance with SEC rules.
Adjusted net income (loss), as defined above, and the related measure of adjusted net income (loss) per share exclude certain items that are
recognized and recorded under U.S. GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business
operations for the periods in which they are so recognized and recorded. We believe adjusted net income (loss) affords investors a different view of
the overall financial performance of the Company than adjusted EBITDA and the U.S. GAAP measure of net income (loss).
Media margin, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share are non-GAAP financial measures with certain
limitations regarding their usefulness. They do not reflect our financial results in accordance with U.S. GAAP, as they do not include the impact of certain
expenses that are reflected in our condensed consolidated statements of operations. Accordingly, these metrics are not indicative of our overall results or
indicators of past or future financial performance. Further, they are not financial measures of profitability and are neither intended to be used as a proxy
for the profitability of our business nor to imply profitability. The way we measure media margin, adjusted EBITDA, and adjusted net income (loss) may
not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various
agreements.
25
Table of Contents
Results of Operations
Summary
Year ended December 31, 2024 compared to year ended December 31, 2023:
•
Revenue decreased 15% to $254.6 million, compared to $298.4 million.
•
Net loss was $29.3 million, or $1.80 per share, compared to net loss of $63.2 million, or $4.59 per share.
•
Gross profit (exclusive of depreciation and amortization) decreased 23% to $60.8 million, representing 24% of revenue for the year-ended December
31, 2024, from $78.5 million, representing 26% of revenue for the year-ended December 31, 2023.
•
Media margin decreased 21% to $72.5 million, representing 28.5% of revenue for the year-ended December 31, 2024, from $91.3 million,
representing 30.6% of revenue for the year-ended December 31, 2023.
•
Adjusted EBITDA was negative $5.6 million, compared to positive $6.8 million.
•
Adjusted net loss was $18.5 million, or $1.14 per share, compared to $7.2 million, or $0.52 per share.
The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue
for those respective periods:
Year Ended December 31,
(in thousands)
2024
2023
Revenue
$
254,623
100% $
298,399
100%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)
193,821
76.1
219,884
73.7
Sales and marketing
17,317
6.8
18,576
6.2
Product development
17,281
6.8
18,454
6.2
General and administrative
37,697
14.8
35,334
11.8
Depreciation and amortization
9,926
3.9
10,876
3.6
Goodwill impairment and impairment of intangible assets
2,241
0.9
55,405
18.6
Total costs and expenses
278,283
109.3
358,529
120.2
Loss from operations
(23,660)
(9.3)
(60,130)
(20.2)
Interest expense, net
(4,749)
(1.9)
(3,204)
(1.1)
Fair value adjustment of Convertible Notes, with related parties
(1,670)
(0.7)
—
—
Loss on early extinguishment of debt
(1,009)
(0.4)
—
—
Loss before income taxes
(31,088)
(12.2)
(63,334)
(21.2)
Income tax benefit
1,811
—
116
—
Net loss
$
(29,277)
(11.5) $
(63,218)
(21.2)
26
Table of Contents
Year ended December 31, 2024 compared to year ended December 31, 2023
Revenue.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Revenue
$
254,623 $
298,399
(15%)
For the year ended December 31, 2024 and 2023, revenue was comprised of owned and operated marketplaces of $168.4 million
and $235.7 million, Commerce Media Solutions of $41.3 million and $10.7 million, and other streams of $44.9 million and $52.0 million, respectively. The
decrease in owned and operated marketplaces revenue was primarily attributable to a challenging macro-economic environment and a decrease in media
supply resulting from changes in our business practices to comply with the FTC Consent Order, which drove a reduction in spend from key clients in the
Media & Entertainment and Staffing & Recruitment sectors. Revenue in owned and operated marketplaces was further negatively impacted by the
enormous social media advertising spend driven by the US Presidential election, which started in late August 2024 and impacted our ability to buy media at
acceptable margins for existing advertiser demand. Partially offsetting that decline, our Commerce Media Solutions business added long-term contracts
with new media partners which drove up revenue from advertiser clients in the Retail & Consumer sector. Within our other streams, we experienced a
decrease related to the True North business we exited in the second quarter of 2024. We expect year-over-year declines in the owned and operated
marketplace to continue; however, we expect such declines and decreases to be more than offset by the continued growth of Commerce Media Solutions in
the second half of 2025.
Cost of revenue (exclusive of depreciation and amortization).
Year Ended December 31,
(In thousands)
2024
2023
% Change
Cost of revenue (exclusive of depreciation and amortization)
$
193,821 $
219,884
(12%)
For the year ended December 31, 2024 and 2023, cost of revenue (exclusive of depreciation and amortization) consisted mainly of owned and operated
media and fulfillment costs of $130.6 million and $173.6 million, Commerce Media Solutions media cost of $27.0 million and $9.9 million, media and
enablement costs related to our other revenue streams of $31.8 million and $32.5 million, and indirect costs of revenue of $4.4 million and $3.9 million,
respectively. Our owned and operated marketplaces cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related
costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our O&O Sites and fulfillment costs related
to rewards earned by consumers. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media due to changes in our
business practices to comply with the FTC Consent Order. Such costs increased as a percentage of revenue. Our Commerce Media Solutions cost of
revenue consists of fees and revenue share payments made to media partners for ads served on their digital properties. The increase in cost of revenue
(exclusive of depreciation and amortization) in the Commerce Media Solutions was driven by increased impressions from new media partners added over
the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions decreased as a percentage of revenue. The
decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, which includes, in addition to media costs, enablement
costs and tracking costs related to our consumer data associated with our call centers, was attributable to these added costs to support the ACA
business offset by a decrease related to our exit from the True North business in the second quarter of 2024. Cost of revenue (exclusive of depreciation and
amortization) for other revenue streams increased as a percentage of revenue. Indirect costs of revenue increased as a result of escalated hosting costs.
For the year ended December 31, 2024, overall cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 76.1%,
compared to 73.7% for the year ended December 31, 2023.
In the normal course of executing paid media campaigns to source consumer traffic for our O&O Sites, we regularly evaluate new channels, strategies, and
partners. For the year ended December 31, 2024, O&O Sites digital media spend continued to be a mix of affiliate traffic, paid media from major digital
platforms, influencer activations, and inventory from strategic media partners. Traffic acquisition costs incurred with the major digital media platforms
have historically been higher than affiliate traffic sources and the mix and profitability of our media channels, strategies, and partners reflect evolving
market dynamics, the impact of our Traffic Quality Initiative, and the increased compliance obligations from the FTC Consent Order. As we evaluate and
scale new media channels, strategies, and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be
able to maintain our quality standards over time, and we may need to discontinue, or modify the practices of, such sources, which could reduce profitability
further. Commerce Media Solutions media partners are generally renumerated on a per impression or rev share basis, leading to more consistent
profitability. Ultimately, we believe improved traffic quality is the foundation to support sustainable long-term growth and position us as an industry leader
and Commerce Media Solutions is key to that goal. Although past levels of cost of revenue (exclusive of depreciation and amortization) as a percentage of
revenue are not indicative of future percentages in the owned and operated and Call Solutions businesses, we expect revenue share agreements in the
Commerce Media Solutions to create more stability in the long-term.
27
Table of Contents
Sales and marketing.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Sales and marketing
$
17,317 $
18,576
(7%)
For the years ended December 31, 2024 and 2023, sales and marketing expense consisted primarily of employee salaries and benefits of $14.8 million
and $15.8 million, restructuring costs of $0.6 million and $0.1 million, advertising costs of $0.6 million and $0.9 million, professional fees of $0.5 million
and $0.4 million, travel and entertainment expense of $0.4 million and $0.4 million, and non-cash share-based compensation expense of $0.2 million
and $0.5 million, respectively. The decrease was primarily due to lower salaries and other employee related costs driven by a decline in headcount
and lower non-cash share-based compensation as a result of lower grants, partly offset by an increase in restructuring costs driven by the current year
reductions in workforce, as described below.
Product development.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Product development
$
17,281 $
18,454
(6%)
For the years ended December 31, 2024 and 2023, product development expense consisted primarily of employee salaries and benefits of $12.7 million
and $13.6 million, professional fees of $1.6 million and $1.7 million, software license and maintenance costs of $1.5 million and $1.9 million, restructuring
and severance costs of $0.7 million and $0.1 million, and non-cash share-based compensation expense of $0.2 million and $0.6 million, respectively. The
decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors and a decline in non-cash share-based
compensation due to lower grants, partly offset by an increase in restructuring and severance costs in the current year period due to the reductions in
workforce, as described below.
General and administrative.
Year Ended December 31,
(In thousands)
2024
2023
% Change
General and administrative
$
37,697 $
35,334
7%
For the years ended December 31, 2024 and 2023, general and administrative expense consisted mainly of employee salaries and benefits of $17.1 million
and $18.5 million, professional fees of $6.3 million and $6.6 million, office overhead of $4.2 million and $4.3 million, software license and maintenance
costs of $3.1 million and $2.6 million, acquisition-related costs of $2.1 million and $2.7 million, non-cash share-based compensation expense of $1.5
million and $2.6 million, restructuring and severance costs of $0.6 million and $0.3 million, and certain litigation and related costs of $0.0 million and a
credit of ($6.3) million, respectively. The increase in general and administrative expenses was primarily related to the absence of the credit for certain
litigation and related costs due to insurance reimbursements for previously incurred legal fees and lower than expected regulatory settlement in the prior
year, along with an increase in restructuring or severance costs, based on the reduction in workforce as described below. This was partially offset by
a reduction in salaries and benefits due to lower headcount, a decline in share-based compensation expense due to lower grants, and a decrease in
acquisition related costs mainly due to the conveyance of True North, LLC and its direct and indirect subsidiaries.
During the first quarter of 2023 and the first, second, and third quarters of 2024, we implemented reductions in the workforce that resulted in the
termination of 20, 20, 19, and 29 employees, respectively, following management's determination to more effectively align resources with our strategic
initiatives. In connection with the first quarter 2023 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time
termination benefits and associated costs, fully settled in cash by March 31, 2024. In connection with the first quarter 2024 reductions, we incurred
$0.7 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by September
30, 2024. In connection with the second quarter 2024 reductions, we incurred $0.6 million in exit-related restructuring costs, consisting primarily of one-
time termination benefits and associated costs, fully settled in cash by December 31, 2024. In connection with the third quarter 2024 reductions, we
incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in
cash by March 15, 2025. Subsequently, we implemented an additional reduction in workforce in the first quarter of 2025, resulting in the termination of
24 employees. The exit-related restructuring costs are expected to be approximately $1.3 million, consisting primarily of one-time termination benefits and
associated costs, to be fully settled in cash by March 31, 2026. Apart from these exit-related restructuring costs, these reductions in workforce are expected
to result in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative
expenses.
28
Table of Contents
Depreciation and amortization.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Depreciation and amortization
$
9,926 $
10,876
(9%)
The decrease in depreciation and amortization expense was mainly due to the full amortization of certain intangible assets as compared to the year-ended
December 31, 2023.
Goodwill impairment and write-off of intangible assets.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Goodwill impairment and impairment of intangible assets
$
2,241
55,405
(96%)
We recognized a $1.3 million goodwill impairment in the current year period related to the All Other reporting unit and a $1.0 million impairment on its
software developed for internal use related to the Fluent reporting unit and customer relationships related to the All Other reporting unit in the current year
period, compared to the goodwill impairment of $55.4 million for the Fluent and All Other Reporting Unit for the prior year period.
Interest expense, net.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Interest expense, net
$
4,749 $
3,204
48%
The increase was driven by the higher average interest rate on the SLR (as defined herein) credit facility in the current year as compared to the prior year's
Citizens Bank, N.A. term loan described below under Note 8, Long-term debt, net along with increased loan amortization.
Fair Value adjustment of Convertible Notes with related parties.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Fair value adjustment of Convertible Notes, with related parties
$
1,670 $
—
100%
The change was due to a
$1.7 million unrealized loss related to the fair value of Convertible Notes entered into in the current year as compared to none in
the prior year.
Loss on early extinguishment of debt.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Loss on early extinguishment of debt
$
1,009 $
—
100%
The change was due to a $1.0 million loss on early extinguishment of debt related to the Citizens Credit Agreement on April 2, 2024 due on September 30,
2025, as compared to no loss on debt extinguishment in the prior year.
Loss before income taxes.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Loss before income taxes
$
(31,088) $
(63,334)
(51%)
The decrease in loss before income taxes of $32.2 million was a result of the foregoing.
29
Table of Contents
Income tax benefit.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Income tax benefit
$
1,811 $
116
1,461%
For the twelve months ended December 31, 2024, the effective income tax rate of 5.8% differed from the statutory federal income tax rate of 21% primarily
due to losses for which no tax benefit is recognized and is fully offset with a valuation allowance, which was partly offset by the benefit of the reversal of
uncertain tax positions from the prior year. For the twelve months ended December 31, 2023, our effective income tax rate of 0.2% was primarily driven by
the impact of a non-deductible goodwill impairment against pre-tax year-to-date losses offset by the benefit of federal research and development credits.
As of December 31, 2024 and 2023, we recorded full valuation allowances against our net deferred tax assets. We intend to maintain full valuation
allowances against the net deferred tax assets until there is sufficient evidence to support the release of all or some portion of such allowances. Release of
some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in
which such a release may be recorded; however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the
level of profitability we are able to achieve and the net deferred tax assets available.
Net loss.
Year Ended December 31,
(In thousands)
2024
2023
% Change
Net loss
$
(29,277) $
(63,218)
(54%)
For the years ended December 31, 2024 and 2023, net loss was $29.3 million and $63.2 million, respectively, as a result of the factors described above.
Liquidity and Capital Resources
Cash flows and liquidity position
Cash flows (used in) provided by operating activities. For the years ended December 31, 2024 and 2023, net cash used in operating activities was
$14.1 million, compared to net cash provided by operating activities of $8.1 million, respectively. Net loss in the current year period of $29.3 million
represents a decrease of $33.9 million, as compared with net loss of $63.2 million in the prior period. Adjustments to reconcile net loss to net cash provided
by operating activities of $18.1 million in the current year period decreased by $52.3 million, as compared with $70.4 million in the prior period, primarily
due to a goodwill impairment of $1.3 million and as compared to the goodwill impairment of $55.4 million in the prior period, offset by the current year
period loss on the fair value adjustment of Convertible Notes of $1.7 million, loss on early extinguishment of debt of $1.0 million, and an increase in
amortization of debt. There were changes in assets and liabilities consuming cash of $2.9 million in the current year period, as compared with sourcing cash
of $0.9 million in the prior period, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing
from clients and disbursements of amounts payable to vendors.
Cash flows used in investing activities. For the years ended December 31, 2024 and 2023, net cash used in investing activities was $6.2 million and
$7.1 million, respectively. The decrease was mainly due to the impact of the 2023 TAPP consolidation, compared to the increase in investment in
capitalized software in the current year period.
Cash flows provided by (used in) financing activities. For the years ended December 31, 2024 and 2023, net cash provided by financing activities was
$15.2 million for the current year period, compared to net cash used in financing activities of $10.8 million in the prior period, respectively. The change
of $26.0 million in cash provided by financing activities in 2024 was mainly due to the sale of pre-funded warrants, convertible notes and common stock,
in part to officers, directors, and significant stockholders, and net proceeds received from the issuance of new debt, which was partly offset by repayment of
the prior debt and new debt revolver as well as debt financing costs.
As of December 31, 2024, we had noncancelable operating lease commitments of $1.9 million and long-term debt which had a $33.0 million principal
balance.
As of December 31, 2024, we had cash, cash equivalents, and restricted cash of approximately $10.7 million, a decrease of $5.1 million from $15.8 million
as of December 31, 2023.
Going concern
The financial covenants under the SLR Credit Agreement (as defined below) were reset based on our twelve- month projections. However, we have not met
our projections for certain recent quarters, and are currently trending below our 2025 first quarter projections. If during any fiscal quarter, we do not
comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR (as defined below) the right to
accelerate maturities. In such case, we would not have sufficient funds to repay the SLR Term Loan (as defined below) under the SLR Credit Agreement
and any outstanding balance on the SLR Revolver (as defined below). Furthermore, even with the additional capital raise completed in March 2025, there
is no assurance the available cash, plus borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months and we
expect to raise additional capital. We will consider implementing cost-saving measures, but there is no guarantee that such plans would be successfully
executed or have the expected benefits. Based upon the foregoing and uncertainty of our ability to satisfy covenants in the SLR Credit Agreement (see
"SLR Credit Agreement" below), management concluded that there exists a substantial doubt about our ability to continue as a going concern, and our
independent registered public accounting firm included in its opinion for the year ended December 31, 2024 an explanatory paragraph expressing
substantial doubt in our ability to continue as a going concern. Our financial statements as of December 31, 2024 did not include any adjustments that
might result from the outcome of this uncertainty.
If our current plans are not successful, we may need to consider other strategic alternatives, including restructuring or refinancing our debt, seeking
additional equity or debt financing, reducing or delaying our business activities and strategic initiatives, selling assets, and other strategic transactions
and/or other measures. See Item 1A. Risk Factors –— "There is substantial doubt about our ability to continue as a going concern." for further information
about the risks of these strategic alternatives.
30
Table of Contents
Workforce reductions and divestitures
Given the continued challenges we have faced achieving profitability, we made reductions in workforce throughout 2024 and the beginning of 2025 and
will continue to further consider cost reduction measures and focus resources on opportunities that will enable us to meet our projected budget and cash
flow requirements. We divested a non-core business unit (see Note 14, Variable Interest Entity, in the Notes to the consolidated financial statements),
transferred another business unit (see Note 6, Intangible assets, net in the Notes to the consolidated financial statements), ceased continuing operations of a
non-core business, and we will review other business units to determine the impact of potential divestments.
Capital resources and cash requirements
Our sources of capital include cash on hand, cash from operations to the extent available and borrowings from the SLR Credit Facility (as defined below)
to the extent available. We have no other committed sources of capital.
Our material cash requirements from known contractual and other obligations consist of our term loan and obligations under operating leases for office
space. For more information regarding our SLR Credit Facility, refer to Note 8 of the Notes to our consolidated financial statements included in this 2024
Form 10-K. For more information regarding our lease obligations, refer to Note 4 of the Notes to our consolidated financial statements included in this
2024 Form 10-K.
Our future cash requirements will depend on many factors, including employee-related expenditures from expansion of our headcount, costs to support the
growth in our client and partner accounts and continued client expansion, the timing and extent of spending to support product development efforts, the
expansion of sales and marketing activities, the introduction of new and enhanced solutions, features, and functionality, and litigation. We may, in the
future, enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. In order to finance
such acquisitions or investments, it may be necessary for us to raise additional funds through public or private financings or draw upon our
revolving facility. If we do not meet the conditions to draw, or additional financing is not accessible from outside sources, we may not be able to raise
additional capital on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and
financial condition would be adversely affected.
SLR Credit Agreement
On April 2, 2024, Fluent, LLC, as Borrower, entered into a credit agreement (as amended, the "SLR Credit Agreement") with the Company and certain
subsidiaries of the Borrower as guarantors, Crystal Financial LLC D/B/A SLR Credit Solutions, as administrative agent, lead arranger and
bookrunner ("SLR"), and the lenders from time to time party thereto. The SLR Credit Agreement provides for a $20.0 million term loan (the "SLR Term
Loan") and a revolving credit facility of up to $30.0 million (the "SLR Revolver" and, together with the SLR Term Loan, the "SLR Credit Facility"). We
used a portion of the net proceeds of the SLR Credit Facility to repay our then-outstanding obligations under the Citizens Credit Agreement dated March
31, 2021, prior to its maturity. As of December 31, 2024, the SLR Credit Facility had an outstanding principal balance of $31.5 million (of which
$11.5 million relates to the SLR Revolver) and matures on April 2, 2029 (the "Maturity Date").
The SLR Credit Facility is secured by substantially all of our assets and those of certain of our direct and indirect subsidiaries, including Fluent, LLC. The
SLR Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including, but not limited
to, limitations on the amount of additional debt we are able to incur and our ability to make certain investments or to pay dividends or other restricted
payments. The SLR Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to grace
periods, among others, payment default, covenant default and judgment default.
We may voluntarily prepay the SLR Term Loan, in whole or in part, at any time, subject to a premium payable on the aggregate principal amount of any
such voluntary prepayments within the first three years following the closing date. There is no principal amortization prior to maturity under the SLR
Credit Agreement, except for certain mandatory prepayments to be made with the net cash proceeds of certain asset sales, casualty events, and other
extraordinary receipts and upon the occurrence of certain other events, in each case, subject to certain reinvestment rights, thresholds and other
exceptions. Unfunded commitments under the SLR Revolver will be subject to an unused facility fee, which will be payable monthly in arrears, as of the
month following the closing, at a rate of 0.50% per annum. All amounts owed under the SLR Credit Facility will be due and payable on the Maturity Date
or earlier following a change in control or other event of default, unless otherwise extended in accordance with the terms of the SLR Credit
Agreement. Borrowings under the SLR Credit Agreement currently bear interest at a rate per annum equal to a 3-month term SOFR plus 0.26161%, subject
to a 1.50% floor, plus 5.75% (the "Applicable Margin"). The Applicable Margin will be reduced to 5.0% when our fixed charge coverage ratio is greater
than 1.10 to 1. The opening interest rate of the SLR Credit Facility was 10.81% (SOFR + CSA + 5.25%), which changed to 10.51% (SOFR + CSA+5.75%)
as of December 31, 2024.
On May 15, 2024, we entered into the First Amendment to the SLR Credit Agreement, pursuant to which SLR (1) waived any required prepayments on the
SLR Revolver from the proceeds from the Private Placement; (2) required that the Credit Parties (as defined in the SLR Credit Agreement) retain a
financial advisor to assist in preparing the Company's projections, (3) increased the minimum excess availability covenant following the Private Placement;
(4) amended the definition of borrowing base (as defined in the SLR Credit Agreement); and (5) amended certain post-closing obligations.
We entered into two letter agreements with SLR, one on July 31, 2024, and another on August 14, 2024, pursuant to which SLR extended the deadline for
delivery of the compliance certificate required for the fiscal month ended June 30, 2024, and the related notice of event of default, to August 21, 2024.
On August 19, 2024, we entered into the Second Amendment to the SLR Credit Agreement, which, among other things, required that we raise $2.0 million
in additional capital. To raise the capital, we entered into convertible subordinated notes (See Note 8, Long-term debt, net in the Notes to the consolidated
financial statements) raising an aggregate of $2.1 million. In addition, the Second Amendment (1) waived non-compliance with the financial covenants as
of June 30, 2024, (2) modified the financial covenants through December 31, 2025, (3) ended a requirement to engage a financial advisor, (4) increased the
interest rate margin from 5.25% to 5.75%, and (5) and waived any required prepayments from the proceeds from the convertible subordinated notes
financing.
We entered into a letter agreement with SLR on October 30, 2024, pursuant to which SLR extended the deadline for delivery of the compliance certificate
required for the fiscal month ended September 30, 2024, and the related notice of event of default, to November 19, 2024.
31
Table of Contents
On November 14, 2024, we entered into the Third Amendment to the SLR Credit Agreement, which, among other things, required that we raise at least
$7.5 million of additional capital by November 29, 2024 which was subsequently extended to December 3, 2024. On November 29, 2024, we entered into
purchase agreements with (1) two institutional investors who purchased stock pursuant to a registered direct offering (the "Registered Direct Offering") and
(2) four Company insiders who purchased pre-funded warrants (the "December Pre-Funded Warrants"), pursuant to which, on December 2, 2024, we
received
aggregate
net
proceeds
of
approximately
$7.9
million,
through
the
combined
transactions,
after
deducting
offering
expenses (See Note 11, Equity in the Notes to the consolidated financial statements). In addition, the Third Amendment (1) waived non-compliance with
the financial covenants as of September 30, 2024, (2) extended the duration of the call protection applicable to the loans, and (3) modified the cash
dominion provisions to remain in effect on an indefinite basis. (See Note 8, Long-term debt, net in the Notes to the consolidated financial statements).
As a result of our economic downward trends as described above in "Advertiser Trends & Seasonality", we were not in compliance with our financial
covenant under the SLR Credit Agreement as of December 31, 2024. In addition, we updated our projections to reflect the continued pressure on our
operating results. On January 30, 2025 and then on March 3, 2025, we entered into letter agreements with SLR, pursuant to which SLR extended the
deadline for delivery of the compliance certificate required for the fiscal month ended December 31, 2024, and the related notice of event of default to
March 10, 2025. On March 10, 2025, we entered into the Fourth Amendment to the SLR Credit Agreement, which, among other things, required that we
raise at least $5.0 million of additional capital for Fluent, LLC, our wholly-owned subsidiary, by March 20, 2025. On March 19, 2025, we entered into
securities purchase agreements with directors and/or officers and certain stockholders of the Company, including our largest shareholder, pursuant to which,
on March 20, 2025, they acquired pre-funded warrants to purchase up to 2,332,104 shares of our common stock for gross proceeds of $5.1 million, before
deducting offering expenses payable by us of $0.1 million (See Note 16, Subsequent Events in the Notes to the consolidated financial statements). In
addition, the Fourth Amendment waived non-compliance with the financial covenants as of December 31, 2024, extended the duration of the call protection
applicable to the loans, and modified the financial covenants, among other things (See Note 16, Subsequent Events in the Notes to the consolidated
financial statements).
The financial covenants under the SLR Credit Agreement were reset based on our twelve month projections. However, we have not met our projections for
certain recent quarters and we may not meet our projections in the future. If during any fiscal quarter, we do not comply with any of our financial
covenants, such non-compliance would result in an event of default that would give SLR the right to accelerate maturities. In such case, we would not have
sufficient funds to repay the SLR Term Loan under the SLR Credit Agreement and the additional amount owing on the SLR Revolver.
Sales of securities
On May 13, 2024, the Company issued pre-funded warrants to purchase up to 2,955,084 shares of the Company's common stock, at a purchase price of
$3.384 per warrant. The aggregate gross proceeds totaled $10.0 million before deducting offering expenses payable by the Company. See Note 11, Equity
in the Notes to the consolidated financial statements.
On August 19, 2024, the Company sold convertible subordinated promissory notes in aggregate principal amount of $2.1 million. See Note 8, Long-term
debt, net in the Notes to the consolidated financial statements.
On December 2, 2024, the Company issued 2,483,586 shares of common stock pursuant to a registered direct offering and issued pre-funded warrants to
purchase up to 1,187,802 shares of the Company’s common stock, at a purchase price of $2.3147 per warrant. The aggregate gross proceeds
totaled $8.5 million before deducting offering expenses payable by the Company. See Note 11, Equity in the Notes to the consolidated financial statements.
On March 20, 2025, the Company issued pre-funded warrants to purchase up to 2,332,104 shares of the Company's common stock, at a purchase price of
$2.174 per warrant. The aggregate gross proceeds totaled $5.1 million before deducting offering expenses payable by the Company. See Note 16,
Subsequent Events in the Notes to the consolidated financial statements.
Critical Accounting Estimates
Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have
been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make certain estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to revenue recognition, recoverability of the carrying amounts of goodwill and intangible
assets, fair value of Convertible Notes, share-based compensation, income taxes, and contingencies. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. All amounts below are presented in thousands.
We believe the following critical accounting estimates govern our more significant judgments and estimates used in the preparation of our consolidated
financial statements. Further details of the Company's accounting policies are available in Item 8, Financial Statements and Supplementary Data, Note 2,
Summary of significant accounting policies, in the Notes to consolidated financial statements.
32
Table of Contents
Revenue recognition
Data and performance-based marketing revenue
Revenue is recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration we expect to be entitled to in
exchange for those goods or services, based on our performance obligation. Our customers simultaneously receive and consume the benefits provided, as
we satisfy our performance obligations. Furthermore, we elected the "right to invoice" practical expedient available within ASC 606-10-55-18 as the
measure of progress, because we have a right to payment from a customer in an amount that corresponds directly with the value of the performance
completed to date.
When there is a delay between the period in which revenue is recognized and when a customer invoice is issued, revenue is recognized and the related
amounts are recorded as unbilled revenue within accounts receivable on the consolidated balance sheets. In line with industry practice, the unbilled revenue
balance is recorded based on our internally tracked conversions, net of estimated variances between this amount and the amount tracked and subsequently
confirmed by customers. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month directly
following the period of service. Our historical estimates related to unbilled revenue have not differed materially from actual invoiced revenue; however,
there is a possibility that invoiced revenue may differ materially from estimates and may impact our consolidated financial statements in future periods.
Commission revenue
We, acting as the agent, recognize commission revenue in the amount expected to be received from the insurance provider when we submit the initial
policy application. Further, we apply the practical expedient to estimate the commission revenue for each insurance policy by applying the use of the
portfolio approach to policies grouped together by product type and period submitted for effectuation.
The commission revenue is variable based on a policy's estimated lifetime value ("LTV"), we expect the policy will remain effective based on historical
trends, industry data, expectations as to future retention rates, and average commission rates, based on the expected value method. Further, we consider the
application of constraints to the LTV and only recognize the amount of variable consideration believed probable to be received that will not be subject to a
significant revenue reversal in the future. As the timeframe of the policy is expected to be greater than a year, a re-assessment of the estimated LTV based
on updated data due to experience, industry changes, and/or commission rate changes, could result in an increase or decrease in revenue and corresponding
asset in the period the change is made, and materially impact our consolidated financial statements.
Business combinations
We record acquisitions pursuant to ASC 805, Business Combinations, by allocating the fair value of purchase consideration to the tangible assets acquired,
liabilities assumed and estimated fair values of intangible assets acquired. The excess of the fair value of purchase consideration over the fair values of
these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions with
respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from
acquired intangible assets, useful lives, and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are
inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. If actual results are materially lower than originally
estimated, it could result in a material impact on our consolidated financial statements in future periods.
Goodwill
In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis
in determining whether it is more likely than not that its fair value exceeds the carrying value. Goodwill is tested for impairment at the reporting unit level
and is conducted by estimating and comparing the fair value of each of our reporting units to their carrying value. If the carrying value of a reporting unit
exceeds its fair value, we recognize an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting
unit.
For the quantitative factors, management utilizes a third-party valuation firm for certain assumptions and analysis including discount rate and market
multiples. We review the assumptions and analysis with the valuation firm to ensure reasonableness, although it is inherently uncertain and unpredictable.
During the three months ended June 30, 2024, we determined that the effects of the expected decline in operations due to the impact of certain client
relationships constituted a triggering event for the All Other reporting unit. We conducted an interim test of the fair value of the All Other reporting unit's
goodwill for potential impairment related to the triggering event. We applied solely the income approach to determine the fair value of the All Other
reporting unit. The results of this approach indicated that the carrying value exceeded its fair value by 58%. We therefore concluded that the goodwill was
impaired as of June 30, 2024 and recorded a non-cash impairment charge for its remaining balance of $1,261.
Intangible assets other than goodwill
Intangible assets are initially capitalized based on actual costs incurred, acquisition cost, or fair value if acquired as part of a business combination. These
intangible assets are amortized on a straight-line basis over their respective estimated useful lives, which are the periods over which these assets are
expected to contribute directly or indirectly to future cash flows. We also capitalize eligible costs, in accordance with ASC 350-40, Software - Internal-Use
Software, which include applicable salaries and benefits, share-based compensation expense, travel expenses and other direct costs of developing internal-
use software that are incurred in the application development stage, when developing or obtaining software for internal use. Once the internal use software
is ready for its intended use, it is amortized on a straight-line basis over its useful life.
33
Table of Contents
Finite-lived intangible assets are evaluated for impairment periodically, or whenever events or changes in circumstances indicate that their related carrying
amounts may not be recoverable, in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. In evaluating intangible assets for
recoverability, we use the best estimate of future cash flows expected to result from the use of the asset and eventual disposition, using assumptions of
revenue growth rates, operating expenses, and terminal growth rates. These matters are highly uncertain, and different assumptions can result in a
materially different estimate of future cash flow. To the extent that estimated future undiscounted cash inflows attributable to the asset, less estimated future
undiscounted cash outflows, is less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying
value of such asset and its fair value.
Asset recoverability is an area involving management judgment, requiring assessment as to whether the carrying values of assets are supported by their
undiscounted future cash flows. We may use a third-party valuation firm to assist us in evaluating asset recoverability.
During the three months ended June 30, 2024, we conducted an interim test of recoverability of the All Other reporting units long lived assets, which
compared projected undiscounted cash flows to the carrying value of the asset group. If we were to experience sales declines, a significant change in
operating margins which may impact our cash flows, and/or a decrease in our projected long-term growth rates, there would be an increased risk of
impairment of other assets. Based on the results of this approach as of June 30, 2024, we concluded that the long-lived asset was not recoverable and an
impairment loss was calculated. We assessed the fair value taking into account the market and the impact of the asset on the forecast and determined that
the full remaining balance was impaired. As such, we recorded a non-cash impairment charge of $383 in the second quarter of 2024.
Convertible Notes, at fair value with related parties
We evaluated the terms of our Convertible Notes to determine whether the debt instrument contained an embedded derivative, and therefore a hybrid
instrument, in which then the fair value option can be elected. The determination is based on judgment when considering the terms of the agreement. To
then determine the fair value of the Convertible Notes, we considered the length of the term until conversion and then applied a discount rate based on that.
We then applied the Black Scholes methodology to determine the conversion date stock price based on assumptions for volatility, risk free-rate, the current
stock price, and term, noting that if any of these assumptions were to change driven by macro-economic factors as well as Company specific results, the
impact to the fair value may be significant. As such, we concluded that its fair value at inception was $4,160, which was adjusted to $3,720 as of December
31, 2024.
Share-based Compensation
We account for share-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under ASC 718, for awards with time-based
conditions, we measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award and
recognize such costs on a straight-line basis over the period the recipient is required to provide service in exchange for the award, which is the vesting
period. For equity awards with market conditions, we recognize costs on a straight-line basis, regardless of whether the market conditions are achieved and
the awards ultimately vest. For equity awards with performance conditions, we record the share-based compensation when achievement of the performance
criteria is deemed probable using the grant date fair value. For equity-based awards settled in cash, we record the share-based compensation when
achievement of the performance criteria is deemed probable, adjusted for fair value at each reporting period. We recognize forfeitures as they occur.
Income taxes
We account for income taxes in accordance with ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The valuation allowances are provided to reduce the amount of deferred tax assets if it is considered more likely than not that some
portion or all of the deferred tax assets will not be realized, which is based on our review of historical results and forecasts.
Further, we recognize in our financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination,
based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs and we consult with external tax
counsel as appropriate. We accrue interest and penalties related to uncertain tax positions, if and when required, as interest expense and a component of
other expenses, respectively, in the consolidated statements of operations. Changes in recognition or measurement are based on factors, including but not
limited to, change in known facts and circumstances, changes in tax law, and new guidance and interpretation, all of which a change in factors could result
in a change in our income tax, which could materially impact our consolidated financial statements in future periods.
Contingencies
We account for contingencies in accordance with ASC 450, Contingencies, by accruing a loss contingency if it is probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued, we evaluate, among other factors, the degree of
probability and the ability to reasonably estimate the amount of any such loss. If the probability changes or the estimates used are incorrect, we may need to
record adjustments to our contingencies, which could material impact on our consolidated financial statements in future periods. In the ordinary course of
business, we are subject to loss contingencies that cover a range of matters.
Recently Issued Accounting Standards
See Note 2, Summary of significant accounting policies, under the caption "(t) Recently issued and adopted accounting standards" in the Notes to
consolidated financial statements for further information on certain accounting standards that have been adopted during 2024 or that have not yet been
required to be implemented and may be applicable to our future operations.
34
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined in Rule 12b-2 of the
Exchange Act.
Item 8. Financial Statements and Supplementary Data.
Our consolidated financial statements and the Notes thereto, together with the report thereon of our independent registered public accounting firm, are filed
as part of this report, beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) as of December 31, 2024. We maintain
disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that
such information is accumulated and communicated to our management, including our Company's Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), the Company's Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures as of
December 31, 2024 and concluded they were effective as of that date.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Management, under the supervision of and with the
participation of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations ("COSO")
of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on that assessment, our Chief Executive Officer and Chief Financial
Officer concluded that our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external purposes in accordance with the U.S. GAAP as of the end of the period covered by
this 2024 Form 10-K.
This 2024 Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the SEC’s "non-accelerated
filer" rules that permit the Company to provide only management’s assessment report for the year ended December 31, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all 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. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The
design of any system of controls is also 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.
Item 9B. Other Information.
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
35
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2024.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2024.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of December 31, 2024.
36
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) List of documents filed as part of this report:
1. Financial Statements: The information required by this item is contained in Item 8 of this Form 10-K.
2. Financial Statement Schedules: The information required by this item is included in the consolidated financial statements contained in Item 8 of this
Form 10-K.
3. Exhibits: The following exhibits are filed as part of, or incorporated by reference into, this Form 10-K.
Exhibit No.Description
Filed
Herewith
3.1
Certificate of Domestication (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed
March 26, 2015).
3.2
Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed
March 26, 2015).
3.3
Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K filed on September 26, 2016).
3.4
Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K filed on April 16, 2018).
3.5
Amended and Restated Bylaws of Fluent, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form
8-K filed on February 19, 2019).
3.6
Certificate of Amendment to the Certificate of Incorporation of Fluent, Inc.,(incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on April 12, 2024).
4.1
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed
April 16, 2018).
4.2
Form of Additional Warrants (incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed October
17, 2017).
4.3
Description of Securities.
X
4.4
Form of Pre-Funded Warrant, dated as of November 29, 2024 (incorporated by reference to Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed December 2, 2024).
4.5
Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 in the Company's Current Report on Form 8-K filed March
21, 2025).
10.1
Form of Indemnity Agreement (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K filed
March 15, 2023).
10.2+
Form of Restricted Stock Unit Agreement under IDI Inc.’s 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to
the Company’s Quarterly Report on Form 10-Q filed August 14, 2015).
10.3+
Form of Non-qualified Stock Option Agreement under IDI Inc.’s 2015 Stock Incentive Plan (incorporated by reference to
Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2015).
10.4+
2015 Stock Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April
30, 2015).
10.5+
Amendment to IDI, Inc. 2015 Stock Incentive Plan, effective June 1, 2016 (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement Form S-8 filed on June 3, 2016).
10.6+
Employment Agreement, dated as of January 8, 2018, by and between Fluent, LLC and Donald Patrick (incorporated by reference
to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on March 27, 2018).
10.7+
Amendment to IDI, Inc. 2015 Stock Incentive Plan, effective January 8, 2018 (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-8 filed on April 6, 2018).
10.8+
Fluent, Inc. 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on June 8, 2018).
10.9+
Employment Agreement, dated as of September 11, 2018, by and between Fluent, Inc. and Ryan Schulke (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on September 12, 2018).
10.10+
Employment Agreement, dated as of September 11, 2018, by and between Fluent, Inc. and Matthew Conlin (incorporated by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed on September 12, 2018).
10.11+
Fluent, Inc. 2022 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K filed on June 10, 2022).
10.12+
Form of Restricted Stock Unit Award Grant Notice (2022 Long Term Incentive Plan) (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q, filed August 21, 2023).
10.13+
Form of Restricted Stock Unit Award Grant Notice (2022 Omnibus Equity Incentive Plan) (incorporated by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q, filed August 21, 2023).
10.14+
Form of 2022 Performance Share Unit Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on
Form 10-Q, filed August 21, 2023).
10.15+
Form of Stock Option Grant Notice and Option Agreement (2022 Omnibus Equity Incentive Plan) (incorporated by reference to
Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed August 21, 2023).
10.16+
Consulting Agreement, dated as of January 20, 2023, by and between Fluent, Inc. and Ryan Perfit (incorporated by reference to Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q, filed May 15, 2023).
10.17+
Amendment to Letter Agreement for Consulting Services, effective as of February 1, 2024, by and between Fluent, LLC and CRIO,
LLC. (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-K filed April 2, 2024).
10.18
Credit Agreement, by and among, Fluent, LLC, Fluent, Inc., certain subsidiaries of Fluent, LLC as guarantors, Crystal Financial
LLC D/B/A SLR Credit Solutions, and each other lender from time to time party thereto. (incorporated by reference to Exhibit
10.26 to the Company’s Quarterly Report on Form 10-K filed April 2, 2024).
10.19**
Form of Securities Purchase Agreement, dated as of May 13, 2024, by and between Fluent, Inc. and the purchasers party
thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2024).
10.20
Form of Pre-Funded Warrant, dated as of May 13, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed May 15, 2024).
10.21
Form of Support Agreement, dated as of May 13, 2024, by and among Fluent, Inc. and the parties thereto (incorporated by reference
to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2024).
37
Table of Contents
10.22
First Amendment to Credit Agreement, dated as of May 15, 2024, by and among the Company, the lenders party thereto, Crystal
Financial LLC d/b/a SLR Credit Solutions, and Fluent, LLC (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly
Report on Form 10-Q filed May 15, 2024).
10.23
Letter Agreement to Credit Agreement, dated as of July 31, 2024, by and among Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC and Fluent, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly
Report on Form 10-Q filed August 19, 2024).
10.24
Second Letter Agreement to Credit Agreement, dated as of August 14, 2024, by and among Crystal Financial LLC D/B/A SLR
Credit Solutions, Crystal Financial SPV LLC and Fluent, LLC (incorporated by reference to Exhibit 10.7 to the Company’s
Quarterly Report on Form 10-Q filed August 19, 2024).
10.25
Second Amendment to Letter Agreement for Consulting Services, effective as of August 1, 2024, by and between Fluent, LLC and
CRIO, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed August 19, 2024).
10.26
Form of Securities Purchase Agreement, dated as of August 19, 2024, by and between Fluent, Inc. and the purchaser party
thereto (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed August 19, 2024).
10.27
Form of Convertible Subordinated Promissory Note, dated as of August 19, 2024 (incorporated by reference to Exhibit 10.11 to the
Company’s Quarterly Report on Form 10-Q filed August 19, 2024).
10.28
Form of Second Amendment Subordination Agreement, dated as of August 19, 2024, by and among the Company, Crystal Financial
LLC D/B/A SLR Credit Solutions, and the Subordinated Creditor party thereto (incorporated by reference to Exhibit 10.12 to the
Company’s Quarterly Report on Form 10-Q filed August 19, 2024).
10.29**
Second Amendment to Credit Agreement, dated as of August 19, 2024, by and among Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly
Report on Form 10-Q/A filed August 21, 2024).
10.30+
Employment Agreement, by and between Fluent, Inc. and Ryan Perfit, dated September 1, 2024 (incorporated by reference to
Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed November 15, 2024).
10.31
Letter Agreement to Credit Agreement, dated as of October 30, 2024, by and among Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly
Report on Form 10-Q filed November 15, 2024).
10.32**
Joinder Agreement to Credit Agreement, dated as of November 1, 2024, by and among Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly
Report on Form 10-Q filed November 15, 2024).
10.33
Third Amendment to Credit Agreement, dated as of November 14, 2024, by and amount Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly
Report on Form 10-Q filed November 15, 2024).
10.34***
Form of Registered Direct Purchase Agreement, dated as of November 29, 2024 (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed December 2, 2024).
10.35***
Form of Placement Agency Agreement, dated as of November 29, 2024 (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed December 2, 2024).
10.36***
Form of Private Placement Purchase Agreement, dated as of November 29, 2024, by and between Fluent, Inc. and the purchasers
party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed December 2, 2024).
10.37
Form of Support Agreement, dated as of November 29, 2024, by and among Fluent, Inc. and the parties thereto (incorporated by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed December 2, 2024).
10.38
Letter Agreement to Credit Agreement, dated as of January 30, 2025, by and between Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC.
X
10.39
Letter Agreement to Credit Agreement, dated as of March 3, 2025, by and between Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC.
X
10.40
Fourth Amendment to Credit Agreement, dated as of March 10, 2024, by and between Crystal Financial LLC D/B/A SLR Credit
Solutions, Crystal Financial SPV LLC, and Fluent, LLC.
X
10.41***
Form of Securities Purchase Agreement, by and among Fluent, Inc. and the purchaser parties thereto (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 21, 2025).
10.42
Form of First Amendment to Support Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed March 21, 2025).
38
Table of Contents
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company's Annual Report on Form 10-K filed on March 13, 2020).
19.1
Form of Insider Trading Policy
X
21.1
Subsidiaries of Fluent, Inc.
X
23.1
Consent of Grant Thornton LLP.
X
31.1
Certification of Chief Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and
Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Chief Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and
Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1*
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
32.2*
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
97.1
Fluent, Inc. Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on
April 2, 2024)
101.INS
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document)
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+
Management contract or compensatory plan or arrangement
*
This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that
section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
**
Certain of the schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(10). The Company
hereby undertakes to furnish supplementally a copy of all omitted schedules to the SEC upon its request.
***
Certain of the schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company hereby
undertakes to furnish supplementally a copy of all omitted schedules to the SEC upon its request.
Item 16. Form 10-K Summary.
Not applicable.
39
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 31, 2025
FLUENT, INC.
By:
/s/ Donald Patrick
Donald Patrick
Chief Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Donald Patrick
Chief Executive Officer
March 31, 2025
Donald Patrick
(Principal Executive Officer)
/s/ Ryan Perfit
Chief Financial Officer
March 31, 2025
Ryan Perfit
(Principal Financial Officer and Principal Accounting Officer)
/s/ Ryan Schulke
Chairman and Chief Strategy Officer
March 31, 2025
Ryan Schulke
/s/ Matthew Conlin
Chief Customer Officer and Director
March 31, 2025
Matthew Conlin
/s/ Don Mathis
Lead Director
March 31, 2025
Don Mathis
/s/ Barbara Kohn
Director
March 31, 2025
Barbara Kohn
/s/ David Graff
Director
March 31, 2025
David Graff
/s/ Richard Pfenniger
Director
March 31, 2025
Richard Pfenniger
/s/ James P. Geygan
Director
March 31, 2025
James P. Geygan
40
Table of Contents
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Page
Report of independent registered public accounting firm for the years ended December 31, 2024 and 2023 (PCAOB ID: 248)
2
Consolidated balance sheets as of December 31, 2024 and 2023
4
Consolidated statements of operations for the years ended December 31, 2024 and 2023
5
Consolidated statements of changes in shareholders’ equity for the years ended December 31, 2024 and 2023
6
Consolidated statements of cash flows for the years ended December 31, 2024 and 2023
7
Notes to consolidated financial statements
8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Fluent, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Fluent, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December
31, 2024 and 2023, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the two years in the period
ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted
in the United States of America.
Going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, as of December 31, 2024, the Company was not in compliance with financial covenants of the SLR Credit
Agreement. On March 10, 2025, the Company entered into the Fourth Amendment (as defined in Note 16) to the SLR Credit Agreement, which among
other things, waived the non-compliance with the financial covenants as of December 31, 2024. The Company’s business plan for 2025, which is also
described in Note 2, contemplates reduced operating losses, maintaining compliance with the revised financial covenants under the SLR Credit Agreement
and obtaining additional working capital. The Company’s ability to achieve the foregoing elements of its business plan and maintaining compliance with
its financial covenants is uncertain and raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any
way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of revenue recognition related to the Fluent reporting segment
As described in Notes 2 and 13 to the financial statements, and disclosed in the consolidated statements of operations, the Company recorded $254.6
million of total revenues for the year ended December 31, 2024, of which $240.8 million related to the Fluent reporting segment.
The Company’s performance obligation related to the Fluent reporting segment is typically to (1) deliver data records, based on predefined qualifying
characteristics specified by the customer or (2) generate conversions, based on predefined user actions and subject to certain qualifying characteristics
specified by the customer. We identified revenue recognition as a critical audit matter.
F-2
Table of Contents
The principal considerations for our determination that revenue recognition related to the Fluent reporting segment is a critical audit matter are (1) the
significant level of audit effort required to evaluate the sufficiency and appropriateness of audit evidence when examining the Company’s customer
confirmations in combination with cash receipts and other supporting evidence; and (2) evaluating the nature and extent of audit evidence obtained for new
revenue contracts or amendments to existing contracts, which require subjective auditor judgement because of the nature of the Company’s revenue
contracts in the Fluent reporting segment and the extent of reliance on third-party evidence.
Our audit procedures related to the evaluation of revenue recognition related to the Fluent reporting segment included the following, among others:
• We obtained understanding of the design of key controls over the Company’s revenue recognition process.
• For a sample of revenue transactions, we performed detailed transaction testing by (1) agreeing the amount recognized to source documentation; (2)
comparing the amount of revenue recognized to third-party customer confirmations obtained by the Company; and (3) comparing the amount of revenue
recognized to subsequent cash remittance advice or obtaining direct third-party confirmations.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
New York, New York
March 31, 2025
F-3
Table of Contents
FLUENT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31, 2024
December 31,
2023
ASSETS:
Cash and cash equivalents
$
9,439 $
15,804
Accounts receivable, net of allowance for credit losses of $487 and $231, respectively
46,532
56,531
Prepaid expenses and other current assets
8,729
6,071
Restricted cash
1,255
—
Total current assets
65,955
78,406
Property and equipment, net
304
591
Operating lease right-of-use assets
1,570
3,395
Intangible assets, net
21,797
26,809
Goodwill
—
1,261
Other non-current assets
3,991
1,405
Total assets
$
93,617 $
111,867
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Accounts payable
$
8,776 $
10,954
Accrued expenses and other current liabilities
21,905
30,534
Deferred revenue
556
430
Current portion of long-term debt
31,609
5,000
Current portion of operating lease liability
1,836
2,296
Total current liabilities
64,682
49,214
Long-term debt, net
250
25,488
Convertible Notes, at fair value with related parties
3,720
—
Operating lease liability, net
9
1,699
Other non-current liabilities
1
1,062
Total liabilities
68,662
77,463
Contingencies (Note 15)
Shareholders' equity:
Preferred stock — $0.0001 par value, 10,000,000 Shares authorized; Shares outstanding — 0 shares for both
periods
—
—
Common stock — $0.0005 par value, 200,000,000 Shares authorized; Shares issued — 20,791,431 and
14,384,936, respectively; and Shares outstanding — 20,022,836 and 13,616,341, respectively
47
43
Treasury stock, at cost — 768,595 and 768,595 shares, respectively
(11,407)
(11,407)
Additional paid-in capital
447,110
427,286
Accumulated deficit
(410,795)
(381,518)
Total shareholders’ equity
24,955
34,404
Total liabilities and shareholders' equity
$
93,617 $
111,867
See notes to consolidated financial statements
F-4
Table of Contents
FLUENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
Year Ended December 31,
2024
2023
Revenue
$
254,623 $
298,399
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)
193,821
219,884
Sales and marketing
17,317
18,576
Product development
17,281
18,454
General and administrative
37,697
35,334
Depreciation and amortization
9,926
10,876
Goodwill and intangible assets impairment
2,241
55,405
Total costs and expenses
278,283
358,529
Loss from operations
(23,660)
(60,130)
Interest expense, net
(4,749)
(3,204)
Fair value adjustment of Convertible Notes, with related parties
(1,670)
—
Loss on early extinguishment of debt
(1,009)
—
Loss before income taxes
(31,088)
(63,334)
Income tax benefit
1,811
116
Net loss
$
(29,277) $
(63,218)
Basic and diluted loss per share:
Basic
$
(1.80) $
(4.59)
Diluted
$
(1.80) $
(4.59)
Weighted average number of shares outstanding:
Basic
16,259,943
13,770,356
Diluted
16,259,943
13,770,356
See notes to consolidated financial statements
F-5
Table of Contents
FLUENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands, except share data)
Additional
Total
Common stock
Treasury stock
paid-in Accumulated Shareholders'
Shares
Amount
Shares Amount
capital
deficit
equity
Balance at December 31, 2022
14,129,530 $
42 716,692 $(11,171) $ 423,384 $
(318,300) $
93,955
Vesting of restricted stock units and issuance of stock
under incentive plans
255,406
1
—
—
(1)
—
—
Increase in treasury stock resulting from shares
withheld to cover statutory taxes
—
—
51,903
(236)
—
—
(236)
Share-based compensation expense
—
—
—
—
3,903
—
3,903
Net loss
—
—
—
—
—
(63,218)
(63,218)
Balance at December 31, 2023
14,384,936 $
43 768,595 $(11,407) $ 427,286 $
(381,518) $
34,404
Vesting of restricted stock units and issuance of stock
under incentive plans
319,933
1
—
—
(1)
—
—
Share-based compensation expense
—
—
—
—
2,011
—
2,011
Issuance of pre-funded warrants
—
—
—
—
12,628
—
12,628
Exercise of pre-funded warrants
3,602,976
2
—
—
(2)
—
—
Registered Direct Offering
2,483,586
1
—
—
5,188
—
5,189
Net loss
—
—
—
—
—
(29,277)
(29,277)
Balance at December 31, 2024
20,791,431 $
47 768,595 $(11,407) $ 447,110 $
(410,795) $
24,955
See notes to consolidated financial statements
F-6
Table of Contents
FLUENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December 31,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(29,277) $
(63,218)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
9,926
10,876
Non-cash loan amortization expense
1,371
426
Non-cash gain on contingent consideration
(250)
—
Non-cash loss on early extinguishment of debt
1,009
—
Share-based compensation expense
1,970
3,756
Fair value adjustment of Convertible Notes, with related parties
1,670
—
Goodwill impairment
1,261
55,405
Impairment of intangible assets
980
—
Allowance for credit losses
401
124
Deferred income taxes
(276)
(145)
Changes in assets and liabilities, net of business acquisition:
Accounts receivable
9,473
6,509
Prepaid expenses and other current assets
(3,211)
(2,565)
Other non-current assets
(51)
325
Operating lease assets and liabilities, net
(325)
(330)
Accounts payable
(2,178)
4,764
Accrued expenses and other current liabilities
(5,878)
(6,088)
Deferred revenue
313
(584)
Other
(1,032)
(1,117)
Net cash (used in) provided by operating activities
(14,104)
8,138
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition/consolidation, net of cash acquired
—
(1,250)
Capitalized costs included in intangible assets
(6,198)
(5,838)
Acquisition of property and equipment
(13)
(25)
Net cash used in investing activities
(6,211)
(7,113)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of debt financing costs
65,440
—
Repayments of long-term debt
(68,228)
(10,000)
Debt financing costs
(1,875)
(532)
Proceeds from issuance of warrants
12,627
—
Proceeds from exercise of warrants
2
—
Proceeds from Convertible Notes, with related parties
2,050
—
Proceeds from Direct Offering
5,750
—
Fees for Direct Offering
(561)
—
Taxes paid related to net share settlement of vesting of restricted stock units
—
(236)
Net cash provided by (used in) financing activities
15,205
(10,768)
Net decrease in cash, cash equivalents, and restricted cash
(5,110)
(9,743)
Cash, cash equivalents, and restricted cash at beginning of period
15,804
25,547
Cash, cash equivalents, and restricted cash at end of period
$
10,694 $
15,804
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest
$
3,553 $
2,984
Cash paid (refund) for income taxes, net
(323)
(272)
Share-based compensation capitalized in intangible assets
48
94
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Contingent payments in connection with TAPP consolidation
$
— $
2,915
Long-term debt issuance
2,000
—
Consideration for True North
989
—
See notes to consolidated financial statements
F-7
Table of Contents
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data)
1. Principal activities and organization
Principal activities
Fluent, Inc. ("Fluent," or the "Company"), a Delaware corporation, is an industry leader in digital marketing services. The Company primarily performs
customer acquisition services by operating highly scalable digital marketing campaigns, through which the Company connects its advertiser clients with
consumers they are seeking to reach. The Company accesses these consumers through both its owned and operated digital media properties and Commerce
Media Solutions marketplace. Since 2024, the Company has delivered data and performance-based acquisition services for over 500 consumer brands,
direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences,
Retail & Consumer, and Staffing & Recruitment.
2. Summary of significant accounting policies
(a) Basis of preparation
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S.
GAAP") and applicable rules and regulations of the Securities and Exchange Commission (the "SEC").
From time to time, the Company may enter into relationships or investments with other entities, and, in certain instances, the entity in which the Company
has a relationship or investment may qualify as a variable interest entity ("VIE"). The Company consolidates a VIE in its financial statements if the
Company is deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that has the power to direct activities that most
significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be
significant to the VIE.
Going concern
In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements – Going Concern, management must evaluate
whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern
for one year after the date these accompanying audited consolidated financial statements are issued (the "issuance date"). As part of this evaluation,
management may consider the potential mitigating impact of its plans that have not been fully implemented as of the issuance date if (a) it is probable that
management's plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant
conditions or events that raise substantial doubt about the Company's ability to continue as a going concern within one year after the issuance date.
The Company has experienced a continued decline in the number of users who register on its O&O Sites starting in 2020 when the Company initiated the
TQI where it eliminated a large portion of our third-party affiliate traffic. In 2023, the FTC Consent Order imposed more rigorous standards and vetting of
the Company's third-party publishers, many of whom elected not to work with the Company, which also negatively impacted the Company's registration
volume on its O&O Sites (see Note 15,Contingencies). These issues, coupled with intermittent difficulties sourcing traffic from social media sites have
resulted in declining revenue and profitability. Based on the above, the borrowings under the SLR Revolver (as defined in Note 8, Long-term debt,
net) under the SLR Credit Agreement (as defined and discussed in Note 8, Long-term debt, net) are limited to a borrowing base, that fluctuates as regularly
as weekly, based on eligible accounts receivable. As a result, the available borrowing capacity is at times insufficient to fund operations and meet the
Company's needs.
As of
December 31, 2024, the Credit Parties were
not in compliance with their financial covenants under the SLR Credit Agreement, which the
Borrower had to report by
January 31, 2025, and which would have resulted in an event of default. However, the Credit Parties entered into
two letter
agreements pursuant to which SLR (as defined and discussed below in Note
8,
Long-term debt, net) extended the deadline for delivery of the compliance
certificate required for the fiscal month ended
December 31, 2024, and the related notice of event of default,
first to
March 4, 2025, then to
March 10,
2025.
On March 10, 2025, the Credit Parties and SLR entered into the Fourth Amendment (as defined and discussed in Note 16, Subsequent Events) to the SLR
Credit Agreement, which required the Company to raise at least $5,000 of additional capital by March 20, 2025. In addition, the Fourth Amendment
waived non-compliance with the financial covenants as of December 31, 2024, extended the duration of the call protection applicable to the loans, and
modified the financial covenants, among other things.
On March 20, 2025, the Company raised $5.0 million in aggregate net proceeds from the sale of pre-funded warrants, satisfying the capital raising
conditions of the Fourth Amendment (as defined and discussed in Note 16, Subsequent Events).
Additionally, given the continued challenges the Company has faced achieving profitability, the Company made reductions in workforce during 2024 and
the beginning of 2025 and will continue to consider further cost reduction measures and focus resources on opportunities that will enable the Company to
meet its projected budget and cash flow requirements. Initial measures included divesting a non-core business unit (see Note 14, Variable Interest Entity),
transferring another business unit (see Note 6, Intangible assets, net), ceased continuing operations of a non-core business, and will continue to review
additional other business units to determine the impact of potential divestments.
The financial covenants under the SLR Credit Agreement were reset based on the Company's twelve month projections. However, the Company
has not met its projections for certain recent quarters and is currently trending below its 2025 first quarter projections. If during any fiscal quarter, the
Company does not comply with any of its financial covenants, such non-compliance would result in an event of default that would give SLR the right to
accelerate maturities. In such case, the Company would not have sufficient funds to repay the SLR Term Loan (as defined and discussed in Note 8, Long-
term debt, net) under the SLR Credit Agreement and any outstanding balance on the SLR Revolver (as defined below in Note 8, Long-term debt,
net). Furthermore, even with the additional capital raise completed in March 2025, there is no assurance that the available cash, plus borrowing base on the
SLR Revolver will be sufficient to fund operations over the next twelve months and the Company expects to raise additional capital. The Company will
consider implementing cost-saving measures, but there is no guarantee that such plans would be successfully executed or have the expected benefits. As a
result, management concluded that there is substantial doubt about the Company's ability to continue as a going concern for one year after the date of
issuance of this Annual Report on Form 10-K.
F-
8
Table of Contents
The accompanying consolidated financial statements do not include any adjustments relating to the possible future effects on the recoverability and
classification of recorded assets and classification of liabilities that might result should the Company be unable to continue as a going concern.
Principles of consolidation
All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation.
(b) Reverse stock split
On April 11, 2024, the Company effected a 1-for-6 reverse split of the issued shares (the "Reverse Stock Split") of the Company's common stock. All
historical share amounts disclosed in this Annual Report on Form 10-K have been retroactively restated to reflect the Reverse Stock Split. No fractional
shares were issued as a result of the Reverse Stock Split, as fractional shares of common stock were rounded up to the nearest whole share. See
Note 11, Equity, for additional information.
(c) Use of estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and
assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and
assumptions include the allowance for credit losses, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible
assets, the portion of revenue subject to estimates for variances between internally-tracked conversions and those confirmed by the customer, the variable
commission revenue based on the estimated LTV, purchase accounting, consolidation of variable interest entity, fair value of Convertible Notes with related
parties based on input assumptions, shared-based compensation and income tax provision. These estimates are often based on complex judgments and
assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates.
(d) Cash, cash equivalents, and restricted cash
Cash and cash equivalents consist of cash on hand and bank deposits with original maturities of three months or less, which are unrestricted as to
withdrawal and use. Restricted cash had included a separately maintained cash account, required under the terms of a lease agreement the Company entered
into on October 10, 2018 for office space in New York City, which was initially released in 2021, but was subsequently required in 2024 due to the New
Credit Facility (as defined in Note 8, Long-term debt, net).
The Company’s cash and cash equivalents are held in major financial institutions located in the United States, which have high credit ratings. As of
December 31, 2024 and 2023, cash and cash equivalents were available for use in servicing the Company's debt obligations and general operating purposes.
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist principally of cash investments. The
Company places its temporary cash instruments with highly rated financial institutions within the United States, and, at times, may maintain balances in
such institutions in excess of the $250 thousand U.S. Federal Deposit Insurance Corporation insurance limit. The Company monitors the credit ratings of its
financial institutions to mitigate this risk.
(e) Accounts receivable and allowance for credit losses
Accounts receivables are due from customers, which are generally unsecured, and consist of amounts earned but not yet collected. None of the Company’s
accounts receivable bear interest.
The allowance for credit losses is management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
Management determines this allowance based on reviews of customer-specific facts and circumstances along with an application of a percentage against
the balance based upon aging and historic charge offs. Management also evaluates the macroeconomic environment to determine if any additional
adjustments are needed. Account balances are charged off against the allowance for credit losses after all customary means of collection have been
exhausted and the potential for recovery is considered remote. The Company does not have off-balance sheet credit exposure related to its customers.
Movements within the allowance for credit losses consist of the following:
Year Ended December 31,
(In thousands)
2024
2023
Beginning balance
$
231 $
544
Charges to expenses
401 $
124
Write-offs
(145) $
(437)
Ending balance
$
487 $
231
F-
9
Table of Contents
(f) Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation or amortization. Expenditures for maintenance, repairs and minor renewals are
charged to expense in the period incurred. Betterments and additions are capitalized. Property and equipment are depreciated on a straight-line basis over
the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or lease terms that are
reasonably assured. The estimated useful lives of property and equipment are as follows:
Years
Computer and network equipment
5
Furniture, fixtures, and office equipment
7
Leasehold improvements
6 - 7
Assets to be disposed of, and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying
value or fair value less costs to sell. When items of property and equipment are retired or otherwise disposed of, loss or income on disposal is recorded for
the difference between the net book value and proceeds received therefrom.
(g) Business combination
The Company records acquisitions pursuant to ASC 805, Business Combinations, by allocating the fair value of purchase consideration to the tangible
assets acquired, liabilities assumed and estimated fair values of intangible assets acquired. The excess of the fair value of purchase consideration over the
fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and
assumptions with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash
flows from acquired intangible assets, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be
reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period,
the Company may record adjustments to acquired assets and assumed liabilities, with corresponding offsets to goodwill. Upon the conclusion of a
measurement period, any subsequent adjustments are recorded to earnings.
(h) Intangible assets other than goodwill
The Company’s intangible assets are initially capitalized based on actual costs incurred, acquisition cost, or fair value if acquired as part of a business
combination. These intangible assets are amortized on a straight-line basis over their respective estimated useful lives, which are the periods over which
these assets are expected to contribute directly or indirectly to the future cash flows of the Company. The Company’s intangible assets represent purchased
intellectual property, software developed for internal use, acquired proprietary technology, customer relationships, trade names, domain names, databases,
and non-competition agreements, including those resulting from acquisitions. Intangible assets have estimated useful lives of 2-20 years.
In accordance with ASC 350-40, Software - Internal-Use Software, the Company capitalizes eligible costs, including applicable salaries and benefits, share-
based compensation, travel, and other direct costs of developing internal-use software that are incurred in the application development stage. Once the
internal-use software is ready for its intended use, it is amortized on a straight-line basis over its useful life.
Finite-lived intangible assets are evaluated for impairment periodically, or whenever events or changes in circumstances indicate that their related carrying
amounts may not be recoverable in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. In evaluating intangible assets for
recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance
with ASC 360-10-15. To the extent that estimated future undiscounted net cash flows are less than the carrying amount, an impairment loss is recognized in
an amount equal to the difference between the carrying value of such asset and its fair value.
Asset recoverability is an area involving management judgment, requiring assessment as to whether the carrying values of assets are supported by their
undiscounted future cash flows. In estimating future cash flows, certain assumptions are required to be made in respect of highly uncertain matters such as
revenue growth rates, operating expenses, and terminal growth rates.
For the year ended December 31, 2024, the Company determined the value of intangible assets was recoverable except for certain internally developed
software costs, developed technology, customer relationships, as discussed in Note 6, Intangible assets, net. As of December 31, 2024 and 2023, the
Company reviewed the indicators for impairment and concluded that no impairment of its finite-lived intangible assets existed.
(i) Goodwill
Goodwill represents the difference between the purchase price and the estimated fair value of net assets acquired, when accounted for by the acquisition
method of accounting. As of December 31, 2024, no goodwill balance remained, and as of December 31, 2023, the goodwill balance was related to the
AdParlor Acquisition (as defined in Note 6, Intangible assets, net).
F-
10
Table of Contents
In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis
in determining whether it is more likely than not that its fair value exceeds the carrying value. For purposes of reviewing impairment and the recoverability
of goodwill, we make certain assumptions regarding estimated future cash flows and other factors in determining the fair values, including market
multiples and discount rates, among others. Goodwill is tested for impairment at the reporting unit level and is conducted by estimating and comparing the
fair value of each of the Company’s reporting units to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the Company
recognizes an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit.
(j) Fair value of financial instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820, Fair
Value Measurements and Disclosure describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value:
•
Level 1 – defined as observable inputs, such as quoted prices in active markets;
•
Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•
Level 3 – defined as unobservable inputs, for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
See Note 9, Fair Value Measurements, for further details.
(k) Revenue recognition
Data and performance-based marketing revenue
Revenue is generated when there is a transfer of control of a good or service for a consideration amount the Company is expected to be entitled to. Revenue
is recognized when a company has satisfied its performance obligations to a customer and can reasonably expect and measure the payment. The Company's
performance obligations are typically to (a) deliver data records based on predefined qualifying characteristics specified by the customer, (b) generate
conversions based on predefined user actions (for example, a click, a registration, or the installation of an app) and subject to certain qualifying
characteristics specified by the customer, (c) transfer calls with the Company's advertiser clients as a part of the call center operation, or (d) deliver media
spend as a part of the business of AdParlor, LLC ("AdParlor"), a wholly-owned subsidiary of the Company. These Company performance obligations have
the customer simultaneously receiving and consuming the benefits provided.
The Company applies the practical expedient related to the review of a portfolio of contracts in reviewing the terms of customer contracts as one collective
group, rather than by individual contract. Based on historical performance of the contracts contained in this portfolio and the similar nature and
characteristics of the customers, the Company concluded that the financial statement effects are not materially different than accounting for revenue on a
contract-by-contract basis.
The Company has elected the "right to invoice" practical expedient available within ASC 606-10-55-18 as the measure for revenue to be recognized, as it
corresponds directly with the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The
Company's revenue arrangements do not contain significant financing components. The Company has further concluded that revenue does not require
disaggregation.
For each identified performance obligation in a contract with a customer, the Company assesses whether it or the third-party supplier is the principal or
agent. In arrangements where the Company has substantive control of the specified goods and services, is primarily responsible for the integration of
products and services into the final deliverable to the customer, and has inventory risk and discretion in establishing pricing, the Company is considered to
have acted as the principal. For performance obligations in which the Company acts as principal, the Company records the gross amount billed to the
customer within revenue and the related incremental direct costs incurred as cost of revenue. If the third-party supplier, rather than the Company, is
primarily responsible for the performance and deliverable to the customer, and the Company solely arranges for the third-party supplier to provide services
to the customer, the Company is considered to have acted as the agent. For performance obligations in which the Company acts as the agent, the net fees on
such transactions are recorded as revenue, with no associated costs of revenue for the Company.
If a customer pays consideration before the Company's performance obligations are satisfied, such amounts are classified as deferred revenue on the
consolidated balance sheets. As of December 31, 2024, 2023 and 2022, the balance of deferred revenue was $556, $430, and $1,014, respectively. The
majority of the deferred revenue balance as of December 31, 2024 will be recognized into revenue during the first quarter of 2025.
F-
11
Table of Contents
When there is a delay between the period in which revenue is recognized and when a customer invoice is issued, revenue is recognized, and the related
amounts are recorded as unbilled revenue within accounts receivable on the consolidated balance sheets. As of December 31, 2024, 2023 and 2022,
unbilled revenue included in accounts receivable was $18,625 and $21,488, and $26,878, respectively. In line with industry practice, the unbilled revenue
balance is recorded based on the Company's internally tracked conversions, net of estimated variances between this amount and the amount tracked and
subsequently confirmed by customers. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month
directly following the period of service. Historical estimates related to unbilled revenue have not differed materially from actual invoiced revenue.
Sales commissions are recorded at the time revenue is recognized and recorded in sales and marketing in the consolidated statements of operations. The
Company has elected to utilize a practical expedient to expense incremental costs incurred related to obtaining a contract.
In addition, the Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original
expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for
services performed.
Commission revenue
The Company, acting as the agent, recognizes commission revenue that it expects to receive from the insurance provider from the sale of certain of
its health insurance policies, which includes the assumed automatic renewals of such policies once its performance obligation is satisfied. The Company
considers its performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission
by the Company of the initial policy application.
The Company applies the practical expedient to estimate the commission revenue for each insurance policy by applying the use of the portfolio approach to
policies grouped together by product type and period submitted for effectuation.
The commission revenue is variable based on a policy's estimated lifetime value ("LTV"), which is the amount of time the Company expects the policy will
remain effective based on past trends, industry data, expectations as to future retention rates, and commission rates, based on the expected value method.
Further, the Company considers the application of constraints to the LTV and only recognizes the amount of variable consideration believed probable to be
received that will not be subject to a significant revenue reversal in the future. Based on this, the commission revenue is recorded upon satisfaction of the
performance obligation, with the associated payment, typically paid monthly, over time, by the insurance provider as the consumer renews and pays the
insurance provider for the policy over the duration the consumer remains on the policy.
The Company reassesses the estimated LTV for the health insurance policies on a quarterly or as-needed basis. Adjustments to the LTV may result in an
increase or decrease in revenue and the corresponding asset in the period the change is made. Due to the higher attrition of policies sold, the Company
reassessed its estimated LTV for the health insurance policies by increasing the constraints applied to the amount of consideration deemed probable which
led to a reduction of estimated LTV during the quarter ended June 30, 2024. Further, due to higher than anticipated attrition rate, partly related to the
impact of regulatory challenges in the marketplace, the Company again reassessed its estimated LTV for the health insurance policies by increasing those
constraints applied to the amount of consideration deemed probable, which led to an additional reduction of estimated LTV during the quarter end
December 31, 2024.
Revenue Disaggregation
The following table presents the Company’s disaggregated revenue by media resources along with its availability and demand for the years ended
December 31, 2024 and 2023, based on segment reporting:
Year Ended December 31,
2024
Fluent
All Other
Consolidated
(In thousands)
Owned and Operated
$
168,411 $
— $
168,411
Commerce Media Solutions
41,267
—
41,267
Call Solutions
31,133
—
31,133
AdParlor
—
9,918
9,918
All Other(1)
—
3,894
3,894
Total Revenue
$
240,811 $
13,812 $
254,623
(1) Balance is partially related to all of the commission revenues
Year Ended December 31,
2023
Fluent
All Other
Consolidated
(In thousands)
Owned and Operated
$
235,709 $
— $
235,709
Commerce Media Solutions
10,744
—
10,744
Call Solutions
32,681
—
32,681
AdParlor
—
9,316
9,316
All Other(1)
—
9,949
9,949
Total Revenue
$
279,134 $
19,265 $
298,399
(1) Balance is partially related to all of the commission revenues
F-
12
Table of Contents
(l) Cost of revenue (exclusive of depreciation and amortization)
Cost of revenue primarily includes media and related costs, which consist of the cost to acquire traffic through the purchase of impressions, clicks or
actions from publishers or third-party intermediaries, such as advertising exchanges, and technology costs that enable media acquisition, or in the case of
Commerce Media Solutions, the revenue share or per impression fees paid to media partners. The costs also include enablement costs associated with call
centers and tracking costs for consumer data. These costs are used primarily to drive user traffic to the Company's and its clients' media properties. Cost of
revenue additionally consists of indirect costs such as call center software, hosting, and fulfillment costs. Cost of revenue is presented exclusive of
depreciation and amortization expenses.
(m) Advertising costs
Advertising costs are charged to operations as incurred. For the years ended December 31, 2024 and 2023, advertising costs, included in sales and
marketing expenses, were $553 and $860, respectively.
(n) Share-based compensation
The Company accounts for share-based compensation in accordance with ASC 718, Compensation - Stock Compensation ("ASC 718"). Under ASC 718,
for awards with time-based conditions, the Company measures the cost of services received in exchange for an award of equity instruments based on the
grant-date fair value of the award and generally recognizes such costs on a straight-line basis over the period the recipient is required to provide service in
exchange for the award, which generally is the vesting period. For equity awards with market conditions, the Company recognizes costs on a straight-line
basis, regardless of whether the market conditions are achieved and the awards ultimately vest. For equity awards with performance conditions, the
Company begins recording share-based compensation when achievement of the performance criteria is probable using grant date fair value. For equity
based awards settled in cash, we record the share-based compensation when achievement of the performance criteria is deemed probable adjusted for fair
value at each reporting period. The Company recognizes forfeitures as they occur.
(o) Income taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting
for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in income in the period that the change in tax rates or laws is
enacted. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the
deferred tax assets will not be realized based on management's review of historical results and forecasts.
ASC 740 clarifies the accounting for uncertain tax positions. This interpretation requires that an entity recognizes in its financial statements the impact of a
tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income
tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs. The Company’s accounting policy is to accrue interest and penalties related to uncertain tax positions, if
and when required, as interest expense and a component of other expenses, respectively, in the consolidated statements of operations.
(p) Income (loss) per share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding, restricted stock
units ("RSUs"), and restricted common stock that have vested but not been delivered during the period. Diluted income (loss) per share reflects the
potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated
using the treasury stock method for stock options, RSUs, restricted stock, warrants (see Note 11, Equity below), direct offering (see Note 11, Equity below),
deferred common stock, and unvested shares. Stock equivalent shares are excluded from the calculation in loss periods, as their effects would be anti-
dilutive.
(q) Segment data
The Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by
the chief operating decision maker in making decisions regarding resource allocation and performance assessment. The Company defines the term "chief
operating decision maker" or "CODM" to be its Chief Executive Officer. The Company has determined it has three operating segments and one reportable
segment.
F-
13
Table of Contents
(r) Contingencies
In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency,
such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In
determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably estimate
the amount of any such loss.
(s) Recently issued and adopted accounting standards
Accounting pronouncements not listed below were assessed and determined to be not applicable or are expected to have minimal impact on the Company's
consolidated financial statements.
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-06, Disclosure
Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiatives, which incorporates updates to the
Codification to align with SEC Disclosure requirements in response to the August 2018 SEC Release No. 33-10532. The amendment updates and
simplifies certain SEC disclosure requirements that were duplicative, overlapping, or outdated due to changes in other SEC requirements and in U.S.
GAAP, International Financial Reporting Standards ("IFRS"), or the overall financial reporting environment. The new guidance is effective for each
amendment only if the SEC removes the related disclosure of presentation requirements from its existing regulations by June 30, 2027. The guidance is to
be applied prospectively, with early adoption prohibited. The Company is currently evaluating the impact of adopting the ASU on its consolidated financial
statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires
a public entity to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), a description of other
segment items by reportable segment, and an explanation of any additional measures the CODM uses in deciding how to allocate resources. The new
guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and
early adoption is permitted. The guidance was applied on a retrospective basis, with such disclosures made in regard to all prior periods presented in the
financial statements. The Company completed its assessment and concluded this update had no material impact on its consolidated financial statements,
which it adopted as of December 31, 2024.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 470): Improvements to Income Tax Disclosures, which are designed to
increase the transparency and decision-usefulness of income tax disclosures for financial statement users. The ASU follows investors' indication and
request for enhanced tax disclosures in order to better assess an entity’s operations, related tax risks, jurisdictional tax exposures, and increase transparency
regarding tax information through improvements to tax disclosures, specifically rate reconciliation, income taxes paid, and unrecognized tax benefits and
certain temporary differences. The new guidance is effective for fiscal years beginning after December 15, 2024 and interim periods within fiscal years
beginning after December 15, 2025, and early adoption is permitted. The guidance will be applied on a prospective basis, but retrospective application is
permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosures about a public business entity’s costs and expenses
on the face of the financial statements. The ASU follows investor's requests for more detailed information and disclosures of disaggregated financial
reporting information about the types of expenses in commonly presented expense captions (such as cost of sales, selling, general, and administrative, and
research and development), including purchases of inventory, employee compensation, depreciation, amortization, and depletion. The new guidance is
effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, and early adoption is permitted. The
guidance will be applied on a prospective basis to financial statements issued for reporting periods after the effective date, or retrospectively to any and all
prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial
statements and disclosures.
3. Income (loss) per share
For the years ended December 31, 2024 and 2023 basic and diluted income (loss) per share was as follows:
Year Ended December 31,
(In thousands, except share data)
2024
2023
Numerator:
Net loss
$
(29,277) $
(63,218)
Denominator:
Weighted average shares outstanding
15,972,494
13,484,550
Weighted average restricted shares vested not delivered
287,449
285,806
Total basic weighted average shares outstanding
16,259,943
13,770,356
Dilutive effect of assumed conversion of restricted stock units
—
—
Dilutive effect of assumed conversion of stock options
—
—
Total diluted weighted average shares outstanding
16,259,943
13,770,356
Basic and diluted loss per share:
Basic
$
(1.80) $
(4.59)
Diluted
$
(1.80) $
(4.59)
Based on exercise prices compared to the average stock prices for the years ended December 31, 2024 and 2023, certain stock equivalents, including RSUs
and stock options, have been excluded from the diluted weighted average share calculations due to their anti-dilutive nature.
Year Ended December 31,
2024
2023
Restricted stock units
801,525
731,538
Stock options
397,667
302,333
Warrants
—
—
Total anti-dilutive securities
1,199,192
1,033,871
F-
14
Table of Contents
4. Lease commitments
At the inception of a contract, the Company determines whether the contract is or contains a lease based on the facts and circumstances present. Operating
leases with terms greater than one year are recognized on the consolidated balance sheets as Operating lease right-of-use assets, Current portion of
operating lease liability, and Operating lease liability, net. Financing leases with terms greater than one year are recognized on the consolidated balance
sheets as Property and equipment, net, Accrued expenses and other current liabilities, and Other non-current liabilities. The Company has elected not to
recognize leases with terms of one year or less on the consolidated balance sheets.
Lease obligations and their corresponding assets are recorded based on the present value of lease payments over the expected lease term. As the interest
rate implicit in lease contracts is typically not readily determinable, the Company utilizes an appropriate incremental borrowing rate, which is the rate
incurred to borrow an amount equal to the applicable lease payments on a collateralized basis, over a similar term, and in a similar economic environment.
Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. The components of a lease are
split into three categories: lease components, non-lease components and non-components; however, the Company has elected to combine lease and non-
lease components into a single component. Rent expense associated with operating leases is recognized over the expected term on a straight-line basis. In
connection with financing leases, depreciation of the underlying asset is recognized over the expected term on a straight-line basis and interest expense is
recognized as incurred.
The Company is party to several noncancelable operating and financing lease agreements that have original lease periods expiring between 2024 and 2025.
Although certain leases include options to renew, the Company does not assume renewals in the determination of the lease term unless the renewals are
deemed to be reasonably assured at lease commencement. The Company's lease agreements do not contain any material residual value guarantees, nor
material restrictive covenants. Effective October 10, 2018, the Company entered into a seven-year operating lease agreement for approximately 42,685
square feet of office space in New York City (the "Company Headquarters"). In connection with this lease agreement, the Company is required to establish
and maintain a $1,255 cash collateral account, which has been recorded in restricted cash on the consolidated balance sheets as of December 31,
2024. Additionally, the Company obtained the right to use certain furniture, fixtures, and office equipment already installed in the new office space, which
the Company has treated as a capital lease.
For the year ended December 31, 2024 and 2023, the components of lease costs are as follows:
Year Ended December 31,
(In thousands)
2024
2023
Operating leases:
Rent expense
$
2,028 $
2,193
Financing lease:
Leased furniture, fixtures, and office equipment depreciation expense
—
49
Interest expense
11
19
Short-term leases:
Rent expense
371
244
Total lease costs
$
2,410 $
2,505
As of December 31, 2024 and 2023, the weighted average lease-term and discount rate of the Company's leases are as follows:
December 31, 2024
Operating Leases
Financing Lease
Weighted average remaining lease-term (in years)
0.9
0.9
Weighted average discount rate
5.0%
5.0%
As of December 31, 2024, scheduled future maturities of the Company's lease liabilities are as follows:
(In thousands)
December 31, 2024
Year
Operating Leases
Financing Lease
Total 2025 undiscounted cash flows
1,888
143
Less: imputed interest
(43)
(3)
Present value of lease liabilities
$
1,845 $
140
For the year ended December 31, 2024 and 2023, supplemental cash flow information related to leases is as follows:
Year Ended December 31,
(In thousands)
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases
$
2,265 $
2,424
Operating cash flows used for financing lease
$
11 $
19
Lease liabilities related to the acquisition of right-of-use assets:
Operating leases
$
— $
—
F-
15
Table of Contents
5. Property and equipment, net
Property and equipment, net consists of the following:
(In thousands)
December 31, 2024
December 31,
2023
Computer and network equipment
$
589 $
600
Furniture, fixtures, and office equipment
862
905
Leased furniture, fixtures, and office equipment
875
875
Leasehold improvements
1,258
1,260
Total cost of property and equipment
3,584
3,640
Less: accumulated depreciation and amortization
(3,280)
(3,049)
Property and equipment, net
$
304 $
591
For the years ended December 31, 2024 and 2023, depreciation of property and equipment was $300 and $398, respectively.
6. Intangible assets, net
Intangible assets, net, other than goodwill, consist of the following:
(In thousands)
Amortization
period (years)
December 31,
2024
December 31,
2023
Gross amount:
Software developed for internal use
3 $
25,478 $
20,175
Acquired proprietary technology
3 - 5
15,792
16,972
Customer relationships
5 - 10
36,686
39,168
Trade names
4 - 20
16,657
16,657
Domain names
20
195
195
Databases
5 - 10
31,292
31,292
Non-competition agreements
2 - 5
1,768
1,768
127,868
126,227
Accumulated amortization:
Software developed for internal use
(16,709)
(12,142)
Acquired proprietary technology
(15,037)
(15,132)
Customer relationships
(35,952)
(37,249)
Trade names
(7,711)
(6,893)
Domain names
(87)
(77)
Databases
(28,807)
(26,157)
Non-competition agreements
(1,768)
(1,768)
(106,071)
(99,418)
Net intangible assets:
Software developed for internal use
8,769
8,033
Acquired proprietary technology
755
1,840
Customer relationships
734
1,919
Trade names
8,946
9,764
Domain names
108
118
Databases
2,485
5,135
$
21,797 $
26,809
The gross amounts associated with software developed for internal use primarily represent capitalized costs of internally developed software. The amounts
relating to acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements primarily
represent the fair values of intangible assets acquired as a result of the acquisition of Fluent, LLC, effective December 8, 2015 (the "Fluent LLC
Acquisition"); the acquisition of Q Interactive, LLC, effective June 8, 2016 (the "Q Interactive Acquisition"); the acquisition of substantially all the assets
of AdParlor Holdings, Inc. and certain of its affiliates, effective July 1, 2019 (the "AdParlor Acquisition"); the acquisition of 50% interest in Winopoly,
LLC (the "Initial Winopoly Acquisition"), effective April 1, 2020; the acquisition of 100% interest in True North Loyalty, LLC, (the "True North
Acquisition"), effective January 1, 2022 (Note 14, Variable Interest Entity); and the consolidation of TAPP Influencers Corp. ("TAPP") effective January 9,
2023 (see Note 14, Variable Interest Entity).
During the second quarter of 2024, the Company determined that the effects of the expected decline in operations due to the impact of certain client
relationships constituted a triggering event for the All Other reporting unit. The Company conducted an interim test of recoverability of its long-lived
assets, which compared the projected undiscounted cash flows to the carrying value of the asset group. The results of this approach indicated that this long-
lived asset was not recoverable and required that an impairment loss related to its customer relationships be calculated. The Company determined that
based on the facts and circumstances, the remaining balance was impaired and recorded a non-cash impairment charge of its customer relationship
intangible of $383 as of June 30, 2024.
The Company completed its quarterly triggering event assessment for the three months ended December 31, 2024 and determined that no triggering event
had occurred requiring further impairment assessment of its long-lived assets.
F-
16
Table of Contents
For the years ended December 31, 2024 and 2023, amortization expenses related to intangible assets, and included in depreciation and amortization
expenses in the Company's consolidated statements of operations, were $9,626 and $10,478, respectively.
For the years ended December 31, 2024 and 2023, the Company capitalized $6,246 and $5,932, respectively, most of which was related to internally
developed software, and took an impairment loss of $980 and $0, respectively, due to $597 of software developed for internal use related to an immaterial
business unit under the Fluent reporting unit that had met the held for sale criteria as of June 30, 2024 and disposed of as of July 1, 2024, and $383 related
to the impairment of All Other customer relationships discussed above. Further, in connection with the True North sale, an additional $652 of developed
technology and software developed for internal use was written off.
As of December 31, 2024, estimated amortization expenses related to the Company’s intangible assets for 2024 through 2030 and thereafter are as follows:
(In thousands)
Year
December 31,
2024
2025
$
9,310
2026
4,874
2027
1,035
2028
825
2029
825
2030 and thereafter
4,928
Total
$
21,797
7. Goodwill
Goodwill represents the difference between the purchase price and the estimated fair value of net assets acquired, when accounted for by the acquisition
method of accounting. As of December 31, 2024, the total balance of goodwill was $0, which represented a decrease of $1,261 from the balance as of
December 31, 2023 due to a non-cash impairment charge recorded as of June 30, 2024. As of December 31, 2024 and 2023, the change in the carrying
value of goodwill for our operating segments (Note 13, Segment information), are listed below:
(In thousands)
Fluent
All Other
Total
Balance at Ended December 31, 2022
$
51,614 $
3,497 $
55,111
TAPP Consolidation
1,555
—
1,555
Goodwill impairment
(53,169)
(2,236)
(55,405)
Balance at December 31, 2023
—
1,261
1,261
Goodwill impairment
—
(1,261)
(1,261)
Balance at December 31, 2024
$
— $
— $
—
As of December 31, 2024, net goodwill was comprised of gross goodwill of $168,552 and accumulated impairment of $168,552.
During the
second quarter of
2024, the Company determined that the effects of the expected decline in operations due to the impact of certain client
relationships constituted a triggering event for the All Other reporting unit. The Company conducted an interim test of the fair value of the All Other
reporting unit's goodwill for potential impairment related to the triggering event. The Company applied solely the income approach to determine the fair
value of the All Other reporting unit. The results of this approach indicated that the carrying value exceeded its fair value by
58%. The Company therefore
concluded that the goodwill was impaired as of
June 30, 2024 and recorded a non-cash impairment charge for its remaining balance of
$1,261.
8. Long-term debt, net
Long-term debt, net of unamortized discount and financing costs, related to the Citizens Credit Facility, the New Credit Facility, Note Payable, and
Convertible Notes with related parties (as set forth herein) consisted of the following:
(In thousands)
December 31, 2024
December 31,
2023
Citizens Credit Facility due 2025 (less unamortized discount and financing costs of $0 and $762,
respectively)
$
—
30,488
Credit Facility Term Loan due 2025 (less unamortized discount and financing costs of $1,186 and $0,
respectively)
30,359
—
Note Payable due 2026
1,500
—
Convertible Notes, at fair value with related parties
3,720
—
Long-term debt, net
35,579
30,488
Less: Current portion of long-term debt
(31,609)
(5,000)
Long-term debt, net (non-current)
$
3,970 $
25,488
F-
17
Table of Contents
Citizens Credit Facility
On April 2, 2024, the Company repaid the $30,000 aggregate principal amount of the term loan ("Citizens Term Loan") due on September 30,
2025, resulting in a loss due to the early extinguishment of debt of $1,009, which was recognized in the second quarter of 2024.
New Credit Facility
On April 2, 2024, Fluent, LLC, a wholly-owned subsidiary of the Company (the "Borrower"), entered into a credit agreement (as amended, the "SLR
Credit Agreement") with the Company and certain subsidiaries of the Borrower as guarantors (collectively, the "Credit Parties"), Crystal Financial LLC
D/B/A SLR Credit Solutions, as administrative agent, lead arranger and bookrunner ("SLR") and each other lender from time to time party thereto.
The SLR Credit Agreement provides for a $20,000 term loan (the "SLR Term Loan") and a revolving credit facility of up to $30,000 (the "SLR Revolver"
and together with the SLR Term Loan, the "SLR Credit Facility"). As of December 31, 2024, the SLR Credit Facility had an outstanding principal balance
of $31,545 (of which $11,545 relates to the SLR Revolver) and matures on April 2, 2029.
The Borrower used a portion of the net proceeds of the SLR Credit Facility to repay the outstanding Citizens Term Loan under the credit agreement dated
March 31, 2021 (the "Citizens Credit Agreement"), by and among the Borrower, certain subsidiaries of the Borrower as guarantors, the lenders thereto, and
Citizens Bank, N.A. ("Citizens Bank").
There is no principal amortization prior to maturity under the SLR Credit Agreement except for certain mandatory prepayments to be made with the net
cash proceeds of certain asset sales, casualty events, and other extraordinary receipts and upon the occurrence of certain other events, in each case subject
to certain reinvestment rights, thresholds and other exceptions. Unfunded commitments will be subject to an unused facility fee, which will be payable
monthly in arrears, as of the month following the closing, at a rate of 0.50% per annum. All amounts owed under the SLR Credit Facility are due and
payable on the five-year anniversary of the closing date (the "Maturity Date"), or earlier following a change in control or an event of default, unless
otherwise extended in accordance with the terms of the SLR Credit Agreement. Borrowings under the SLR Credit Agreement bear interest at a rate per
annum equal to a 3-month term SOFR plus 0.26161%, subject to a 1.50% floor, plus a margin (the "Applicable Margin") of 5.25% which was increased
to 5.75% pursuant to the Second Amendment to the SLR Credit Agreement (the "Second Amendment"). The Applicable Margin will be reduced to 5.0%
when the Borrower's fixed charge coverage ratio is greater than 1.10 to 1. The opening interest rate of the SLR Credit Facility was 10.81% (SOFR + CSA
+ 5.25%), which changed to 10.51% (SOFR + CSA+5.75%) as of December 31, 2024.
The SLR Credit Agreement contains restrictive covenants which impose limitations on the way the Credit Parties conducts business, including limitations
on the amount of additional debt the Credit Parties are able to incur and their ability to make certain investments or other restricted payments. The
SLR Credit Agreement is guaranteed by the Company and certain of its direct and indirect subsidiaries and is secured by substantially all of the Company's
assets and those of its direct and indirect subsidiaries, including the Borrower.
The Borrower's ability to draw on the SLR Revolver depends on its weekly borrowing base, which is calculated by applying specified percentages
established by SLR to the Borrower's eligible accounts receivable and cash, less reserves, subject to certain limitations.
Debt issuance costs and debt discount costs, net of accumulated amortization, related to the issuance and amendments of the SLR Revolver was $853 and
$796, respectively, as of December 31, 2024. The amounts are included in other non-current assets in the Company's consolidated balance sheets. The
Company amortizes these costs over the life of the related debt.
On May 15, 2024, the Credit Parties and SLR entered into the First Amendment to the SLR Credit Agreement (the "First Amendment"), pursuant to which
SLR, among other things, (1) waived any required prepayments on the SLR Revolver from the proceeds from the Company's Private Placement, (2)
required that the Credit Parties (as defined in the SLR Credit Agreement) retain a financial advisor to assist in preparing the Company's projections, (3)
increased the minimum excess availability covenant following the Private Placement (as defined herein) (see Note 11, Equity) (4) amended the definition of
borrowing base (as defined in the SLR Credit Agreement), and (5) amended certain post-closing obligations.
On August 19, 2024, the Credit Parties and SLR entered into the Second Amendment, which, among other things, required that the Company
raise $2,000 in additional capital. To raise the capital, the Company entered into convertible subordinated notes, as described below, raising an aggregate
$2,050. In addition, SLR waived non-compliance with the financial covenants as of June 30, 2024, modified the financial covenants through December
31, 2025, ended a requirement to engage a financial advisor, increased the Applicable Margin from 5.25% to 5.75%, and waived any required prepayments
from the proceeds from the convertible subordinated notes financing.
On November 14, 2024, the Credit Parties and SLR entered into the Third Amendment to the SLR Credit Agreement, which, among other things, required
that the Company raise at least $7,500 of additional capital by November 29, 2024, which on November 27, 2024 was extended to December 3, 2024. In
addition, the Third Amendment waived non-compliance with the financial covenants as of September 30, 2024, extended the duration of the call protection
applicable to the loans, and modified the cash dominion provisions to remain in effect on an indefinite basis.
As of December 31, 2024, the Credit Parties were not in compliance with their financial covenants under the SLR Credit Agreement, which the Borrower
had to report by January 31, 2025, and which would have resulted in an event of default; however, the Credit Parties and SLR entered into two letter
agreements pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended December 31,
2024, and the related notice of event of default, first to March 4, 2025, then to March 10, 2025.
F-
18
Table of Contents
On March 10, 2025, the financial covenants under the SLR Credit Agreement were reset based on the Company's twelve month projections (refer to
Note 16, Subsequent Events, for details on the Fourth Amendment). However, the Company has not met its projections for certain recent quarters and is
currently trending below its 2025 first quarter projections. If during any fiscal quarter, the Credit Parties do not comply with any of their financial
covenants, such non-compliance would result in an event of default that would give SLR the right to accelerate maturities. In such case, the Company
would not have sufficient funds to repay the term loan under the SLR Credit Agreement and the additional amounts on the SLR Revolver. Accordingly, all
borrowings under the Credit Agreement were classified as current as of December 31, 2024.
Note Payable
On March 17, 2024, Fluent, LLC entered into a junior secured promissory note (the "Note Payable") with Freedom Debt Relief, LLC ("FDR") in the
principal amount of $2,000 in connection with the Berman Settlement Agreement (as defined herein) (see Note 15, Contingencies). The Note Payable bears
interest equal to one-month CME Term SOFR (defined as the rate published by the CME Group Benchmark Administration Limited) plus 11.0% per
annum, compounded quarterly. The opening interest rate of the Note Payable was 16.32% (SOFR +11%), which changed to 15.52% (SOFR + 11%) as of
December 31, 2024.
A maximum of $1,000 of the borrowings under the Note Payable are secured by substantially all of the assets of Fluent, LLC. This security interest is
subordinate to the security interest under the SLR Credit Agreement.
The Note Payable matures on March 31, 2026 and interest is payable quarterly. Scheduled principal amortization of the Note Payable is $250 per quarter,
which commenced with the fiscal quarter ended June 30, 2024, but was subsequently paid upon receipt of the invoice from FDR and applied as of July 17,
2024.
Convertible Notes, with related parties
On August 19, 2024, the Company entered into a securities purchase Agreement (the "Securities Purchase Agreement") with certain of the Company's
officers and directors and the largest stockholder (the "Purchasers") to sell convertible subordinated promissory notes (the "Convertible Notes") in
aggregate principal amount of $2,050. The Convertible Notes mature on April 2, 2029, and bear interest at 13% per annum payable quarterly in kind or
may be paid in cash (subject to payment conditions in the Subordination Agreement (as defined below)) beginning December 31, 2024. Subject to certain
payment conditions in the Subordination Agreement, the Company may prepay the Convertible Notes in whole or in part at any time upon ten days’
written notice, provided that no prepayment will be permitted prior to stockholder approval without the consent of the applicable holder.
Each holder of an August Convertible Note is entitled to convert the Conversion Amount (as defined below) into shares of the Company's common stock at
a conversion price equal to the lesser of (i) $3.01, and (ii) the greater of (A) the consolidated closing bid price of the Company's common stock as reported
on Nasdaq on the applicable conversion date and (B) $1.00, in each case subject to adjustments for stock splits, recapitalizations and the like. However, the
applicable conversion price will in no event be lower than the price established by clause (ii) above unless and until the Company's stockholders have
approved matters related to the issuance of common stock upon conversion of the August Convertible Notes, which vote is expected to take place at the
Company's 2025 annual meeting of stockholders. The “Conversion Amount” is the sum of all or any portion of the outstanding principal amount of the
August Convertible Note, as designated by the holder upon exercise of its right of conversion, plus all accrued and unpaid interest. The August Convertible
Notes are subject to additional limits on conversion until stockholder approval is obtained, including an aggregate limit on the number of shares that may
be issued upon conversion to 19.99% of the Company's outstanding shares of common stock and provisions to prevent a change of control as defined in the
rules of the Nasdaq Stock Market. Holders of the August Convertible Notes will be permitted to vote on such stockholder approval but may not vote any
shares obtained from conversion of the August Convertible Notes prior to such vote.
In connection with the Second Amendment and the Securities Purchase Agreement, the Company and SLR entered into a Second Amendment
Subordination Agreement with each purchaser of the Convertible Notes on August 19, 2024 (the "Subordination Agreements"). The Subordination
Agreements confirm the subordinated nature of the Convertible Notes and restrict payments to and remedies of the holders of the Convertible Notes for so
long as the SLR Credit Agreement has indebtedness outstanding. The Subordination Agreements provide that the Company may not make any payment of
principal or interest on the Convertible Notes unless certain conditions are met.
The Convertible Notes are accounted for at fair value due to the election of the fair value option ("FVO") in accordance with ASC 825, Financial
Instruments ("ASC 825"). Within ASC 825, the FVO can be elected for debt host financial instruments containing embedded features which would
otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic
estimated fair value measurements under ASC 815. Notwithstanding, ASC 825-10-15-4 provides for the FVO election, to the extent not otherwise
prohibited by ASC 825-10-15-5, to be afforded to financial instruments, wherein bifurcation of an embedded derivative is not necessary, and the financial
instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each
reporting period date.
Within ASC 825-10-45-5, the estimated fair value adjustments are recognized as a component of other comprehensive income with respect to the portion of
the fair value adjustment attributed to a change in the instrument-specific credit risk, with the remaining amount of the fair value adjustment recognized as
other income (expense) within the consolidated statement of operations. As then provided by ASC 825-10-50-30(b), the estimated fair value adjustment is
presented in a respective single line item within other income (expense) in the consolidated statements of operations, as the Company concluded that the
change in fair value of the Convertible Notes was not attributable to instrument specific credit risk. The Company then elected to not present the interest
expense for the Convertible Notes separately.
The initial fair value was determined to be greater than the principal balance of the Convertible Notes. The Company noted that the transaction was entered
into with certain of the Company's officers and directors and the largest stockholder and was required under the Second Amendment for liquidity needs.
Further, the Company reviewed the valuation and determined it was appropriate. As a result, based on ASC 825-10, the Company recorded a
day one unrealized loss on the Convertible Notes of $2,110.
As of December 31, 2024, the principal balance of the Convertible Notes was $2,148, with a fair value of $3,720. The Company recognized an additional
decrease in fair value of $440 for the period ended December 31, 2024, which was recognized as after current period other income (loss) from
operations. For the twelve months ended December 31, 2024, accrued interest was paid in kind.
F-
19
Table of Contents
Maturities
As of December 31, 2024, scheduled future maturities of the Credit Agreement, including the required principal prepayment based on a portion of the
Company's quarterly excess cash flow and excluding potential future additional principal prepayments, are as follows, not reflective of the debt being
accelerated as noted in Note 2:
(In thousands)
Year
2025
$
2,959
2026
250
2027
—
2028
—
2029
31,984
Total maturities
$
35,193
9. Fair Value Measurements
The fair value of the Company's cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their
carrying values because of the short-term nature of these instruments. Restricted cash includes a separately maintained cash account, as required under the
terms of a lease agreement the Company entered into on October 10, 2018 for office space in New York City.
As of
December 31, 2024, the Company regards the fair value of its long-term debt to approximate its carrying value.
The following tables present the Company’s fair value hierarchy for assets and liabilities that are measured at fair value on a recurring basis as of
December 31, 2024
and
December 31, 2023
:
December 31, 2024
December 31, 2023
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets:
Restricted cash
$
1,255
—
— $
—
—
—
Liabilities:
Long term debt, net(1)
—
33,045
—
—
31,250
—
Convertible Notes, with related parties
—
—
3,720
—
—
—
Contingent consideration in connection
with TAPP consolidation(2)
—
—
988
—
—
1,950
(1)Inclusive of the credit facilities and notes payable. The debt fair value does not include debt issuance costs or debt discount. See Note 8, Long-term
debt, net.
(2)Balance recorded in prepaid and other expenses and other non-current assets with changes to the balance as a result of adjustment of the fair value
related to the initial discount rate and payments made. See Note 14, Variable Interest Entity, for initial assumptions of the fair value.
Convertible Notes, with related parties
The Company issued the Convertible Notes on August 19, 2024 and elected the fair value option, see Note 8, Long-term debt, net. The following is a
reconciliation of the fair value from the issuance date of such notes to December 31, 2024:
Amount
Fair value as of August 19, 2024
$
4,160
(Gain) loss on change in fair value reported in the consolidated statement of operations
(440)
Fair value as of December 31, 2024
$
3,720
As the Convertible Notes mature on April 2, 2029, and bear interest at 13% per annum paid in kind but may be converted into shares of the Company’s
common stock (the "call option"), the estimated fair value is computed as the sum of (a) the present value of the expected interest and principal payments
using the discounted cash flow method based on an estimated discount rate and (b) the fair value of the call option computer using the Black-Scholes
model. Both approaches are based on the following assumptions:
Assumptions
December 31,
2024
Face value of principal payable
$
2,148
Conversion price
3.04
Value of common stock
2.52
Contractual term (years)
4.3
Volatility
79.0%
Risk free rate
3.8%
Discount rate
16.8%
Contingent Consideration
In connection with the contingent consideration received related to the consolidation of TAPP, the Company had to determine the fair value of the identified
assets acquired and liabilities assumed. The Company determined that the estimated fair value of the net assets acquired, excluding the net working capital,
was a Level 3 measurement, as certain inputs to determine fair value were unobservable. See Note 14, Variable Interest Entity.
Amount
Fair value as of December 31, 2023
$
1,950
Payment for annual bonus
(1,083)
Adjustment to compensation expense
121
Fair value as of December 31, 2024
$
988
F-
20
Table of Contents
The fair value of certain long-lived non-financial assets and liabilities may be required to be measured on a nonrecurring basis in certain circumstances,
including when there is evidence of impairment. As of December 31, 2024, certain non-financial assets have been measured at fair value subsequent to
their initial recognition. The Company determined the estimated fair value to be a Level 3 measurement, as certain inputs used to determine fair value are
unobservable. See Note 7, Goodwill.
10. Income taxes
The Company is subject to federal and state income taxes in the United States. For the years ended December 31, 2024 and 2023, the provision for income
taxes on income (loss) from operations consisted of the following:
Year Ended December 31
(In thousands)
2024
2023
Current:
Federal
$
(1,260) $
(24)
State
(278)
(70)
Foreign
3
123
Total current
(1,535)
29
Deferred:
Federal
(7,597)
(3,352)
State
(1,001)
(462)
Foreign
(275)
20
Less: valuation allowance
8,597
3,649
Total deferred
(276)
(145)
Total income tax expense (benefit)
$
(1,811) $
(116)
For the years ended December 31, 2024 and 2023, the provision for income taxes differs from the amounts computed by applying the applicable federal
statutory rates as follows:
Year Ended December 31,
(In thousands)
2024
2023
Federal income taxes at the statutory rate
$
(6,528)
21.0% $
(13,300)
21.0%
Share-based compensation shortfall (windfall)
6
(0.0)
13
(0.0)
Effect of state taxes, net of federal tax benefit
(999)
3.2
(517)
0.8
Non-deductible items
39
(0.1)
(421)
0.7
Goodwill impairment
—
—
9,491
(15.0)
Return to provision adjustment
(540)
1.7
2,731
(4.3)
Foreign rate difference
(56)
0.2
16
(0.0)
Deferred only adjustments
343
(1.1)
197
(0.3)
Research and development credit
(1,194)
3.8
(1,992)
3.1
Other
1
(0.0)
17
(0.0)
Change in valuation allowance
8,597
(27.7)
3,649
(5.8)
Reversal of uncertain tax position (UTP)
(1,480)
4.8
—
—
Income tax expense (benefit)
$
(1,811)
5.8% $
(116)
0.2%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31, 2024 and 2023, the significant components of deferred tax assets and
(liabilities) consist of the following:
(In thousands)
December 31, 2024
December 31,
2023
Deferred tax assets:
Net operating loss carryforwards
$
5,136 $
1,400
Share-based compensation
4,569
5,129
Capitalized research and experimental expenditures
5,257
3,069
Intangible assets, net
2,230
1,415
Tax credits
2,786
1,413
Accrued expense
894
1,178
Operating lease liability
450
973
Interest expense limitation
1,652
589
Accounts receivable, net
119
56
Other
765
280
23,858
15,502
Valuation allowance
(23,165)
(14,568)
Total deferred tax assets, net of valuation allowance
693
934
Deferred tax liabilities:
Operating lease right-of-use asset
(383)
(827)
Property and equipment, net
(64)
(136)
(447)
(963)
Net deferred tax asset (liability)
$
246 $
(29)
As of December 31, 2024, the Company has federal net operating loss carryforwards of $15,294, which can be carried forward indefinitely, and state net
operating loss carryforwards of $31,803, which begin to expire in 2030.
F-
21
Table of Contents
As of December 31, 2024 and 2023, the Company recorded a full valuation allowance against its net deferred tax assets of $23,165 and $14,568,
respectively, which is driven by the movement in the net deferred tax assets. For the year ended December 31, 2024, the movement in the net deferred tax
assets are primarily a result of the capitalized research and experimental expenditures, increase in capitalized interest expense, and generation of federal
and state net operating losses. The Company intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is
sufficient evidence to support the release of all or some portion of these allowances. Release of some or all of the valuation allowance would result in the
recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded, however, the exact
timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability that the Company is able to achieve
and the net deferred tax assets available.
The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The
Company files tax returns in federal and certain state and local jurisdictions. The periods subject to examination are generally for tax years ended
2020 through 2023, including the following major jurisdictions: U.S. Federal, New York State, and New York City.
For the years ended December 31, 2024 and 2023, reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and
penalties, consists of the following:
Year Ended December 31,
(In thousands)
2024
2023
Unrecognized tax benefits, opening balance
$
1,480 $
1,480
Reductions in unrecognized tax benefits for tax positions of prior years
(1,480)
—
Unrecognized tax benefits, ending balance
$
— $
1,480
11. Equity
Common stock
Effective at 6:00 p.m. Eastern Time on April 11, 2024, the Company effected the Reverse Stock Split pursuant to a certificate of amendment to the
Company's Certificate of Incorporation, as amended, filed with the Secretary of State of the State of Delaware on April 11, 2024. As a result of the
Reverse Stock Split, every six shares of common stock issued and outstanding or held by the Company in treasury stock were combined and reclassified
into one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who were otherwise entitled to
receive a fractional share received an additional fraction of a share of common stock to round up to the next whole share. The Reverse Stock Split affected
all stockholders uniformly and did not alter any stockholder's percentage ownership interest or any stockholder's proportionate voting power, except for
immaterial adjustments that resulted from the treatment of fractional shares. The Reverse Stock Split did not change the number of authorized shares of
common stock or the par value per share of the common stock.
The Reverse Stock Split reduced the number of issued and outstanding shares of common stock from 81,571,864 shares to 13,660,598 shares and reduced
the issued shares of common stock held by the Company in treasury stock from 4,611,569 shares to 768,595 shares.
The common stock began trading on a reverse split-adjusted basis at the opening of trading on The Nasdaq Capital Market on April 12, 2024, under the
same symbol (FLNT) with a new CUSIP number (34380C 201).
As of the effective time of the Reverse Stock Split, the number of shares available for issuance under the Company's equity incentive plans and the number
of shares issuable pursuant to each outstanding equity award immediately prior to the Reverse Stock Split were reduced proportionately at the Reverse
Stock Split Ratio, and the exercise price for each outstanding stock option was increased in inverse proportion to the Reverse Stock Split Ratio.
As of December 31, 2024 and 2023, the number of issued shares of common stock were 20,791,431 and 14,384,936, respectively, which included shares of
treasury stock of 768,595 and 768,595, respectively.
For the year ended December 31, 2024, the increase in the number of issued shares of common stock was the result of the exercise of 3,602,976 shares
related to the warrants, as described below, 2,483,586 shares related to the direct offering, as described below, and 319,933 shares of common stock issued
upon vesting of RSUs, in which no shares of common stock were withheld to cover statutory taxes upon such vesting.
For the year ended December 31, 2023, the increase in the number of issued shares of common stock was the result of the exercise of 255,406 shares of
common stock issued upon vesting of RSUs, in which 51,903 shares of common stock were withheld to cover statutory taxes upon such vesting, which are
reflected as additions to treasury stock in the consolidated statements of changes in shareholders' equity.
Direct Offering:
On November 29, 2024, the Company entered into securities purchase agreements (the "Registered Direct Purchase Agreements") with certain pre-existing
institutional investors (the "Registered Direct Investors"), pursuant to which the Company agreed to sell to such investors an aggregate of 2,483,586 shares
of common stock of the Company, par value $0.0005 per share (the "Registered Direct Offering"). The offering by the Company was made pursuant to its
shelf registration statement on Form S-3, which was effective September 9, 2024.
In connection with the Registered Direct Offering, the Company entered into a placement agency agreement (the "Placement Agency Agreement") with
ThinkEquity LLC, as the placement agent (the "Placement Agent"), for the sale of 1,943,676 shares of common stock under the Registered Direct Investor.
Pursuant to the Placement Agency Agreement, the Company, among other things, agreed to pay the Placement Agent a cash fee equal to 4% of the gross
proceeds raised in the Registered Direct Offering by an investor making an investment of $4,500.
On December 2, 2024, the Registered Direct Offering was closed and the gross proceeds totaled $5,750, before deducting offering expenses payable by the
Company of $562 that includes the Placement Agent fee. The Company intends to use the net proceeds from the Registered Direct Offering for general
corporate purposes, which may include capital expenditures, working capital and general and administrative expenses.
F-
22
Table of Contents
Pre-Funded Warrants
On May 13, 2024, the Company entered into securities purchase agreements (the "May Purchase Agreements") with certain accredited investors (the "May
Purchasers"), all of whom were related parties, pursuant to which the Company sold pre-funded warrants (the "May Pre-Funded Warrants") to purchase up
to 2,955,084 shares of the Company's common stock, at a purchase price of $3.384 per Pre-Funded Warrant (the "May Private Placement"). The May
Purchasers included three officers and a principal stockholder of the Company. No underwriting discounts or commissions were paid with respect to the
May Private Placement.
The aggregate gross proceeds for the May Private Placement totaled $10,000, before deducting offering expenses payable by the Company of $100. The
May Pre-Funded Warrants, which terminated when exercised in full, had an exercise price of $0.0005 per share of common stock and became immediately
exercisable upon stockholder approval of the Private Placement. In connection with the Private Placement, the Company entered into Support Agreements
with three of the May Purchasers, the Company's largest stockholders, who agreed to vote all of their beneficially owned shares of the Company's common
stock in favor of the corporate actions required for stockholder approval. Stockholder approval of the Private Placement was obtained on July 2, 2024, at a
special meeting of the Company's stockholders.
On November 29, 2024, the Company entered into securities purchase agreements (the "December Purchase Agreements") with accredited investors (the
"December Purchasers"), all of whom were related parties, pursuant to which the Company agreed to sell to the December Purchasers unregistered pre-
funded warrants (the "December Pre-Funded Warrants") to purchase up to 1,187,802 shares of Company’s common stock, at a purchase price of $2.3147
per December Pre-Funded Warrant. The December Purchasers consisted of three officers and a principal stockholder of the Company. No underwriting
discounts or commissions were paid with respect to the Private Placement.
On December 2, 2024, the December Pre-Funded Warrants closed and the aggregate gross proceeds totaled $2,750, before deducting offering expenses
payable by the Company of $22. The principal stockholder exercised his warrant on December 9, 2024. The December Pre-Funded Warrants purchased by
the three officers of the Company will be immediately exercisable after stockholder approval of the December Purchase Agreement and will terminate
when exercised in full.
The Company is obligated to use its reasonable best efforts to obtain such stockholder approval of the exercise of the officers' December Pre-Funded
Warrants at the 2025 Annual Meeting of Stockholders. The Company entered into Support Agreements with the Registered Direct Investors and the
December Purchasers. Pursuant to Support Agreements entered into by the Company with the Registered Direct Investors and the December Purchasers,
the Registered Direct Investors, and the December Purchasers agreed to vote their shares of the Company's common stock beneficially owned by them in
favor of certain actions subject to Stockholder Approval (as defined in the Support Agreements) at any meeting of stockholders of the Company.
As of December 31, 2024, all of the May Pre-Funded Warrants and 647,892 of the December Pre-Funded Warrants had been exercised. The issuance of the
shares upon exercise of the Pre-Funded Warrants was made in reliance upon the exemption from registration under Section 4(a)(2) of the Securities Act
of 1933, as amended.
The settlement of the May Pre-Funded Warrants was reflected in the Company's stockholder's equity within common stock and additional paid-in-capital as
of December 31, 2024. The issuance of the December Pre-Funded Warrants was reflected in the Company’s stockholder's equity within additional paid-in-
capital, with those exercised adjusted for within common stock. In accordance with ASC 815-40, Derivatives and Hedging, a contract is classified as an
equity agreement if it is both indexed to its own stock and classified in stockholder's equity in its financial position. Both the May and December Pre-
Funded Warrants met the requirements of being classified as equity because (i) they had a fixed share limit and the Company had sufficient authorized and
unissued shares, (ii) they required physical or net share settlement, and (iii) no cash payments or settlement top-off was required by the Company.
Treasury stock
As of December 31, 2024 and 2023, the Company held 768,595 and 768,595 shares in treasury, with a cost of $11,407 and $11,407, respectively.
The Company's share-based incentive plans allow employees the option to either make cash payment or forfeit shares of common stock upon vesting to
satisfy federal and state statutory tax withholding obligations associated with equity awards. The forfeited shares of common stock may be taken into
treasury stock by the Company or sold on the open market.
For the year ended December 31, 2024 and 2023, 0 and 51,903 shares, respectively, were withheld to cover withholding taxes owed by certain employees,
all of which were taken into treasury stock.
Preferred stock
As of December 31, 2024 and 2023, the Company had 10 million shares of blank-check preferred stock with par value of $0.0001 per share authorized.
No shares of preferred stock have been issued or are outstanding.
12. Share-based compensation
On June 8, 2022, the stockholders of the Company approved the Fluent, Inc. 2022 Omnibus Equity Incentive Plan (the "2022 Plan") that authorized for
issuance 2,570,421 shares of the Company's common stock. As of December 31, 2024, the Company had 665,767 shares of common stock available for
grants pursuant to the 2022 Plan, which included 262,517 shares of common stock previously available for issuance under the 2018 Stock Incentive Plan.
F-
23
Table of Contents
The primary purpose of the 2022 Plan and prior plans is to attract, retain, reward, and motivate certain individuals by providing them with opportunities to
acquire or increase their ownership interests in the Company. In October 2022, the Company issued to certain of its senior officers and employees,
restricted stock units ("RSUs") (time-based), long-term incentive grants (performance and time-based vesting RSUs), or performance stock units ("PSUs")
(on achievement of targets, a cash payout) under the 2022 Plan.
Stock options
The Compensation Committee of the Company's Board of Directors approved the grant of stock options to certain Company officers, which were issued
on February 1, 2019, December 20, 2019, March 1, 2020, and March 1, 2021. Subject to continuing service, 50% of the shares subject to these stock
options will vest if the Company's stock price remains above 125%, 133.33%, 133.3% and 133.33%, respectively, of the exercise prices for twenty
consecutive trading days, and the remaining 50% of the shares subject to these stock options will vest if the Company's stock price remains above 156.25%,
177.78%, 177.78% and 177.78%, respectively, of the exercise prices for twenty consecutive trading days; provided, that no shares will vest prior to the first
anniversary of the grant date. As of December 31, 2024, the first condition for the stock options issued on February 1, 2019, December 20, 2019 and March
1, 2020 had been met and the second condition for the stock options issued on December 20, 2019 and March 1, 2020 had been met. Any shares that
remain unvested as of the fifth anniversary of the grant date will vest in full on such date. The fair value of the stock options granted was estimated at the
trading day before the date of grant using a Monte Carlo simulation model. The key assumptions utilized to calculate the grant-date fair values for these
awards are summarized below:
Issuance Date
February 1,
2019
December 20,
2019
March 1, 2020 March 1, 2021
Fair value lower range
$
16.86 $
9.48 $
8.76 $
26.04
Fair value higher range
$
17.16 $
9.66 $
8.94 $
26.58
Exercise price
$
28.32 $
15.36 $
13.98 $
37.98
Expected term (in years)
1.0 - 1.3
1.0 - 1.6
1.0 - 1.5
1.0 - 1.3
Expected volatility
65%
70%
70%
80%
Dividend yield
—%
—%
—%
—%
Risk-free rate
2.61%
1.85%
1.05%
1.18%
On September 9, 2024, the Compensation Committee of the Company's Board of Directors approved the grant of stock options to the Company's Chief
Financial Officer in connection with his employment agreement. Subject to continuing service, 50% of the shares subject to these stock options will vest
when the average closing price of the Company's common stock is equal to three times the exercise price of the option for ten consecutive trading days, and
the remaining 50% of the shares subject to these stock options will vest when the average closing price of the Company's common stock is equal
to five times the exercise price of the option for ten consecutive trading days. Notwithstanding the foregoing, the options will immediately vest upon the
occurrence of certain conditions such as a change in control. The fair value of the stock option granted was estimated at the trading day of the date of the
grant using a Monte Carlo simulation model. The key assumptions utilized to calculate the grant-date fair value for the award is summarized below:
Issuance Date
September 9, 2024
Fair value lower range
$
—
Fair value higher range
$
15.59
Exercise price
$
2.75
Expected term (in years)
3.0 - 4.3
Expected volatility
65%
Dividend yield
—%
Risk-free rate
3.7%
For the years ended December 31, 2024 and 2023, the activity related to stock options consisted of the following:
Number of
options
Weighted
average
exercise price
per share
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic value
Outstanding as of December 31, 2022
356,500 $
26.22
6.3 $
—
Granted
—
Forfeited
(51,334)
—
Expired
(2,833)
Outstanding as of December 31, 2023
302,333 $
25.68
5.4
—
Granted(1)
136,667
3.06
9.6
—
Forfeited
—
—
—
Expired
(41,333)
—
—
Outstanding as of December 31, 2024
397,667 $
18.33
6.2
—
Options exercisable as of December 31, 2024
249,001 $
25.90
4.3
—
(1) Balance also includes the stock options granted on June 3, 2024 to one employee of the Company totaling 16,667 that vest equally over four annual
installments and are exercisable for ten years after the grant date.
The aggregate intrinsic value amounts in the table above represent the difference between the closing price of the Company’s common stock at the end of
the reporting period and the corresponding exercise prices, multiplied by the number of in-the-money stock options as of the same date.
F-
24
Table of Contents
For the years ended December 31, 2024 and 2023, the unvested balance of stock options was as follows:
Number of options
Weighted average
exercise price per
share
Weighted average
remaining
contractual term
(years)
Unvested as of December 31, 2023
123,833 $
29.72
5.4
Granted (1)
136,667 $
3.06
9.6
Forfeited
(6,000)
—
—
Vested
(105,834)
—
—
Unvested as of December 31, 2024
148,666 $
5.66
9.4
(1) Balance also includes the stock options granted on June 3, 2024 to one employee of the Company totaling 16,667 that vest equally over four annual
installments and are exercisable for ten years after the grant date.
For the years ended December 31, 2024 and 2023, compensation expense recognized for stock options of $29 and $0, respectively, was recognized in
product development and general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, there
was $240 of unrecognized share-based compensation with respect to outstanding stock options.
Restricted stock units and restricted stock
For the years ended December 31, 2024 and 2023, details of unvested RSUs were as follows:
Weighted average
Number of units
grant date fair
value
Unvested as of December 31, 2022
703,859 $
32.22
Granted
581,185
5.34
Vested and delivered
(203,503)
17.76
Withheld as treasury stock (1)
(51,903)
10.92
Vested not delivered (2)
(6,599)
17.10
Forfeited
(291,501)
7.20
Unvested as of December 31, 2023
731,538
25.95
Granted
701,028
3.62
Vested and delivered
(319,933)
10.42
Withheld as treasury stock (1)
—
—
Vested not delivered (2)
3,833
10.60
Forfeited
(314,941)
7.29
Unvested as of December 31, 2024
801,525
20.72
(1) As discussed in Note 11, Equity, the treasury stock was related to shares withheld to cover statutory withholding taxes upon the delivery of shares
following the vesting of RSUs. As of December 31, 2024 and 2023, there were 768,595 outstanding shares of treasury stock for both periods.
(2) Vested not delivered represents vested RSUs with delivery deferred to a future time. During the year ended December 31, 2024, there was a
3,833 change in the vested not delivered balance due to a net 568 shares that were deferred due to timing of delivery of certain shares, along with 3,265
shares that elected deferred delivery. As of December 31, 2024 and 2023, there were 286,099 and 289,932 outstanding RSUs that were vested not
delivered, respectively.
For the years ended December 31, 2024 and 2023, the Company recognized compensation expense for RSUs of $1,982 and $3,903, respectively, in sales
and marketing, product development, and general and administrative in the consolidated statements of operations, and intangible assets in the consolidated
balance sheets. As of December 31, 2024, there was $1,946 of unrecognized share-based compensation with respect to outstanding RSUs and restricted
stock. The fair value of the RSUs and restricted stock was estimated using the closing prices of the Company's common stock on the dates of grant.
As of December 31, 2024, unrecognized share-based compensation expense associated with the granted RSUs, restricted stock and stock options is $2,186,
which is expected to be recognized over a weighted average period of 2.0 years. For the years ended December 31, 2024 and 2023, share-based
compensation for the Company’s equity awards were allocated to the following lines in the consolidated financial statements:
Year Ended December 31,
(In thousands)
2024
2023
Sales and marketing
$
218 $
543
Product development
239
626
General and administrative
1,506
2,640
Share-based compensation expense
1,963
3,809
Capitalized in intangible assets
48
94
Total share-based compensation
$
2,011 $
3,903
As of December 31, 2024, the Company recorded a liability of $29 and $22, respectively, related to PSUs that are to be settled in cash.
401(k) Profit Sharing Plan and Trust Plan
The Company maintains a 401(k) Profit Sharing Plan and Trust ("Plan") covering all U.S. employees. Under the Plan, the Company makes a safe harbor
matching contribution equal to 100% of an employee’s salary deferrals that do not exceed 3% of the employee’s compensation plus 50% of the employee’s
salary deferrals between 3% and 5% of such employee’s compensation. This safe harbor matching contribution is 100% vested. During 2024, we made
matching contributions to the Plan of $966. During 2023, we made matching contributions to the Plan of $1,034.
The Company also has a discretion to award eligible employees under the Plan, profit sharing contributions
F-
25
Table of Contents
13. Segment information
The Company identifies operating segments as components of an entity for which discrete financial information is available and are regularly reviewed by
the Chief Executive Officer, who is the Company’s CODM, who has final authority in making decisions regarding resource allocation and performance
assessment. The profitability measure employed by CODM is earnings before interest, taxes, depreciation and amortization ("EBITDA"). The use of
EBITDA as a financial metric provides management and investors with a clearer view of the core business performance and profitability, excluding the
effects of financing and other non-operational expenses.
During the quarter ended December 31, 2024, the Company completed its reassessment of its segments and determined that it had three operating
segments: a) "Fluent", which is Owned and Operated and Commerce Media Solutions revenue, b) "Call Solutions", and c) "AdParlor". The Company
determined that there was one reportable segment, "Fluent," for the purposes of segment reporting. The Fluent reporting segment combines Fluent with the
Call Solutions operating segment. This reporting unit works with advertisers to then bring consumers to their products through multiple media channels and
earn revenue when a consumer completes an action as agreed upon with the advertisers. The "All Other" segment represents the operating results of
AdParlor, LLC, which mainly performs media buying, and those businesses sold or in run-off, which are included for purposes of reconciliation of the
respective balances below to the consolidated financial statements.
The Company determined its segments based on how revenue is earned as well as the agreements entered into with its advertisers. In addition, certain
advertisers overlap within the different operating segments. Further, they are managed consistently with shared management.
As of December 31, 2024, the Company adopted ASU 2023-07 (see Note 2, Summary of significant accounting policies, under the caption “(s) Recently
issued and adopted accounting standards” for further discussion). Accordingly, the segment disclosures provided have been updated in accordance with the
current presentation and accounting standard requirements. The significant expense categories and amounts align with the segment-level information that is
regularly provided to and used by the CODM in evaluating performance and EBITDA profitability and were identified as a) cost of revenue b) salaries and
benefits, c) professional fees, and d) IT and software.
The Company does not allocate certain shared expenses such as interest expense and other non-recurring items. The allocation methodology is regularly
assessed, evaluated and subject to future changes.
Summarized financial information concerning the Company's segments for the twelve months ended twelve months ended December 31, 2024 and
2023 are shown in the following tables below, noting prior period amounts have been recast to conform to the Company's current period segment
presentation:
Year Ended December 31,
Year Ended December 31,
2024
2023
Fluent
All Other
Total
Fluent
All Other
Total
Revenue(1):
United States
$
158,871 $
13,812 $
172,683 $
165,579 $
19,265 $
184,844
International
81,940
—
81,940
113,555
—
113,555
Total segment revenue
$
240,811 $
13,812 $
254,623 $
279,134 $
19,265 $
298,399
Costs of revenue
Cost of revenue (exclusive of depreciation
and amortization)
184,109
9,712
193,821
202,548
17,336
219,884
Costs and expenses:
Salaries and benefits
36,194
8,347
44,541
38,657
9,270
47,927
Professional fees
7,425
1,034
8,459
7,912
777
8,689
IT and software
3,967
661
4,628
3,960
646
4,606
Other operating expense items (2)
12,354
4,554
16,908
61,598
4,949
66,547
EBITDA
$
(3,238) $
(10,496) $
(13,734) $
(35,541) $
(13,713) $
(49,254)
Depreciation and amortization
9,072
854
9,926
9,507
1,369
10,876
Loss from operations
$
(12,310) $
(11,350) $
(23,660) $
(45,048) $
(15,082) $
(60,130)
Reconciliation of profit or loss:
Interest Expense, net
$
(4,749)
$
(3,204)
Fair value adjustment of Convertible
Notes, with related parties
(1,670)
—
Loss on early extinguishment of debt
(1,009)
—
Loss before income taxes
$
(31,088)
$
(63,334)
(1) Revenue aggregation is based upon location of the customer.
(2) Balance includes sales and marketing expense, travel and entertainment expense, office overhead, restructuring and severance, goodwill impairment
and impairment of intangible assets, and other operating costs.
December 31,
December 31,
2024
2023
Total assets:
Fluent
$
84,373 $
90,395
All Other
9,244
21,472
Total assets
$
93,617 $
111,867
As of December 31, 2024, long-lived assets are all located in the United States.
For the year ended December 31, 2024, 18.2% of the Company’s revenue is earned from customers located in Israel.
F-
26
Table of Contents
14. Variable Interest Entity
A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii)
has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary is the party that has the power to direct
activities that most significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could
potentially be significant to the VIE. The Company assesses whether we are the primary beneficiary of a VIE at the inception of the arrangement and as of
the reporting date.
True North
On May 1, 2024, the Company and Caspian Ventures, LLC ("Caspian") entered into a membership interest purchase agreement pursuant to which the
Company conveyed 100% of the membership interests of True North Loyalty, LLC and its direct and indirect subsidiaries (collectively, "True North") to
Caspian (the "True North Conveyance"). True North is a subscription-based business that utilizes call center operations and other media channels to
market third-party recurring revenue services to consumers. The deemed fair value of the consideration received was $989, which consisted of (i) the
forgiveness of a $500 deferred payment owed by the Company in connection with the True North Acquisition on January 1, 2022, (ii) a share of the True
North contribution margin after the closing until the Company has received an amount equal to the closing net working capital of approximately $168, and
(iii) a continued share of the True North contribution margin of an additional amount at fair value of $321. The True North founder who entered into an
employment agreement in connection with the True North Acquisition has remained an employee of the Company after the closing of the True North
Conveyance. It was determined that True North did not meet the discontinued operations criterion under ASC 205-20, Discontinued Operations.
In accordance with ASC 810, Consolidation ("ASC 810"), the Company determined that True North was a VIE based upon the receivable for the
consideration to be received. Initially, as the majority membership owner of Caspian remained a full-time employee of the Company and had the power to
unilaterally make significant decisions at True North, it was determined that the Company was the primary beneficiary of Caspian and therefore should
consolidate Caspian's operations going forward, under the de facto agent guidance. As a result, no gain or loss was to be recognized on the True North
Conveyance. On September 1, 2024, Caspian’s operating agreement was amended to require the consent of multiple members rather than a majority
interest for major decisions. As a result, the Company determined that it was no longer the primary beneficiary, and under ASC 810, True North
was no longer consolidated as of September 1, 2024. No gain or loss was recognized for the three months ended December 31, 2024. The Company will
have no continued business relationship with True North apart from receiving the remaining consideration owed by True North.
The Company’s total exposure to True North consisted solely of the carrying amount of the receivable related to the True North Conveyance which had
been recorded as other non-current assets totaling $489. As of December 31, 2024, due to the cessation of the True North operations, the receivable had
been fully written off.
TAPP
On January 9, 2023, the Company entered into employment agreements with certain key employees of TAPP, an influencer-based business that uses an
application to utilize its relationships with influencers to bring consumers to advertising clients. The Company is also a customer of TAPP and accounts for
the majority of TAPP's revenues. As a result of significant influence over TAPP's key employees and financial performance, the Company determined that
TAPP qualified as a VIE in which the Company has a variable interest and that the Company is the primary beneficiary. Therefore, the Company
consolidates the TAPP operations. As the Company does not have an equity interest in TAPP, 100% of the net assets and results of the operations of TAPP
are attributable to non-controlling interests.
As the Company gained control of TAPP, in accordance with ASC 805, Business Combinations, it was then determined that TAPP constituted a business.
The deemed fair value of the consideration was $4,165, which consisted of $1,250 of initial cash and $2,915 contingent upon the achievement of specified
revenue and media margin targets over three years. The fair value of assets acquired, which excluded the immaterial net-working capital, were determined
to be the publisher contracts of $1,100, which were valued using the 'with or without' method, a variation of the income approach, to be amortized over a
period of one year and industry-based trade secrets of $1,510, which were valued using the excess earnings method, a variation of the income approach, to
be amortized over a period of four years. The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill in
the amount of $1,555 and primarily represents workforce and expected cash flow generation for the TAPP business that does not qualify for separate
recognition as intangible assets included within the Fluent operating segment. For tax purposes, the value of the acquisition payments is treated as ordinary
compensation for services rendered, deductible when paid and included in the employees' wages.
15. Contingencies
Except as disclosed below, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of management, is
likely to have a material adverse effect on the business, financial condition, results of operations or cash flows. Legal fees associated with such legal
proceedings are expensed as incurred. The Company reviews legal proceedings and claims on an ongoing basis and follows the appropriate accounting
guidance, including ASC 450, when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the
incurrence of a loss is probable and can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible
loss in excess of the amount accrued, if such disclosure is necessary for the consolidated financial statements to not be misleading. To estimate whether a
loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the probability of an unfavorable outcome and the
ability to make a reasonable estimate of the amount of the loss. The Company does not accrue liabilities when the likelihood that the liability has been
incurred is probable, but the amount cannot be reasonably estimated.
In addition, the Company may be involved in litigation from time to time in the ordinary course of business. It is the opinion of the Company's
management that the ultimate resolution of any such matters currently pending will not have a material adverse effect on the Company's business, financial
condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and there can be no assurance that the
ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on the Company's business, financial
condition, results of operations and cash flows.
In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably
estimate the amount of any such loss.
F-
27
Table of Contents
On January 28, 2020, the Company received a Civil Investigative Demand from the Federal Trade Commission ("FTC") regarding compliance with the
FTC Act and the Telemarketing Sales Rule. On May 26, 2023, the Company agreed to the terms of a Stipulated Order for Permanent Injunction, Monetary
Judgment, Civil Penalty Judgment, and Other Relief (the "FTC Consent Order"). The FTC Consent Order imposed a civil penalty of $2,500, required
additional changes to the Company's employment opportunities marketplace and programmatic advertising business, and resulted in the implementation of
compliance measures across the business. On July 17, 2023, the FTC and the Company filed a Joint Motion for Entry of Proposed Stipulated Order in the
United States District Court for the Southern District of Florida. The FTC Consent Order was entered by the Court on August 11, 2023, and the escrow
funds were released on August 15, 2023. On August 12, 2024, the Company filed its required compliance report. The Company maintains insurance
policies that covered a majority of the legal costs incurred related to the FTC inquiry.
On October 6, 2020, the Company received notice from the Pennsylvania Office of the Attorney General ("PAAG") that it was reviewing the Company's
business practices relating to telemarketing. On May 18, 2023, the parties entered into a settlement and jointly filed a Consent Petition of Final Decree,
wherein the Company agreed to injunctive relief and to pay the PAAG $250 for investigatory costs, all of which was paid as of June 30, 2023.
The Company was involved in a Telephone Consumer Protection Act class action, Daniel Berman v. Freedom Financial Network, which was originally
filed in the Northern District of California in 2018. On May 31, 2023, the parties entered into an Amended Class Action Settlement Agreement (the
"Berman Settlement Agreement"), which included injunctive provisions and payment to plaintiffs of $9,750 for legal fees and a consumer redress fund, of
which the Company was responsible for $3,100. The final approval of the Berman Settlement Agreement was filed on February 23, 2024. To satisfy its
obligations under the Berman Settlement Agreement, the Company made a cash payment of $1,100 on March 15, 2024 and issued a junior secured
promissory note in the principal amount of $2,000 payable to the co-defendant, FDR, as discussed in Note 8, Long-term debt, net.
16. Subsequent Events
Amendment to the SLR Credit Agreement
On March 10, 2025, the Credit Parties and SLR entered into the Fourth Amendment to the SLR Credit Agreement, (the "Fourth Amendment") which,
among other things, required that the Company raise at least $5,000 of additional capital by March 20, 2025 (refer below for details on the capital raise). In
addition, the Fourth Amendment waived non-compliance with the financial covenants as of December 31, 2024, extended the duration of the call
protection applicable to the loans, and modified the financial covenants.
Private Placement
On March 19, 2025, the Company entered into securities purchase agreements (the "March Purchase Agreements") with certain accredited investors (the
"March Purchasers"), a majority of whom were related parties, pursuant to which the Company agreed to sell the March Purchasers unregistered pre-
funded warrants (the "March Pre-Funded Warrants") to purchase up to 2,332,104 shares of our common stock, at a purchase price of $2.174 per March Pre-
Funded Warrant. The March Pre-Funded Warrants will have an exercise price of $0.005 per share of common stock, will be immediately exercisable after
stockholder approval and will terminate when exercised in full. The March Purchasers include three directors and/or officers of the Company, the
Company's largest shareholder, and institutional investor. No underwriting discounts or commissions were paid with respect to the March Purchase
Agreement.
The aggregate gross proceeds totaled $5,070, before deducting offering expenses payable by the Company of $70. The exercise of the March Pre-Funded
Warrants is subject to stockholder approval, which the Company will seek to obtain at the 2025 Annual Meeting of Stockholders. The Company is
obligated to use its reasonable best efforts to obtain such stockholder approval of the exercise of the officers' and/or directors' March Pre-Funded
Warrants at the 2025 Annual Meeting of Stockholders. In connection with the offering, the Company entered into a First Amendment to Support
Agreement (the "First Amendment to Support Agreement") with each of the March Purchasers. Pursuant to the Support Agreement, as amended, the March
Purchasers agreed to vote their shares of the Company's common stock beneficially owned by them in favor of certain actions at any meeting of the
Company’s stockholders.
Amendment to the Sublease
On March 19, 2025, the Company entered into a Second Amendment to Sublease (the "Sublease Amendment") with sublandlord Virtu KCG Holdings LLC
to reduce the monthly payments for the Company Headquarters effective as of the date of such amendment. The Sublease Amendment is currently pending
the landlord's consent, which, if obtained, would extend the term of the sublease by four years from the Commence Date (as such term is defined in the
Sublease Agreement) of the Sublease Agreement and reduce the subleased premises by 42%.
F-28
Exhibit 4.3
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of March 27, 2025, Fluent, Inc. ("the Company") had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") — our common stock, par value $0.0005 per share ("Common Stock").
Description of Common Stock
The following description of our Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by
reference to our Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and our Amended and Restated Bylaws (the "Bylaws"), each
of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.3 is a part. We encourage you to read our
Certificate of Incorporation, Bylaws, and the applicable provisions of the Delaware General Corporation Law (the "DGCL") for additional information.
Authorized Capital Shares
Our authorized capital shares consist of 200,000,000 shares of Common Stock, $0.0005 par value per share, and 10,000,000 shares of preferred stock,
$0.0001 par value per share ("Preferred Stock"). As of March 27, 2025, there were 20,643,660 shares of Common Stock issued and outstanding. There
were no shares of Preferred Stock issued or outstanding as of March 27, 2025.
Voting Rights
Holders of Common Stock are entitled to one vote per share on all matters voted on by the stockholders, including the election of directors. Our
Certificate of Incorporation and Bylaws do not provide for cumulative voting in the election of directors.
Dividend Rights
Holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Board of Directors ("Board") in its
discretion out of funds legally available for the payment of dividends subject to the prior rights of holders of Preferred Stock and any contractual
restrictions we have against the payment of dividends on Common Stock.
Liquidation Rights
In the event of our liquidation, the holders of our Common Stock will be entitled to share ratably in any distribution of our assets after payment of all
debts and other liabilities and the preferences payable to holders of shares of Preferred Stock then outstanding, if any.
Applicable Anti-Takeover Provisions
Set forth below is a summary of the provisions of the Certificate of Incorporation and the Bylaws that could have the effect of delaying or preventing a
change in control of the Company. The following description is only a summary, and it is qualified by refence to the Certificate of Incorporation, the
Bylaws, and relevant provisions of the DGCL.
No Written Consent of Stockholders
Our Certificate of Incorporation provides that stockholders are not entitled to act by written consent in lieu of a meeting. This provision could
discourage potential acquisition proposals and could delay or prevent a change of control.
No Ability of Stockholders to Call Special Meetings
Our Certificate of Incorporation and Bylaws do not provide stockholders with the right to call a special meeting of stockholders.
Advance Notice Requirements
Our Bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as
directors or new business to be brought before meetings of stockholders. These procedures provide that notice of such stockholder proposals must be timely
given in writing to the Secretary of the Company prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at
our principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the annual meeting for the preceding year. The
notice must contain certain information specified in our Bylaws.
Blank Check Preferred Stock
Our Certificate of Incorporation provides for 10,000,000 authorized shares of "blank check" preferred stock, the terms of which may be
determined by our board of directors without obtaining stockholder approval. Undesignated or "blank check" preferred stock may enable our board of
directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and to
thereby protect the continuity of our management.
Exclusive Forum Provision
In accordance with an exclusive forum provision set forth in the Bylaws, unless the Company consents in writing to the selection of an alternative
forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over
a particular matter, any state or federal court located within the State of Delaware) shall be the sole and exclusive forum for the following types of actions
or proceedings: (i) any derivative action or proceeding brought against or on behalf of the Company, (ii) any action asserting a claim of breach of a duty
owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any
action asserting a claim arising pursuant to any provision of the DGCL, (iv) any action as to which the DGCL confers jurisdiction upon the Court of
Chancery in the State of Delaware, or (v) any action asserting a claim governed by the internal affairs doctrine.
Listing
The Common Stock is traded on The Nasdaq Capital Market under the trading symbol "FLNT."
Transfer Agent
The Company’s transfer agent is Continental Stock Transfer & Trust.
Exhibit 10.38
January 30, 2025
VIA EMAIL
Fluent, LLC
300 Vesey Street, 9th Floor New York, NY 10282
RE: SLR-Fluent Credit Agreement 2024 Q4 Deliverables Dear Mr. Barsky:
Reference is made to that certain Credit Agreement dated as of April 2, 2024 (as amended, restated, amended and restated, extended, modified,
supplemented or otherwise in effect from time to time, the “Credit Agreement”), by and among (i) Fluent, LLC, as the borrower (the “Borrower”); (ii)
Fluent, Inc., as a guarantor, (iii) the other Credit Parties party thereto from time to time; (iv) Crystal Financial LLC d/b/a SLR Credit Solutions, as the
administrative agent (in such capacity, together with its successors and assigns, the “Administrative Agent”) for the Lenders; and (v) the Lenders party
thereto from time to time. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
The Borrower has requested that the Lenders and the Administrative Agent extend until March 14, 2025, the deadline for delivery of (i) the
Compliance Certificate required by Section 6.04(b)(ii) for the Fiscal Month ended December 31, 2024, and (ii) the notice of Event of Default required by
Section 6.05(a) for the Borrower’s violation of Section 7.12(b)(i) for the Fiscal Quarter ended December 31, 2024. The Lenders and the Administrative
Agent are willing to, and by delivery of this letter hereby agree to, extend such deadlines until March 4, 2025.
This letter together with the other Loan Documents embodies the entire understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and inducements, whether express or implied, oral or
written.
[Signature pages follow]
Sincerely,
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as Administrative Agent and Lender
By:
Name:
Rebecca Tarby
Title:
Senior Managing Director
CRYSTAL FINANCIAL SPV LLC, as a Lender
By:
Name:
Rebecca Tarby
Title:
Senior Managing Director
[Signature Page to SLR-FLNT 2024 Q4 Extension Letter]
Acknowledged and agreed,
FLUENT, LLC, as Borrower and on behalf of the Guarantors
By:
Name: Daniel Barsky
Title: General Counsel
[Signature Page to SLR-FLNT 2024 Q4 Extension Letter]
Exhibit 10.39
March 3, 2025
VIA EMAIL
Fluent, LLC
300 Vesey Street, 9th Floor
New York, NY 10282
RE: SLR-Fluent Credit Agreement 2024 Q4 Deliverables
Dear Mr. Barsky:
Reference is made to that certain Credit Agreement dated as of April 2, 2024 (as amended, restated, amended and restated, extended, modified,
supplemented or otherwise in effect from time to time, the “Credit Agreement”), by and among (i) Fluent, LLC, as the borrower (the “Borrower”); (ii)
Fluent, Inc., as a guarantor, (iii) the other Credit Parties party thereto from time to time; (iv) Crystal Financial LLC d/b/a SLR Credit Solutions, as the
administrative agent (in such capacity, together with its successors and assigns, the “Administrative Agent”) for the Lenders; and (v) the Lenders party
thereto from time to time. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them
in the Credit Agreement.
The Borrower has requested that the Lenders and the Administrative Agent extend until March 10, 2025, the deadline for delivery of (i) the
Compliance Certificate required by Section 6.04(b)(ii) for the Fiscal Month ended December 31, 2024, and (ii) the notice of Event of Default required by
Section 6.05(a) for the Borrower’s violation of Section 7.12(b)(i) for the Fiscal Quarter ended December 31, 2024. The Lenders and the Administrative
Agent are willing to, and by delivery of this letter hereby agree to, extend such deadlines until March 10, 2025.
This letter together with the other Loan Documents embodies the entire understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and inducements, whether express or implied, oral or
written.
[Signature pages follow]
Sincerely,
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as Administrative Agent and Lender
By:
Name:
Rebecca Tarby
Title:
Senior Managing Director
CRYSTAL FINANCIAL SPV LLC, as a Lender
By:
Name:
Rebecca Tarby
Title:
Senior Managing Director
[Signature Page to SLR-FLNT 2024 Q4 Extension Letter]
Acknowledged and agreed,
FLUENT, LLC, as Borrower and on behalf of the
Guarantors
By:
Name:Daniel Barsky
Title: General Counsel
[Signature Page to SLR-FLNT 2024 Q4 Extension Letter]
Exhibit 10.40
Execution Version
FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 10, 2025 (this “Amendment”), is entered into by and among
the lenders identified on the signature pages hereto (each such lender, together with its successors and permitted assigns, is referred to hereinafter as a
“Lender”), CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, a Delaware limited liability company, as administrative agent for the
Lenders (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”), FLUENT, LLC, a Delaware limited
liability company (the “Borrower”), FLUENT, INC., a Delaware corporation (“Parent”), and each of the Guarantors (as defined in the Credit Agreement
referred to below) identified on the signature pages hereto.
WHEREAS, the Borrower, the other Credit Parties (as defined in the Credit Agreement referred to below), the Lenders and the Administrative
Agent entered into that certain Credit Agreement, dated as of April 2, 2024 (as amended by that certain First Amendment to Credit Agreement, dated as of
May 15, 2024, that certain Second Amendment to Credit Agreement, dated as of August 19, 2024, and that certain Third Amendment to Credit Agreement,
dated as of November 14, 2024 the “Existing Credit Agreement”, and as amended by this Amendment and as may be further amended, restated, amended
and restated, extended, modified, supplemented or otherwise modified and in effect from time to time, the “Credit Agreement”);
WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent amend (i) the covenants set forth in Section 7.12(b) of the
Existing Credit Agreement (the “Financial Covenant Amendments”) and (ii) certain other provisions of the Credit Agreement; and
WHEREAS, the Lenders and the Administrative Agent are willing to agree to (i) the Financial Covenant Amendments and (ii) amend certain
other provisions of the Credit Agreement, subject to all of the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged, the parties hereto agree as follows
1. Definitions. Capitalized terms used and not defined in this Amendment are used herein as defined in the Credit Agreement as amended
hereby.
2. Amendments to Credit Agreement.
(a) Composite Credit Agreement. The Credit Agreement is hereby amended to delete the bold, stricken text (indicated textually in the same
manner as the following example: stricken text) and to add the bold, double-under lined text (indicated textually in the same manner as the following
example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex A hereto.
(b) Exhibits to Credit Agreement. Exhibit I to the Existing Credit Agreement is hereby deleted in its entirety and replaced by a new Exhibit I
(Subordinated Indebtedness Payment Conditions) in the form attached hereto as Annex B.
1
3. Representations, Warranties, Covenants and Acknowledgments.
(a) Each Credit Party represents and warrants to the Administrative Agent and the Lenders that, upon and after giving effect to this
Amendment, (i) each of the representations and warranties made by such Credit Party under the Loan Documents are true and correct in all
material respects (but without duplication of any materiality qualifications) on and as of the date hereof, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (but without
duplication of any materiality qualifications) as of such earlier date, (ii) it has the power and authority and is duly authorized to enter into and to
deliver this Amendment and to perform all of its obligations under this Amendment, (iii) this Amendment has been duly executed and delivered
by each Credit Party that is party hereto, (iv) this Amendment, the Credit Agreement and each of the other Loan Documents to which it is a party
is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors’ rights generally and (v) the execution, delivery and performance of this Amendment in accordance with its terms does not and
will not (A) violate any provision of federal, state, provincial, foreign or local law or regulation applicable to any Credit Party or its Subsidiaries
or any order, judgment, or decree of any court or other Governmental Authority binding on any Credit Party or its Subsidiaries, (B) violate the
Governing Documents of any Credit Party or its Subsidiaries, (C) conflict with, result in a breach of, or constitute (with due notice or lapse of time
or both) a default under any Material Agreement of any Credit Party or its Subsidiaries, (D) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any assets of any Credit Party, other than Permitted Liens, or (E) require any approval of any board of
directors, member, manager, partner (or similar governing body) or any holder of equity interests of a Credit Party or any approval or consent of
any Person under any material agreement of any Credit Party, other than consents or approvals that have been obtained and that are still in force
and effect, except in each case referred to in clauses (A), (C), (D) and (E), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.
(b) Each Credit Party represents and warrants to the Administrative Agent and the Lenders that no Default or Event of Default shall exist
after giving effect to this Amendment, or would result from giving effect to this Amendment.
(c) Each Credit Party does hereby acknowledge and agree that, as of the date hereof, no known right of offset, defense, counterclaim, claim,
causes of action or objection exists in favor of any Credit Party against the Administrative Agent or any Lender arising out of or with respect to (i)
the Obligations, this Amendment, the Credit Agreement or any of the other Loan Documents, (ii) any other documents evidencing, securing or in
any way relating to the foregoing, or (iii) the administration or funding of the Loans or the Obligations.
(d) All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment and no
investigation by the Administrative Agent or the Lenders shall affect such representations or warranties or the right of the Administrative Agent
and the Lenders to rely upon them.
4. Amendment Fee. In consideration of the agreements set forth herein, the Borrower hereby agrees to pay to the Administrative Agent for the
ratable benefit of the Lenders, an amendment fee in the amount of $250,000 (the “Fourth Amendment Fee”), which fee is non-refundable when paid and is
fully-earned as of the date of this Amendment, of which $125,000 is due and payable on the Fourth Amendment Effective Date and $125,000 is due and
payable on September 10, 2025.
5. Closing; Conditions Precedent.
(a) Each party hereto agrees that the Financial Covenant Amendments shall be effective on or prior to March 10, 2025 so long as the Fourth
Amendment Effective Date has occurred.
2
(b) Each party hereto agrees that this Amendment (other than the Financial Covenant Amendments) shall be effective on the date on which each
of the following conditions precedent has been fulfilled to the reasonable satisfaction of the Administrative Agent (such date being the “Fourth Amendment
Effective Date”):
(i) The Administrative Agent shall have received counterparts to this Amendment duly executed by the Credit Parties and the Lenders.
(ii) The Administrative Agent shall have received the portion of the Fourth Amendment Fee that is due and payable on the date hereof.
(iii) Any consents or approvals required in connection with the effectiveness of this Amendment and the other Loan Documents shall have
been obtained and shall be in full force and effect.
(iv) The representations and warranties contained in Section 4 shall be true and correct as of the Fourth Amendment Effective Date.
6. Fees and Expenses. Without limiting the generality of Section 10.04 of the Credit Agreement, the Borrower agrees to pay on demand,
without duplication, all reasonable and documented out-of-pocket costs and expenses incurred by the Administrative Agent in connection with the
preparation, execution, delivery and performance of this Amendment and all other documents, instruments and agreements entered into in connection
herewith and in connection with any other transactions contemplated hereby, including, without limitation, the reasonable fees, charges and disbursements
of legal counsel to the Administrative Agent.
7. Release. As a material inducement to the Administrative Agent and the Lenders entering into this Amendment each Credit Party, for itself and
its respective successors and assigns, (a) does hereby remise, release, waive, relinquish, acquit, satisfy and forever discharge the Administrative Agent and
each Lender and all of the respective past, present and future officers, directors, employees, agents, attorneys, representatives, participants, heirs, Affiliates,
successors and assigns of the Administrative Agent and each Lender (collectively the “Discharged Parties” and each a “Discharged Party”), from any and
all manner of debts, accountings, bonds, warranties, representations, covenants, promises, contracts, controversies, agreements, liabilities, obligations,
expenses, damages, judgments, executions, actions, suits, claims, counterclaims, demands, defenses, setoffs, objections and causes of action of any nature
whatsoever, whether at law or in equity, either now accrued or hereafter maturing and whether known or unknown, including, but not limited to, any and all
claims which may be based on allegations of breach of contract, failure to lend, fraud, promissory estoppel, libel, slander, usury, negligence,
misrepresentation, breach of fiduciary duty, bad faith, lender malpractice, undue influence, duress, tortious interference with contractual relations,
interference with management, or misuse of control which such Credit Party now has or hereafter can, shall or may have by reason of any matter, cause,
thing or event occurring on or prior the date of this Agreement, in each case, arising out of, in connection with or relating to (i) the Obligations, including,
but not limited to, the administration or funding thereof, (ii) any of the Loan Documents or the indebtedness evidenced and secured thereby, and (iii) any
other agreement or transaction between any Credit Party and any Discharged Party relating to or in connection with the Loan Documents or the transactions
contemplated therein; and (b) does hereby covenant and agree never to institute or cause to be instituted or continue prosecution of any suit or other form of
action or proceeding of any kind or nature whatsoever against any Discharged Party, by reason of or in connection with any of the foregoing matters, claims
or causes of action, provided, however, that the foregoing release and covenant not to sue shall not apply to any claims first arising after the date of this
Amendment with respect to acts, occurrences or events after the date of this Amendment.
3
8. Additional Acknowledgement. Each Credit Party expressly acknowledges and agrees that the waivers, estoppels and releases in favor of the
Administrative Agent and the Lenders contained in this Amendment shall not be construed as an admission of any wrongdoing, liability or culpability on
the part of the Administrative Agent or any Lender, or as an admission by the Administrative Agent or any Lender of the existence of any claims by any
Credit Party against the Administrative Agent or any Lender. Each Credit Party further acknowledges and agrees that, to the extent that any such claims
exist, they are of a speculative nature so as to be incapable of objective valuation and that, to the extent that any such claims may exist and may have value,
such value would constitute primarily “nuisance” value or “leverage” value in adversarial proceedings between any Credit Party and the Administrative
Agent or any Lender. In any event, each Credit Party acknowledges and agrees that the value to such Credit Party of the covenants and agreements on the
part of the Administrative Agent and each Lender contained in this Amendment substantially and materially exceeds any and all value of any kind or nature
whatsoever of any claims or other liabilities waived or released by such Credit Party hereunder.
9. Conflict; Amendments; Covenants. In the event of any conflict between the provisions of the Loan Documents and this Amendment, the
provisions of this Amendment shall govern, it being the intent of the parties hereto that this Amendment shall constitute an amendment and modification of
the Credit Agreement.
10. No Waiver. Nothing contained in this Amendment shall extend to or affect in any way any of the rights or obligations of the Borrower, the
other Credit Parties and their respective affiliates and/or subsidiaries, as applicable, or the Administrative Agent’s and the Lenders’ obligations and rights
and remedies under the Loan Documents and applicable law. Except as expressly set forth herein, all of the terms and provisions of the Credit Agreement
and the other Loan Documents shall remain in full force and effect. This Amendment shall be binding upon the Borrower, the other Credit Parties, any
successors or assigns thereof, and any other guarantor or co-obligor of any of the Obligations.
11. Ratification. Each of the Credit Parties hereby ratifies and confirms all of its Obligations to the Administrative Agent and the Lenders and
all of the terms and conditions of each of the Loan Documents to which it is a party, and each of the Credit Parties acknowledges and agrees that each of
the Loan Documents (including any schedules thereto and exhibits thereto), as amended by this Amendment, remains in full force and effect. Each of the
Credit Parties hereby acknowledges, confirms and agrees that the Loan Documents, and any and all Collateral previously pledged to the Administrative
Agent, for the benefit of the Secured Parties, pursuant thereto, shall continue to secure all Obligations of the Credit Parties at any time and from time to
time outstanding under the Credit Agreement and the Loan Documents, as such Obligations have been, and may hereafter be, amended, restated,
supplemented, increased or otherwise modified from time to time. Each Credit Party agrees that this Amendment is not intended to be, and is not, a
novation of any of the Loan Documents or any of the Obligations thereunder.
12. Miscellaneous.
(a) Each Credit Party agrees to take such further action as the Administrative Agent shall reasonably request in connection herewith to evidence
the agreements herein contained.
(b) This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single contract. This Amendment constitutes the entire contract among the parties relating
to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Delivery of an executed counterpart of a signature page of this Amendment by telecopy or other electronic imaging means shall be effective as delivery of
a manually executed counterpart of this Amendment.
4
(c) This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW (OTHER THAN THE NEW YORK GENERAL
OBLIGATIONS LAW §5-1401 and §5-1402)).
(e) This Amendment may not be modified, altered or amended except by agreement in writing signed by all of the parties hereto. Each Credit
Party acknowledges that it has consulted with counsel and with such other expert advisors as it deemed necessary in connection with the negotiation,
execution and delivery of this Amendment. This Amendment shall be construed without regard to any presumption or rule requiring that it be construed
against the party causing this Amendment or any part hereof to be drafted. Nothing in this Amendment shall be construed to alter the debtor-creditor
relationship between the Borrower, on the one hand, and the Administrative Agent and the Lenders, on the other. Wherever possible, each provision of this
Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provisions of this Amendment shall be
prohibited by or rendered invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Amendment. This Amendment is not intended as, nor shall it be construed
to create, a partnership or joint venture relationship between or among any of the parties.
(f) This Amendment shall be deemed a Loan Document, and all obligations included in this Amendment (including, without limitation, all
obligations for the payment of principal, interest, fees and other amounts and expenses) shall constitute Obligations under the Loan Documents and shall be
secured by the Collateral as security for the Obligations. This Amendment together with the other Loan Documents embodies the entire understanding and
agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings
and inducements, whether express or implied, oral or written.
(g) This Amendment shall in all respects be subject to the confidentiality provisions of Section 10.07 of the Credit Agreement.
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized representatives as
of the date first above written, and the Guarantors (i) join in the execution and delivery of this Amendment and give their consent to this Amendment, and
to the execution, delivery and performance thereof by the Borrower, (ii) agree to be bound by the terms of this Amendment, and (iii) waive any right (to
notice or otherwise) owed, or defense otherwise available, to such Guarantor in respect of this Amendment or the execution, delivery or performance
thereof by the Borrower.
BORROWER:
FLUENT, LLC, a Delaware limited liability company
By:
Name:
Title:
PARENT:
FLUENT, INC., a Delaware corporation
By:
Name:
Title:
[Fluent – Signature Page to Fourth Amendment to Credit Agreement]
GUARANTORS:
2 THREADS MEDIA, LLC,
828 COMMUNICATIONS, LLC,
ADFLOW SOLUTIONS, LLC,
ADPARLOR, LLC
AMERICAN PRIZE CENTER LLC
BIG PUSH MEDIA LLC
DELIVER TECHNOLOGY LLC
EARN BIG REWARDS, LLC
EARNVIRTUAL, LLC
EASE WINS, LLC
FIND DREAM JOBS, LLC
FLUENT MEDIA LABS, LLC
HVGUS, LLC
HUNT FOR JOBS, LLC
INBOX PAL, LLC
INFLUENTZ, LLC
MAIN SOURCE MEDIA, LLC
OGLP VENTURES, LLC,
POWER HOUR DIGITAL, LLC,
PURPOSE APP, LLC
PURPOSE INSURANCE AGENCY, LLC
RETROPOINT, LLC
REWARD ZONE USA LLC
REWARDSFLOW LLC
SAMPLES & SAVINGS, LLC
SEA OF SAVINGS LLC
SEARCH WORKS MEDIA LLC
SMALL PUSH MEDIA, LLC,
THE SMART WALLET, LLC
VESEY STUDIOS, LLC,
VICTORY EDGE, LLC,
each a Delaware limited liability company
By:
Name:
Title:
WINOPOLY LLC, a New York limited liability
company
By:
Name:
Title:
[Fluent – Signature Page to Fourth Amendment to Credit Agreement]
ADMINISTRATIVE AGENT:
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT
SOLUTIONS
By:
Name:
Rebecca Tarby
Title:
Senior Managing Director
[Fluent – Signature Page to Fourth Amendment to Credit Agreement]
LENDER:
CRYSTAL FINANCIAL SPV LLC, as a Lender
By:
Name: Rebecca Tarby
Title:
Senior Managing Director
[Fluent – Signature Page to Fourth Amendment to Credit Agreement]
ANNEX A
Composite Credit Agreement
[see attached]
ANNEX B
Exhibit I to Existing Credit Agreement
(Subordinated Indebtedness Payment Conditions)
[see attached]
ANNEX A TO THIRDFOURTH AMENDMENT
CREDIT AGREEMENT
Dated as of April 2, 2024,
as amended by the First Amendment, dated as of May 15, 2024
as amended by the Second Amendment, dated as of August 19, 2024
as amended by the Third Amendment, dated as of November 14, 2024
as amended by the Fourth Amendment, dated as of March 10, 2025
by and among
FLUENT, LLC,
as the Borrower
The Other Credit Parties Party Hereto,
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS
and the other Lenders Party Hereto,
and
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS,
as Administrative Agent,
with
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS,
as Sole Lead Arranger and Sole Bookrunner
TABLE OF CONTENTS
(cont'd)
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1
1.01
Defined Terms
1
1.02
Other Interpretive Provisions
38
1.03
Accounting Terms
3839
1.04
Rounding
39
1.05
Times of Day
39
1.06
Rates
3940
ARTICLE II THE COMMITMENTS AND LOANS
3940
2.01
Loans
3940
2.02
Borrowings of Committed Loans
4041
2.03
Prepayments; Mandatory Repayments
41
2.04
Termination or Reduction of Commitments
44
2.05
Repayment of Loans; Application of Payments
4445
2.06
Interest
4647
2.07
Fees
47
2.08
Computation of Interest and Fees
48
2.09
Evidence of Debt
48
2.10
Payments Generally; Administrative Agent’s Clawback
4849
2.11
Sharing of Payments by Lenders
50
2.12
Collateral and Guarantees
5051
2.13
[Reserved]
5051
2.14
Defaulting Lenders
5051
2.15
Protective Advances
5152
2.16
Loan Account
5253
2.17
Reserves and Eligibility Criteria
53
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
5354
3.01
Taxes
5354
3.02
Inability to Determine Rates; Illegality
58
3.03
Increased Costs
5859
3.04
Compensation for Losses
5960
3.05
Mitigation Obligations; Replacement of Lenders
60
3.06
Survival
6061
ARTICLE IV CONDITIONS PRECEDENT TO LOANS
6061
4.01
Conditions to the Closing Date
6061
4.02
Conditions to all Loans
6364
ARTICLE V REPRESENTATIONS AND WARRANTIES
64
5.01
Corporate Authority, Etc.
64
5.02
Financial Statements; Projections
65
5.03
Solvency
66
i
TABLE OF CONTENTS
(cont'd)
Page
5.04
No Material Adverse Change
66
5.05
Ownership of Property; Liens
66
5.06
Franchises, Patents, Copyrights, etc.
66
5.07
Litigation
6667
5.08
No Default
6667
5.09
Compliance with Laws
6667
5.10
Tax Status
67
5.11
Insurance
67
5.12
Investment Company Acts
6768
5.13
ERISA Compliance
6768
5.14
Regulations U and X
68
5.15
Jurisdiction of Organization; Chief Executive Office
6869
5.16
Fiscal Year
6869
5.17
Subsidiaries, etc.
6869
5.18
Environmental Compliance
6869
5.19
Labor Contracts
6869
5.20
Disclosure
69
5.21
Anti-Corruption Laws; Sanctions Laws; Beneficial Ownership Certification
69
5.22
Borrowing Base Certificates
6970
ARTICLE VI AFFIRMATIVE COVENANTS
70
6.01
Punctual Payment
70
6.02
Maintenance of Office; Certain Changes
7071
6.03
Records and Accounts
7071
6.04
Financial Statements, Certificates and Information
71
6.05
Notices
7374
6.06
Legal Existence; Maintenance of Properties
75
6.07
Insurance
7576
6.08
Taxes
76
6.09
Compliance with Laws, Contracts, Licenses, Permits
76
6.10
Third Amendment Capital Raise Raises
7677
6.11
Use of Proceeds
7677
6.12
Covenant to Guarantee Obligations and Give Security
7677
6.13
Conduct of Business
7879
6.14
Further Assurances
7879
6.15
Inspections; Collateral Reports, etc.
7879
6.16
Cash Management
7980
6.17
Post-Closing Obligations
8081
6.18
Financial Advisor
80
ARTICLE VII NEGATIVE COVENANTS
81
7.01
Investments
81
7.02
Restrictions on Indebtedness
8382
7.03
Restrictions on Liens
84
ii
TABLE OF CONTENTS
(cont'd)
Page
7.04
Restricted Payments; Payments on Other Debt
8685
7.05
Merger, Consolidation and Disposition of Assets
86
7.06
Sale and Leaseback
8887
7.07
Accounting Changes; Change of Fiscal Year
8887
7.08
Transactions with Affiliates
88
7.09
Change in Terms of Governing Documents
88
7.10
Change in Nature of Business
88
7.11
Margin Regulations
88
7.12
Financial Covenants
88
7.13
Sanctions
89
7.14
Holding Company
89
7.15
Subordinated Indebtedness
89
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
90
8.01
Events of Default
90
8.02
Remedies Upon Event of Default
92
8.03
Event of Default Application of Funds
92
ARTICLE IX ADMINISTRATIVE AGENT
93
9.01
Appointment and Authority
93
9.02
Rights as a Lender
94
9.03
Exculpatory Provisions
94
9.04
Reliance by Administrative Agent
95
9.05
Delegation of Duties
95
9.06
Resignation of Administrative Agent
96
9.07
Non-Reliance
96
9.08
No Other Duties, Etc.
96
9.09
Administrative Agent May File Proofs of Claim
96
9.10
Collateral and Guarantee Matters
97
9.11
Second Amendment Subordination Agreement
97
9.12
Third Amendment Subordination Agreement
98
9.13
Fourth Amendment Subordination Agreement
98
ARTICLE X MISCELLANEOUS
98
10.01
Amendments, Etc.
98
10.02
Notices; Effectiveness; Electronic Communication
99
10.03
No Waiver; Cumulative Remedies
100101
10.04
Expenses; Indemnity; Damage Waiver
101
10.05
Payments Set Aside
103
10.06
Successors and Assigns
103
10.07
Treatment of Certain Information; Confidentiality
107
10.08
Right of Setoff
108
10.09
Interest Rate Limitation
108109
10.10
Counterparts; Integration; Effectiveness
109
10.11
Survival of Representations and Warranties
109
10.12
Severability
109
iii
TABLE OF CONTENTS
(cont'd)
Page
10.13
Replacement of Lenders
109
10.14
Governing Law; Jurisdiction; Etc.
110
10.15
USA PATRIOT Act Notice
111
10.16
ENTIRE AGREEMENT
111112
10.17
No Advisory or Fiduciary Responsibility
112
10.18
Joint and Several Liability of the Credit Parties
112
10.19
Erroneous Payments.
113
iv
TABLE OF CONTENTS
(cont'd)
Page
SCHEDULES
Schedule
1.01A
Specified Account Debtors
Schedule
1.01B
Specified Holders
Schedule 2.01
Commitments and Applicable Percentages
Schedule 5.08
No Default
Schedule 5.17
Environmental Compliance
Schedule 5.19
Labor Contracts
Schedule 6.17
Post-Closing Obligations
Schedule 7.01
Existing Investments
Schedule 7.02
Existing Indebtedness
Schedule 7.03
Existing Liens
Schedule 7.08
Transactions with Affiliates
Schedule 10.02
Administrative Agent’s Office; Certain Addresses for Notices
EXHIBITS
Exhibit A
Form of Borrowing Request Notice
Exhibit B-1
Form of Term Loan Note
Exhibit B-2
Form of Revolving Credit Note
Exhibit C
Form of Compliance Certificate
Exhibit D
Form of Assignment and Assumption
Exhibit E
Form of Borrowing Base Certificate
Exhibit F
Form of Prepayment Notice
Exhibit G
Form of U.S. Tax Compliance Certificates
Exhibit H
Closing Date Perfection Certificate
Exhibit I
Subordinated Indebtedness Payment Conditions
i
CREDIT AGREEMENT
This CREDIT AGREEMENT (this “Agreement”) is entered into as of April 2, 2024, among:
(a) FLUENT, LLC, a Delaware limited liability company (the “Borrower”);
(b) FLUENT, INC., a Delaware corporation (“Parent”), as a Guarantor;
(c) the other Credit Parties from time to time party hereto;
(d) CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS and each other Lender from time to time party hereto; and
(e) CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as Administrative Agent (as defined below).
RECITALS:
WHEREAS, the Borrower has requested that the Lenders provide certain extensions of credit, and the Lenders are willing to do so on the terms
and conditions set forth herein;
WHEREAS, the Borrower and the other Credit Parties desire to secure all of their Obligations under the Loan Documents by granting to the
Administrative Agent, for the benefit of the Secured Parties, a security interest in and lien upon the Collateral;
WHEREAS, subject to the terms hereof, each Credit Party is willing to guaranty all of the Obligations of each other Credit Party;
WHEREAS, the Credit Parties are members of a group of related entities through common ownership, the success of any of which is dependent in
part on the success of the other members of such group; and
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
“Account” means all rights to the payment of money for goods sold or services rendered owing to any Credit Party, consisting of “accounts” (as
such term is defined in the UCC) of the Credit Parties, including, without limitation, (a) the unpaid portion of the obligation of a customer of a Credit Party
in respect of the rendition of services by a Credit Party, as stated on the respective invoice of a Credit Party and (b) the unpaid portion of the obligation of a
customer of a Credit Party in respect of the rendition of services by a Credit Party but not yet invoiced.
“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a general intangible.
1
“Acquisition” means any transaction or series of related transactions resulting, directly or indirectly, in: (a) the acquisition by any Person of (i) all
or substantially all of the assets of another Person or (ii) all or substantially all of any business line, unit or division of another Person, (b) the acquisition by
any Person (i) of in excess of 50% of the Capital Stock of any other Person, or (ii) otherwise causing any other Person to become a Subsidiary of such
Person, or (c) a merger, amalgamation consolidation, or any other combination of any Person with another Person (other than a Person that is a Credit
Party) in which a Credit Party or any of its Subsidiaries is the surviving Person.
“Act” has the meaning specified in Section 10.15.
“AdParlor Sale” means the sale of the Capital Stock in (or all or substantially all of the assets of) AdParlor, LLC and its Subsidiaries to an
unaffiliated third-party purchaser.
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term
SOFR Adjustment; provided that if Adjusted Term SOFR as so determined shall ever be less than 1.50%, then Adjusted Term SOFR shall be deemed to be
1.50% for purposes of this Agreement.
“Adjustment Date” means, (a) as to the first Adjustment Date, January 1, 2025, and (b) thereafter, the first day of each Fiscal Quarter following
such date.
“Administrative Agent” means SLR, acting as administrative agent for the Secured Parties, or any successor appointed in accordance with this
Agreement.
“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such
other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.
“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.
“Affiliate” means, with respect to any 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.
“Agency Account Agreement” means any deposit account control agreement, securities account control agreement or other similar agreement
entered into by a Credit Party, the Administrative Agent and the applicable financial institution, in form and substance reasonably satisfactory to the
Administrative Agent.
“Agency Fee” has the meaning specified in Section 2.07(b).
“Aggregate Commitments” means, as at any date of determination thereof, the aggregate of the Commitments of all of the Lenders, as reduced
from time to time pursuant to the terms and conditions hereof. As of the Closing Date, the Aggregate Commitments are $50,000,000.
“Agreement” has the meaning specified in the introductory paragraph hereto.
2
“Anti-Corruption Laws” means any applicable Laws relating to anti-bribery or anti-corruption (governmental or commercial), including, without
limitation, Laws that prohibit the corrupt payment, offer, promise, receipt, request or authorization of the payment or transfer of anything of value
(including gifts or entertainment), directly or indirectly, including the U.S. Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act of
2010, each as amended, any Law enacted in connection with, or arising under, the OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, and any other Law of any foreign or domestic jurisdiction of similar effect or that relates to bribery or corruption.
“Applicable Percentage” means (a) in respect of the Term Loan Facility, with respect to any Lender at any time, the percentage (carried out to the
ninth decimal place) of the Term Loan Facility represented by (i) on or prior to the Closing Date, such Lender’s Term Loan Commitment at such time and
(ii) thereafter, the Outstanding Amount of such Lender’s Term Loans at such time, and (b) with respect of the Revolving Credit Facility at any time, the
percentage (carried out to the ninth decimal place) of the Revolving Credit Facility represented by (i) such Lender’s Revolving Credit Commitment at such
time and (ii) the Outstanding Amount of such Lender’s Revolving Credit Loans at such time. The initial Applicable Percentage of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as
applicable.
“Applicable Rate” means,
(a) on the Closing Date and through the day immediately preceding the Second Amendment Effective Date, the percentage per
annum equal to 5.25%.
(b) on the Second Amendment Effective Date and for each period commencing on an Adjustment Date through the date immediately
preceding the next Adjustment Date, the percentage per annum in the table set forth below corresponding to the Consolidated Fixed Charge
Coverage Ratio (as determined on each Adjustment Date based on the immediately preceding Fiscal Quarter for which a Compliance Certificate
was required to have been delivered to the Administrative Agent) set forth in the table below.
Level Consolidated Fixed Charge Coverage Ratio
Applicable Rate
1
Less than 1.10:1.00
5.75%
2
Greater than or equal to 1.10:1.00
5.00%
The Applicable Rate for the period commencing on the Second Amendment Effective Date and ending on December 31, 2024, shall be
set at Level 1 specified in the table set forth above.
In the event that (x) an Event of Default has occurred and is continuing or (y) the Administrative Agent is unable to determine the
Applicable Rate due to the failure of the Borrower to deliver a Compliance Certificate or other information necessary for the calculation of any
amount included as a component of the calculation of the Consolidated Fixed Charge Coverage Ratio, then, at the Administrative Agent’s election,
effective as of the applicable Adjustment Date and through the date immediately preceding the next Adjustment Date, the Applicable Rate shall
conclusively be presumed to equal Level 1 set forth above specified in the table set forth above until the Applicable Rate can be determined in
accordance with the terms hereof and no Event of Default has occurred and is continuing.
3
In the event that any Compliance Certificate or component information is inaccurate, and such inaccuracy, if corrected, would have led to
the imposition of a higher Applicable Rate for any period than the Applicable Rate actually applied for such period, then (i) the Borrower shall
deliver, within three (3) consecutive calendar days following delivery of such inaccurate Compliance Certificate, to the Administrative Agent a
corrected Compliance Certificate for such period, (ii) the Applicable Rate shall be determined based on the corrected Compliance Certificate for
such period, and (iii) the Borrower shall, concurrently with the delivery of such corrected Compliance Certificate, pay to the Administrative Agent
(for the account of the Lenders that hold the Commitments at the time such payment is received, regardless of whether those Lenders held the
Commitments during the relevant period) the accrued additional interest owing as a result of such increased Applicable Rate for such period. This
paragraph shall not limit the rights of the Administrative Agent or the Lenders with respect to Section 2.06(b) and Article VIII hereof and shall
survive the termination of this Agreement.
“Applicable Revolving Credit Percentage” means with respect to any Lender at any time, such Lender’s Applicable Percentage in respect of the
Revolving Credit Facility at such time.
“Approved Fund” means any Fund (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for
the primary benefit of, a natural person) 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 SLR, in its capacity as sole lead arranger and sole book runner.
“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same
investment advisor.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Administrative Agent and the Borrower.
“Attributable Indebtedness” means, on any date, (a) in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance with GAAP (subject to Section 1.03(b)), and (b) in respect of any
Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP (subject to Section 1.03(b)) if such lease were accounted for as a capital lease.
“Audited Financial Statements” means the audited consolidated balance sheets of the Parent and its Subsidiaries for the fiscal year most recently
ended prior to the Closing Date, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of
the Parent and its Subsidiaries, including the notes thereto.
“Bankruptcy Code” means Title 11 of the United States Code as now and hereinafter in effect and any successors to such statutes.
“Base Rate” means for any day a fluctuating rate per annum equal to the highest of: (a) one and one half percent (1.50%); (b) the Federal Funds
Rate plus one half (1/2) of one percent (1%); and (c) the rate last quoted by The Wall Street Journal as the “Prime Rate” in the United States or, if The Wall
Street Journal ceases to quote such rate, the highest per annum interest rate published by the FRB 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 reasonably determined
by the Administrative Agent) or any similar release by the FRB (as reasonably determined by the Administrative Agent). Any change in the Base Rate due
to a change in any of the foregoing shall take effect at the opening of business on the day specified in the public announcement of such change.
4
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower” has the meaning set forth in the preamble of this Agreement.
“Borrowing” means a Term Borrowing or a Revolving Credit Borrowing, as the context may require.
“Borrowing Base” means, as reflected in the most recent Borrowing Base Certificate delivered in accordance with this Agreement, an amount in
Dollars equal to the sum of:
(a) 97.5% of the amount of Eligible Domestic Investment Grade Accounts at such date (provided, that, beginning on October 2, 2024
such advance rate shall be reduced by 0.50% on the first day of the first five Fiscal Quarters following such date and, on and after the first day of
the fifth Fiscal Quarter following such date, such advance rate shall be 95.0%); plus
(b) 95.0% of the amount of Eligible Domestic Non-Investment Grade Accounts at such date (provided, that, beginning on October 2,
2024 such advance rate shall be reduced by 0.50% on the first day of the first five Fiscal Quarters following such date and, on and after the first
day of the fifth Fiscal Quarter following such date, such advance rate shall be 92.5%); plus
(c) 90.0% of the amount of Eligible Unbilled Domestic Accounts at such date (provided, that, beginning on October 2, 2024 such
advance rate shall be reduced by 0.50% on the first day of the first ten Fiscal Quarters following such date and, on and after the first day of the
tenth Fiscal Quarter following such date, such advance rate shall be 85.0%); plus
(d) 90.0% of the amount of Eligible Foreign Accounts at such date (provided, that, beginning on October 2, 2024 such advance rate
shall be reduced by 0.50% on the first day of the first ten Fiscal Quarters following such date and, on and after the first day of the tenth Fiscal
Quarter following such date, such advance rate shall be 85.0%); plus
(e) 90.0% of the amount of Eligible Unbilled Foreign Accounts at such date (provided, that, beginning on October 2, 2024 such
advance rate shall be reduced by 0.50% on the first day of the first ten Fiscal Quarters following such date and, on and after the first day of the
tenth Fiscal Quarter following such date, such advance rate shall be 85.0%); plus
(f) 100% of Reserved Cash; minus
(g) Reserves established by the Administrative Agent from time to time in its Permitted Discretion in accordance with this Agreement.
Notwithstanding the foregoing, the amount of the “Borrowing Base” attributable to (i) the sum of Eligible Unbilled Domestic Accounts and
Eligible Unbilled Foreign Accounts shall not exceed 45.0% of the “Borrowing Base” after giving effect to such limitation and (ii) the sum of Eligible
Foreign Accounts plus Eligible Unbilled Foreign Accounts shall not exceed 30.0% of the “Borrowing Base” after giving effect to such limitation.
“Borrowing Base Certificate” means the certificate in substantially the form of Exhibit E hereto or in such other form reasonably acceptable to the
Administrative Agent, signed by a Financial Officer of the Borrower and delivered to the Administrative Agent and the Lenders pursuant to Sections
4.01(c), 6.04(c), or any other provision hereof.
5
“Borrowing Request Notice” means a notice of a Borrowing, which, if in writing, shall be substantially in the form of Exhibit A.
“Breakage Costs” has the meaning specified in Section 3.04.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of,
or are in fact closed in, the state where the Administrative Agent’s Office is located.
“Capital Stock” means any and all shares, limited liability company interests, partnership interests, other interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.
“Capitalized Leases” means leases under which a Credit Party is the lessee or obligor, the discounted future rental payment obligations under
which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP (subject to Section 1.03(b)) and the amount of
Indebtedness represented by such obligations shall be the Attributable Indebtedness in respect thereof.
“Cash Dominion Trigger Event” means the occurrence of the Third Amendment Effective Date.
“Cash Equivalents” means any of the following types of Investments, to the extent owned by a Credit Party or Subsidiary thereof:
(a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing
within one year from the date of acquisition thereof;
(b) commercial paper maturing no more than 270 days from the date of creation thereof and having the highest or next highest rating
obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc. determined at the time of investment;
(c) certificates of deposit, banker’s acceptances and time deposits maturing no more than 180 days from the date of creation thereof
issued or guaranteed by, or placed with, and demand deposit and money market deposit accounts issued or offered by, (i) any Lender or (ii) any
commercial bank, that at the time of investment, (x) has total assets in excess of $250,000,000, (y) a senior unsecured rating of “A” or better by a
nationally recognized rating agency and (z) is organized under the laws of the United States of America, any state thereof or is the principal
banking subsidiary of a bank holding company organized under the laws of the United States or any state thereof; and
(d) money market mutual funds that invest solely in one or more of the investments described in clauses (a) through (c) above.
“Cash Release Conditions” has the meaning specified in Section 2.03(b).
“Casualty Event” means, with respect to any property (including any interest in property) of a Credit Party, any loss of, damage to, recall, or
condemnation or other taking of, such property for which a Credit Party receives insurance proceeds, proceeds of a condemnation award or other
compensation.
6
“CERCLA” has the meaning specified in the definition of “Environmental Laws”.
“Change in Law” means the occurrence, after the date of this Agreement (or with respect to any Lender, if later, the date on which such Lender
becomes a Lender), 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.
“Change of Control” means an event or series of events by which:
(a) any Person or two or more Persons, other than the Specified Holders, acting in concert shall have acquired, by contract or otherwise,
control over the Capital Stock of the Parent to vote for members of the board of directors or equivalent governing body of the Parent on a fully-
diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right)
representing 30.0% or more of the combined voting power of such Capital Stock; or
(b) Parent shall cease to own and control legally and beneficially, either directly or indirectly, Capital Stock in the Borrower
representing 100% of the combined voting power of all of Capital Stock entitled to vote for members of the board of directors or equivalent
governing body of the Borrower on a fully-diluted basis (and taking into account all such Capital Stock that such Person has the right to acquire
pursuant to any option right).
“Closing Date” means April 2, 2024.
“Closing Date Perfection Certificate” means the Perfection Certificate delivered by the Credit Parties to the Administrative Agent on the Closing
Date attached hereto as Exhibit H.
“Closing Fee” has the meaning specified in Section 2.07(a).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means all of the property, rights and interests of the Credit Parties that are subject to the Liens created by the Security Documents
(provided that in no event shall the term “Collateral” include any Excluded Assets and provided further, that if and when any property shall cease to be
Excluded Assets, such property shall be deemed at all time from and after such date to constitute Collateral). Collateral shall include Reserved Cash.
“Collection Account” has the meaning specified in Section 6.16(b).
“Commitment” means a Term Loan Commitment or a Revolving Credit Commitment, as the context may require.
“Committed Loan” means a Term Loan or a Revolving Credit Loan, as the context may require.
7
“Compliance Certificate” means a certificate substantially in the form of Exhibit C.
“Concentration Account” has the meaning specified in Section 6.16(a).
“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.
“Consolidated or consolidated” means, with reference to any term defined herein, shall mean that term as applied to the accounts of the Credit
Parties, consolidated in accordance with GAAP.
“Consolidated Capital Expenditures” means, with respect to the Credit Parties and their Subsidiaries on a Consolidated basis, for any period the
sum of (without duplication) all expenditures paid in cash by the Credit Parties and their Subsidiaries during such period for items that would be classified
as “property, plant or equipment” (including charges and expenses relating to capitalized software development for such period) or comparable items on the
Consolidated balance sheet of the Credit Parties and their Subsidiaries in accordance with GAAP. The term “Consolidated Capital Expenditures” shall not
include (a) any Permitted Acquisition that constitute Investments not prohibited hereunder, (b) capital expenditures in respect of the reinvestment of
proceeds from Casualty Events in accordance with the terms of Section 2.03(d) but only to the extent such capital expenditure occurs during the same
Measurement Period as the reinvestment of the proceeds received by the Credit Parties or their respective Subsidiaries, (c) expenditures made in connection
with the acquisition, replacement, substitution, improvement or restoration of assets (or the acquisition of other capital assets used or useful in the business
of the Credit Parties and their respective Subsidiaries) to the extent financed (i) from insurance, warranty or indemnity proceeds (or other similar
recoveries) paid on account of the loss of or damage to the assets being replaced or restored, (ii) with cash awards of compensation arising from the taking
by eminent domain or condemnation of the assets being replaced, or (iii) with Net Cash Proceeds of asset dispositions (or a sale, transfer or disposition of
assets excluded from such definition) that are reinvested in accordance with the terms of Section 2.03(c); provided that, with respect to each of clauses (i)
through (iii), only to the extent such capital expenditure occurs during the same Measurement Period as proceeds or cash awards are received by the Credit
Parties or their respective Subsidiaries, (d) expenditures that are accounted for as capital expenditures of the Credit Parties and their respective Subsidiaries
that are actually reimbursed by a third party (other than a Credit Party or any Affiliate of a Credit Party), (e) expenditures made to effect leasehold
improvements to any real property leased by Parent or its Subsidiaries, to the extent such expenditures (x) have been reimbursed by the landlord or paid
directly by the landlord and (y) occur during the same Measurement Period as such landlord reimbursements are received by the Credit Parties or their
respective Subsidiaries, and (f) the purchase price of equipment to the extent purchased substantially contemporaneously with the trade in or exchange of
existing equipment (to the extent of the value of such trade or exchange).
“Consolidated EBITDA” means, with respect to the Credit Parties and their Subsidiaries, on a consolidated basis, for any period, without
duplication, an amount equal to: (a) Consolidated Net Income for such period plus (b) the sum of, without duplication, the following to the extent deducted
in calculating Consolidated Net Income for such period:
(i) any provision for federal, state, local or foreign taxes based on income or profits or capital gains;
(ii) Consolidated Interest Expense;
(iii) depreciation and amortization expense;
8
(iv) (A) transaction costs in connection with the closing of the Loan Documents in an aggregate amount not to exceed $2,600,000, (B)
transaction fees and expenses due and payable to a single investment banking firm or investment advisor retained by the Credit Parties in connection with
the Third Amendment Capital Raise, and (C) transaction costs in connection with the closing of consents, amendments, and other modifications to the Loan
Documents; plus
(v) non-cash charges, losses or expenses (excluding reserves for future cash charges);
and minus
(c) without duplication, to the extent included in the calculation of Consolidated Net Income of the Credit Parties for such period in
accordance with GAAP, non-cash gains or income and non-cash charges previously added back to Consolidated Net Income in determining Consolidated
EBITDA to the extent such non-cash charges have become cash charges during such period.
“Consolidated Fixed Charge Coverage Ratio” means the ratio, determined on a Consolidated basis for the Credit Parties and their Subsidiaries for
the applicable Measurement Period, of (a) (i) Modified Consolidated EBITDA, minus (ii) cash Consolidated Capital Expenditures, that are not duplicative
of amounts deducted in the calculation of Modified Consolidated EBITDA, made during such Measurement Period that are not financed, minus (iii) the
aggregate amount of federal, state, local and foreign income taxes based on income or profits or capital gains paid in cash, in each case, of or by the Credit
Parties and their Subsidiaries for the most recently completed Measurement Period included in the calculation of Consolidated EBITDA during such
Measurement Period to (b) Consolidated Fixed Charges.
“Consolidated Fixed Charges” means, for any period, for the Credit Parties and their Subsidiaries on a Consolidated basis, the sum of, without
duplication, (a) Consolidated Interest Expense paid in cash during such period, net of interest income paid or payable in cash during such period, (b) all
regularly scheduled principal repayments made in cash in respect of Consolidated Funded Indebtedness during such period and (c) all Restricted Payments
(other than Restricted Payments made by a Credit Party to another Credit Party), including, for the avoidance of doubt, all payments in connection with a
Permitted Acquisition constituting earn-outs, profit sharing, working capital adjustments or similar payments, made in cash during such period.
“Consolidated Funded Indebtedness” means, as of any date of determination, all Indebtedness of the Credit Parties and their Subsidiaries on a
Consolidated basis of the type described in clauses (a), (b) (excluding the amount of such letters of credit, bankers’ acceptances, bank guaranties, surety
bonds and similar instruments that remain undrawn or as to which demand for payment has not yet been made), (d), (f) and (g) of the definition of
“Indebtedness” and with respect to Guarantees in respect of any of the foregoing.
“Consolidated Interest Expense” means, for any period, for the Credit Parties and their Subsidiaries on a consolidated basis, the sum of (a) all
interest, premium payments, debt discount, fees, charges and related expenses of the Credit Parties and their Subsidiaries in connection with borrowed
money (including capitalized cash interest) or in connection with the deferred purchase price of assets to the extent treated as interest in accordance with
GAAP, and (b) the portion of rent expense of the Credit Parties and their Subsidiaries with respect to such period under Capitalized Leases that is treated as
interest in accordance with GAAP.
9
“Consolidated Net Income” means, at any date of determination for any period of determination, the net income (or loss) of the Credit Parties and
their Subsidiaries on a consolidated basis for such period; provided that Consolidated Net Income shall exclude (a) income of any Subsidiary during such
period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such income is not permitted by operation of
the terms of its Governing Documents or any agreement, instrument or Law applicable to such Subsidiary during such period and is not actually distributed
during such period to a Credit Party, except that equity of a Credit Party in any net loss of any such Subsidiary for such period shall be included in
determining Consolidated Net Income and (b) any income (or loss) for such period of any Person if such Person is not a Subsidiary, except equity of a
Credit Party in the net income of any such Person for such period shall be included in Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to a Credit Party or a Subsidiary as a dividend or other distribution (and in the case of a dividend or other
distribution to a Subsidiary, such Subsidiary is not precluded from further distributing such amount to a Credit Party as described in clause (a) of this
proviso).
“Contract” means all of a Credit Party’s now owned and hereafter acquired consumer credit agreements, accounts, lease contracts, instruments,
notes, documents, chattel paper, and all other forms of obligations owing to such Credit Party.
“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.
“Corresponding Loan Amount” has the meaning assigned to such term in Section 10.19.
“Credit Card Issuer” shall mean any person (other than the Borrower or other Credit Party) who issues or whose members issue credit cards,
including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International,
Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards,
including, without limitation, credit or debit cards issued by or through American Express Travel Related Services Company, Inc., and Novus Services, Inc.
and other issuers approved by the Administrative Agent.
“Credit Card Processor” shall mean any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures with respect to a Credit Parties’ sales transactions involving credit card or
debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.
“Credit Card Receivables” means each “payment intangible” (as defined in the UCC) together with all income, payments and proceeds thereof,
owed by a Credit Card Issuer or Credit Card Processor to a Credit Party resulting from charges by a customer of a Credit Party on credit or debit cards
issued by such Credit Card Issuer in connection with the sale of goods by a Credit Party, or services performed by a Credit Party, in each case in the
ordinary course of its business.
“Credit Parties” or “Credit Party” means, collectively, the Borrower and the other Guarantors or individually, the Borrower or any of the
Guarantors.
“Daily Cash Sweep Repayment Amount” means for any day, with respect to repayments of the Revolving Credit Loans pursuant to Section
2.03(h), the aggregate principal amount of the Revolving Credit Loans repaid on such date.
“Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, winding-up, administration or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
10
“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both,
would be an Event of Default.
“Default Rate” means when used with respect to Obligations, an interest rate or rate equal to the interest rate or rate otherwise applicable thereto,
including any Applicable Rate (and if no rate is specified, a rate per annum equal to the Adjusted Term SOFR), plus 2.00% per annum.
“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two (2)
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 funding (each of which conditions
precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied and the Required Lenders have not
advised the Administrative Agent that such condition has been met, or (ii) pay to the Administrative Agent or any other Lender any other amount required
to be paid by it hereunder within two (2) Business Days of the date when due, (b) has notified the Borrower and 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 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) and the Required Lenders have not advised the Administrative Agent that such condition has been met, (c) has failed, within three (3)
Business Days after written request by the Administrative Agent, to confirm in writing to the Administrative Agent 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), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any
Debtor Relief Law, 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 Capital Stock in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not
result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements
made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any or more of clauses (a) through (d)
above, and of the effective date of such status, shall be conclusive and binding absent manifest error and such Lender shall be deemed to be a Defaulting
Lender as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the
Administrative Agent to the Borrower and each Lender promptly following such determination.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory itself is the subject of any Sanction.
“Determination Date” means the Closing Date and the first Business Day of each calendar month thereafter.
“Dilution Ratio” means, as of any date of determination, a percentage, as determined by the Administrative Agent in its Permitted Discretion
based on the most recent field examination conducted by or on behalf of the Administrative Agent, that is the result of dividing the Dollar amount of (a)
bad debt write-downs, discounts, allowances, credits, or other dilutive items with respect to the Credit Parties’ Accounts during such period, by (b) the sum
of (i) the Credit Parties’ billings with respect to Accounts during such period and (ii) the Credit Parties’ unbilled receivables with respect to Accounts
during such period.
11
“Dilution Reserve” means, at any date, the product of (a) the applicable Dilution Ratio at such time multiplied by (b) the aggregate amount of
Eligible Accounts at such time.
“Disqualified Stock” means any Capital Stock which, by its terms (or by the terms of any security or other Capital Stock into which it is
convertible or for which it is exchangeable), or upon the happening of any event or condition, (a) matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is one hundred
twenty (120) days following the Maturity Date (excluding any provisions requiring redemption upon a “change of control” or similar event; provided that
such “change of control” or similar event results in the substantially concurrent or prior payment in full in cash of the Obligations (other than contingent
indemnification obligations to the extent no claim giving rise thereto has been asserted), the termination of all commitments to lend hereunder and the
termination of this Agreement), (b) is convertible into or exchangeable for (i) Indebtedness or (ii) any Capital Stock referred to in (a) above, in each case, at
any time on or prior to the date that is one hundred twenty (120) days following Maturity Date, or (c) entitles the holder thereof to receive scheduled
dividends or distributions in cash substantially concurrently or prior to the time that the Obligations (other than contingent indemnification obligations to
the extent no claim giving rise thereto has been asserted) are paid in full in cash, the commitments to lend hereunder are terminated and the termination of
this Agreement has occurred.
“Dollar” and “$” mean lawful money of the United States.
“Early Termination Premium” means an early termination fee that the Borrower shall pay to the applicable Lenders concurrently with the
repayment of Term Loans and/or reduction or termination of Revolving Credit Commitments, as applicable, payable in an amount equal to (i) 3.00% of the
principal amount of the Loans paid or Revolving Credit Commitments reduced to the extent such payment or reduction occurs before the one-year
anniversary of the Third Amendment Effective Date, (ii) 2.00% of the principal amount of the Loans paid or Revolving Credit Commitments reduced to the
extent such payment or reduction occurs on or after the one-year anniversary of the Closing Date but before the two-year anniversary of the Third
Amendment Effective Date, (iii) 1.00% of the principal amount of the Loans paid or Revolving Credit Commitments reduced to the extent such payment or
reduction occurs on or after the two-year anniversary of the Closing Date but before the three-year anniversary of the Third Amendment Effective Date,
and (iv) 0.00% of the principal amount of the Loans paid or Revolving Credit Commitments reduced to the extent such payment or reduction occurs on or
after the three-year anniversary of the Third Amendment Effective Date.
“Early Termination Premium Trigger Event” means:
(a) Except for any mandatory prepayment pursuant to Section 2.03(g) or Section 2.03(h), any prepayment by any Credit Party of all, or
any part, of the principal balance of any Term Loan for any reason (including, but not limited to, any optional prepayment or mandatory
prepayment, and any refinancing thereof), any full or partial termination by the Borrower of the Revolving Credit Commitments, and whether
before or after (i) the occurrence of an Event of Default, or (ii) the commencement or any institution of any Insolvency Proceeding;
(b) the acceleration of the Obligations for any reason, including, but not limited to, acceleration in accordance with Section 8.02,
including as a result of the commencement or any institution of any Insolvency Proceeding;
12
(c) the satisfaction, release, payment, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of any of the
Obligations in any Insolvency Proceeding, foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the
making of a distribution of any kind in any Insolvency Proceeding to the Administrative Agent, for the account of the Lenders in full or partial
satisfaction of the Obligations; or
(d) the termination of this Agreement for any reason.
Solely for the purposes of the definition of the term Early Termination Premium, and for no other purpose, if an Early Termination Premium
Trigger Event occurs under clause (a) (ii), (b), (c) or (d) above, the entire outstanding principal amount of the Term Loans shall be deemed to have been
prepaid and the entire amount of the Revolving Credit Commitments will be deemed to have been terminated, in each case on the date on which such Early
Termination Premium Trigger Event occurs.
“Electronic Medium” means the electronic medium through which notices and other communications are sent (including e-mail) pursuant to
procedures approved by the Administrative Agent and otherwise in accordance with Section 10.02(b).
“Eligible Accounts” means collectively, Eligible Domestic Accounts, Eligible Domestic Investment Grade Accounts, Eligible Domestic Non-
Investment Grade Accounts, Eligible Unbilled Domestic Accounts, Eligible Foreign Accounts and Eligible Unbilled Foreign Accounts.
“Eligible Assignee” means any Person (other than a natural person (or a holding company, investment vehicle or trust for, or owned and operated
for the primary benefit of, a natural person), a Credit Party or any Affiliate or Subsidiary of a Credit Party) that meets the requirements to be an assignee
under Section 10.06(b)(iii) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).
“Eligible Domestic Accounts” means (without duplication of any Eligible Foreign Account) those Accounts created and owned by a Credit Party
in the ordinary course of its business, that arise out of such Credit Party’s sale of goods or rendition of services, that comply with each of the
representations and warranties respecting Eligible Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more
of the excluding criteria set forth below; provided, that such criteria may be revised from time to time by the Administrative Agent in the Administrative
Agent’s Permitted Discretion to address the results of any information with respect to the Credit Parties’ business or assets of which the Administrative
Agent becomes aware after the Closing Date, including any field examination performed by (or on behalf of) the Administrative Agent from time to time
after the Closing Date. Any changes to the eligibility criteria set forth below shall have a reasonable relationship to the event, condition, other
circumstance, or fact that is the basis for such change in eligibility and shall not be duplicative of any other eligibility criteria. In determining the amount to
be included, Eligible Domestic Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts,
credits, allowances and rebates. Eligible Domestic Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within the earlier of (i) (x) with respect to the Account Debtors specified on
Schedule 1.01A(i) (and such other Account Debtors as may be approved by the Administrative Agent from time to time in writing in its sole discretion), so
long as such Account Debtors continue to maintain an Investment Grade Rating, one hundred ten (110) days of original invoice date and (y) otherwise,
ninety (90) days of original invoice date or (ii) sixty (60) days of due date,
(b) Accounts owed by an Account Debtor (or its Affiliates) where fifty percent (50%) or more of all Accounts owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above,
13
(c) Accounts with selling terms of more than sixty (60) days (or, in the case of Accounts of Account Debtors specified on Schedule
1.01A(i) (and such other Account Debtors as may be approved by the Administrative Agent from time to time in writing in its sole discretion), so long as
such Account Debtors continue to maintain an Investment Grade Rating, ninety (90) days),
(d) Accounts with respect to which the Account Debtor is an Affiliate of a Credit Party or an employee or agent of a Credit Party or any
Affiliate of a Credit Party,
(e) (i) Accounts that are not evidenced by an invoice which has been delivered to the applicable Account Debtor or (ii) any Account for
which the documents and instruments (including, without limitation, any contract evidencing such Account, or the origination thereof) (w) are not governed
by the Laws of a state of the United States, (x) do not comply in all material respects with all applicable Laws, (y) cannot be enforced in accordance with
their terms, (z) for which the cancellation or rescission periods related thereto (if applicable) have not expired, or (iii) any Account that is not in full force
and effect or does not represent a legal, valid and binding obligation of the Account Debtor,
(f) Accounts that are not payable in Dollars,
(g) Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or (ii)
is not organized under the laws of the United States, any state thereof or the District of Columbia,
(h) Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which a Credit Party has complied with the Assignment of Claims Act, 31 USC §3727),
or (ii) any state of the United States or any other Governmental Authority (other than Accounts with respect to which such Credit Party has complied with
any applicable state assignment of claims act),
(i) Accounts with respect to which the Account Debtor is a creditor of a Credit Party, or with respect to which the Account Debtor has
or has asserted a right of recoupment or setoff, or has disputed its obligation to pay all or any portion of the Account, to the extent of such claim, right of
recoupment or setoff, or dispute,
(j) Accounts with respect to an Account Debtor whose Eligible Domestic Accounts owing to a Credit Party exceed (x) twenty percent
(20%) with respect to any such Account Debtor who has an Investment Grade Rating, (y) fifteen percent (15%) with respect to Moon Active Ltd. and its
Affiliates and (z) ten percent (10%) for all other Account Debtors (such percentage, as applied to a particular Account Debtor, being subject to reduction by
the Administrative Agent in its Permitted Discretion if the creditworthiness of such Account Debtor deteriorates) of all Eligible Accounts, to the extent of
the obligations owing by such Account Debtor in excess of such percentage; provided, that in each case, the amount of Eligible Accounts that are excluded
because they exceed the foregoing percentage shall be determined by the Administrative Agent based on all of the otherwise Eligible Accounts prior to
giving effect to any eliminations based upon the foregoing concentration limit,
(k) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business,
or as to which a Credit Party has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account
Debtor,
(l) Accounts, the collection of which, the Administrative Agent in its Permitted Discretion determines to be doubtful, including by
reason of the Account Debtor’s financial condition,
14
(m) (i) any Account with respect to which a Credit Party does not have good and marketable title and the right to grant a Lien on, or
pledge, assign and deliver, such Account to the Administrative Agent (other than to the extent any prohibition would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408, or 9-409 of the UCC) free from all Liens or claims whatsoever, or (ii) Accounts that are not subject to a valid and perfected
first priority the Administrative Agent’s Lien,
(n) Accounts with respect to which the services giving rise to such Account have not been fully earned by performance and/or not billed
to the Account Debtor as evidence by a “final” reconciled invoice which has been delivered to the applicable Account Debtor,
(o) Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity,
(p) Accounts (i) that represent the right to receive progress payments or other advance billings that are due prior to the completion of
performance by a Credit Party of the subject contract for goods or services, or (ii) that represent credit card sales or Credit Card Receivables, or
(q) Accounts owned by a target acquired in connection with a Permitted Acquisition or permitted Investment, or Accounts owned by a
Person that is joined to this Agreement as a Credit Party pursuant to the provisions of this Agreement, until the completion of a field examination with
respect to such Accounts, in each case, satisfactory to the Administrative Agent in its Permitted Discretion.
“Eligible Domestic Investment Grade Accounts” means Eligible Domestic Accounts owing by an Account Debtor who has an Investment Grade
Rating.
“Eligible Domestic Non-Investment Grade Accounts” means Eligible Domestic Accounts which are not Eligible Domestic Investment Grade
Accounts.
“Eligible Foreign Accounts” means (without duplication of any Eligible Domestic Account) those Accounts created and owned by a Credit Party
in the ordinary course of its business, that arise out of such Credit Party’s sale of goods or rendition of services, that comply with each of the
representations and warranties respecting Eligible Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more
of the excluding criteria set forth below; provided, that such criteria may be revised from time to time by the Administrative Agent in the Administrative
Agent’s Permitted Discretion to address the results of any information with respect to the Credit Parties’ business or assets of which the Administrative
Agent becomes aware after the Closing Date, including any field examination performed by (or on behalf of) the Administrative Agent from time to time
after the Closing Date. Any changes to the eligibility criteria set forth below shall have a reasonable relationship to the event, condition, other
circumstance, or fact that is the basis for such change in eligibility and shall not be duplicative of any other eligibility criteria. In determining the amount to
be included, Eligible Foreign Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts,
credits, allowances and rebates. Eligible Foreign Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within the earlier of (i) ninety (90) days of original invoice date or (ii) sixty (60)
days of due date,
(b) Accounts owed by an Account Debtor (or its Affiliates) where fifty percent (50%) or more of all Accounts owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above,
(c) Accounts with selling terms of more than sixty (60) days,
15
(d) Accounts with respect to which the Account Debtor is an Affiliate of a Credit Party or an employee or agent of a Credit Party or any
Affiliate of a Credit Party,
(e) (i) Accounts that are not evidenced by an invoice which has been delivered to the applicable Account Debtor or (ii) any Account for
which the documents and instruments (including, without limitation, any contract evidencing such Account, or the origination thereof) (w) are not subject
to a contract governed by the Laws of a state of the United States (other than Accounts of Account Debtors located in a province of Canada (or in other
jurisdictions as may be determined by the Administrative Agent in its Permitted Discretion), whose contract will meet the requirements of this clause (w) if
governed by the Laws of a province of Canada or the Laws of a state of the United States), unless the Administrative Agent agrees otherwise in writing in
its sole discretion (provided that the Administrative Agent agrees that Accounts owed by Account Debtors set forth on Schedule 1.01A(ii) shall not be
excluded as a result of this clause (w) but for the avoidance of doubt will continue to be subject to the other eligibility criteria set forth in this Agreement),
(x) do not comply in all material respects with all applicable Laws, (y) cannot be enforced in accordance with their terms, (z) for which the cancellation or
rescission periods related thereto (if applicable) have not expired, or (iii) any Account that is not in full force and effect or does not represent a legal, valid
and binding obligation of the Account Debtor,
(f) Accounts that are not payable in Dollars and Accounts the payment instructions for which do not require the Account Debtor to
make payment to a deposit account domiciled in the United States,
(g) Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in, and is not organized
under the laws of, Canada, the United Kingdom, Ireland, Germany, Austria, the Netherlands, France, Spain, Israel, Singapore or Australia or any other
jurisdiction in which the Borrower fails to comply with any requirements set forth in the Security Agreement as determined by the Administrative Agent in
its Permitted Discretion; provided that, following the date that is thirty (30) days after the Closing Date (or such longer period as the Administrative Agent
may reasonably agree in writing), any such Accounts with respect to which the Account Debtor either maintains its chief executive office in, or is
organized under the laws of, Germany, Austria, France, Spain, Israel or Singapore shall be covered by credit insurance in form, substance and amount, and
by an insurer, reasonably satisfactory to the Administrative Agent, or (ii) is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, in each
case unless (A) the Account is supported by an irrevocable letter of credit reasonably satisfactory to the Administrative Agent (as to form, substance, and
issuer or domestic confirming bank) that has been delivered to Administrative Agent and, if requested by Administrative Agent, is directly drawable by
Administrative Agent or (B) such Account is otherwise reasonably acceptable in all respects to the Administrative Agent (subject to such lending formula
with respect thereto as the Administrative Agent may reasonably determine),
(h) Accounts with respect to which the Account Debtor is any Governmental Authority,
(i) Accounts with respect to which the Account Debtor is a creditor of a Credit Party, or as to which the Account Debtor has or has
asserted a right of recoupment or setoff, or has disputed its obligation to pay all or any portion of the Account, to the extent of such claim, right of
recoupment or setoff, or dispute,
16
(j) Accounts with respect to an Account Debtor whose Eligible Foreign Accounts owing to a Credit Party exceed (x) fifteen percent
(15%) with respect to Moon Active Ltd. and its Affiliates and (y) ten percent (10%) for all other Account Debtors (such percentage, as applied to a
particular Account Debtor, being subject to reduction by the Administrative Agent in its Permitted Discretion if the creditworthiness of such Account
Debtor deteriorates) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, that in
each case, the amount of Eligible Accounts that are excluded because they exceed the foregoing percentage shall be determined by the Administrative
Agent based on all of the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the foregoing concentration limit,
(k) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business,
or as to which a Credit Party has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account
Debtor,
(l) Accounts, the collection of which, the Administrative Agent in its Permitted Discretion determines to be doubtful, including by
reason of the Account Debtor’s financial condition,
(m) (i) any Account with respect to which a Credit Party does not have good and marketable title and the right to grant a Lien on, or
pledge, assign and deliver, such Account to the Administrative Agent (other than to the extent any prohibition would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408, or 9-409 of the UCC or pursuant to any similar provisions of any foreign laws) free from all Liens or claims whatsoever, or
(ii) Accounts that are not subject to a valid and perfected first priority the Administrative Agent’s Lien,
(n) Accounts with respect to which the services giving rise to such Account have not been fully earned by performance and/or not billed
to the Account Debtor as evidence by a “final” reconciled invoice which has been delivered to the applicable Account Debtor,
(o) Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity,
(p) Accounts (i) that represent the right to receive progress payments or other advance billings that are due prior to the completion of
performance by the Credit Parties of the subject contract for goods or services, or (ii) that represent credit card sales or Credit Card Receivables, or
(q) Accounts owned by a target acquired in connection with a Permitted Acquisition or permitted Investment, or Accounts owned by a
Person that is joined to this Agreement as a Credit Party pursuant to the provisions of this Agreement, until the completion of a field examination with
respect to such Accounts, in each case, satisfactory to the Administrative Agent in its Permitted Discretion.
“Eligible Unbilled Domestic Accounts” means all Accounts with respect to which the invoice and other necessary billing documentation have not
been submitted to the applicable Account Debtor in connection with a completed (or contracted) sale of goods or rendition of services, but which otherwise
satisfy the criteria for “Eligible Domestic Accounts” (as set forth in the definition thereof), until the earlier of (a) such Account has converted into a billed
Account or (b) the thirtieth (30th) day of the subsequent month following the completion (or contracting) of the sale of goods or rendition of services (for
the avoidance of doubt, and by way of an example only, if such Eligible Unbilled Domestic Accounts were earned and accrued in the month of March, with
regards to this clause (b) they would remain eligible until the 30th day of April), and so long as (i) no additional goods need be provided to or further
services need be performed for the applicable Account Debtor by the Credit Party as a condition to such Account Debtor’s obligation to pay such Credit
Party, (ii) such Account is verifiable by the Administrative Agent, and (iii) such Account was not previously an Eligible Unbilled Domestic Account that
had ceased to be an Eligible Unbilled Domestic Account.
17
“Eligible Unbilled Foreign Accounts” means all Accounts with respect to which the invoice and other necessary billing documentation have not
been submitted to the applicable Account Debtor in connection with a completed (or contracted) sale of goods or rendition of services, but which otherwise
satisfy the criteria for “Eligible Foreign Accounts” (as set forth in the definition thereof), until the earlier of (a) such Account has converted into a billed
Account or (b) the thirtieth (30th) day of the subsequent month following the completion (or contracting) of the sale of goods or rendition of services (for
the avoidance of doubt, and by way of an example only, if such Eligible Unbilled Foreign Accounts were earned and accrued in the month of March, with
regards to this clause (b) they would remain eligible until the 30th day of April), and so long as (i) no additional goods need be provided to or further
services need be performed for the applicable Account Debtor by the Credit Party as a condition to such Account Debtor’s obligation to pay such Credit
Party, (ii) such Account is verifiable by the Administrative Agent, and (iii) such Account was not previously an Eligible Unbilled Foreign Account that had
ceased to be an Eligible Unbilled Foreign Account.
“Enhanced Collateral Reporting Period” means a period commencing on the date (a) (i) the Consolidated Fixed Charge Coverage Ratio shall have
been less than 1.10:1.00 (as determined based on the immediately preceding Fiscal Month for which a Compliance Certificate was required to have been
delivered to the Administrative Agent) and (ii) Excess Availability shall have been less than the greater of (x) 17.5% of the Line Cap or (y) $7,500,000 (the
“Enhanced Collateral Reporting Start Date”) and (b) continuing until the date (i) the Consolidated Fixed Charge Coverage Ratio shall have been equal to or
greater than 1.10:1.00 (as determined based on the immediately preceding Fiscal Month for which a Compliance Certificate was required to have been
delivered to the Administrative Agent) and (ii) Excess Availability shall have been equal to or greater than the greater of (x) 17.5% of the Line Cap or (y)
$7,500,000, in the case of this clause (ii), for at least five consecutive weeks after the Enhanced Collateral Reporting Start Date; provided, that an Enhanced
Collateral Reporting Period shall be deemed to be in effect immediately upon the occurrence and during the continuance of any Specified Event of Default.
“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the
environment or the release of any Hazardous Materials into the environment, including those related to discharges to waste or public systems and including
without limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended (“CERCLA”) and the Superfund Amendments and Reauthorization Act of 1986 (“SARA”).
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of a Credit Party, any other Credit Party or any of their respective Subsidiaries directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the 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.
“Environmental Permits” means any, approval, identification number, license or other authorization required under any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
18
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Credit Party within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of any Credit Party or any ERISA Affiliate from
a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of
ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Credit
Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of
proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered
or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or any ERISA
Affiliate.
“Erroneous Payment” has the meaning assigned to such term in Section 10.19.
“Erroneous Payment Return Deficiency” has the meaning assigned to such term in Section 10.19.
“Event of Default” has the meaning specified in Section 8.01.
“Excluded Accounts” means any deposit account, securities account or commodities account (a) that is used exclusively and for the sole purpose
of making payroll and withholding tax payments related thereto and other employee wage and benefits payments and accrued and unpaid employee
compensation payments (including salaries, wages, benefits and expense reimbursements, 401(k) and other retirement plans and employee benefits,
including rabbi trusts for deferred compensation and health care benefits), (b) that is used for the sole purpose of paying taxes, including sales taxes, (c) that
no less frequently than on each Business Day automatically transfer all amounts contained therein to a deposit account subject to an Agency Account
Agreement, (d) that is the Well Fargo Bank, N.A. account of FM Canada whose account number has been disclosed to the Administrative Agent in writing
prior to the Closing Date, (e) that contains cash or Cash Equivalents to secure letter of credit reimbursement obligations to the extent such letters of credit
are permitted under Section 7.02(f) and prohibit the granting of a Lien; provided that all cash or Cash Equivalents remaining in such account after the
expiry or draw of such letter of credit shall be transferred to a deposit account subject to an Agency Account Agreement (f) that has an average daily
balance for any Fiscal Month of less than (i) $25,000 for each such account at any time and (ii) $100,000 at any time in the aggregate for all such accounts
under this clause (e).
“Excluded Assets” has the meaning assigned to such term in the Security Agreement.
“Excluded Subsidiary” means (a) FM Canada, so long as FM Canada does not account for more than 5.00% of the Consolidated total assets of the
Credit Parties or more than 5.00% of the Consolidated total revenues of the Credit Parties based on the most recently available financial statements;
provided that, if FM Canada accounts for more than 5.00% of the Consolidated total assets of the Credit Parties or more than 5.00% of the Consolidated
total revenues of the Credit Parties based on the most recently available financial statements, FM Canada shall cease to be an Excluded Subsidiary and shall
comply with Sections 6.14 and 6.16 within the time periods set forth therein, (b) any Subsidiary to the extent the Administrative Agent and the Borrower
mutually determine the cost and/or burden of obtaining a Guarantee from such Subsidiary outweigh the benefit to the Lenders and (c) until the thirtieth
(30th) day following the Closing Date, the True North Loyalty Entities, provided that if the True North Loyalty Sale has not occurred by such date (unless
such date shall be extended in writing by the Administrative Agent in its reasonable discretion), each of the True North Loyalty Entities shall cease to be an
Excluded Subsidiary and shall immediately comply with Sections 6.14 and 6.16.
19
“Excess Availability” means, as of any date of determination, an amount equal to the lesser of (a) the amount of the Revolving Credit
Commitments less the Total Revolving Credit Outstandings and (b) the Borrowing Base less Total Outstandings.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a
payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, excise Taxes or similar Taxes, and
branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case
of any Lender, its Lending Office located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) that are Other Connection
Taxes, (b) in the case of a Lender or any other Recipient of a payment hereunder, U.S. federal withholding Taxes imposed on amounts payable to or for the
account of such Recipient on the date such Recipient becomes a party to this Agreement or of such Lender with respect to an applicable interest in a Loan
or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to
an assignment request by any Credit Party under Section 10.13) or (ii) such Lender changes its Lending Office, except in each case to the extent that,
pursuant to Section 3.01(a)(ii), 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
3.01(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.
“Extraordinary Receipts” means any cash received by or paid to any Credit Party not in the ordinary course of business (and not consisting of Net
Cash Proceeds received as a result of any Casualty Event, asset disposition or so long as no Specified Event of Default shall have occurred and be
continuing, insurance proceeds received by any Credit Party as an expense reimbursement), including tax refunds, pension plan reversions, proceeds of
insurance, eminent domain or condemnation awards and similar proceedings (and payments in lieu thereof), indemnity payments (including, without
limitation, in connection with any Acquisition) and any purchase price adjustments (including, without limitation, in connection with any Acquisition), in
each case, except to the extent that such amounts (x) constitute reimbursement or compensation for amounts previously paid by Parent or any of its
Subsidiaries to a third party that is not an Affiliate in respect of any such event or (y) so long as no Specified Event of Default shall have occurred and be
continuing, are payable to a Person that is not an Affiliate of the Parent or any of its Subsidiaries.
“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), any current or future regulations or official interpretations thereof and any
agreements entered into pursuant to Section 1471(b)(1) of the Code, and any fiscal or regulatory legislation, rules or practices adopted pursuant to any
intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“FM Canada” means Fluent Media Canada, Inc., a British Columbia corporation.
20
“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on
the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such
next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of one one-
hundredth (1/100) of one percent (1%)) charged to major financial institutions reasonably acceptable to the Administrative Agent on such day on such
transactions as determined by the Administrative Agent.
“Financial Advisor” means a financial advisor reasonably acceptable to the Administrative Agent.
“Financial Advisor Engagement Letter” means that certain engagement letter, dated as of the First Amendment Effective Date, by and between
Borrower and the Financial Advisor (as may be amended, restated, supplemented or otherwise modified from time to time as permitted by this Agreement).
“Financial Officer” means, with respect to any Person, its chief financial officer, treasurer, controller or assistant controller or other officer
reasonably acceptable to the Administrative Agent.
“First Amendment” means that certain First Amendment to Credit Agreement, dated as of the First Amendment Effective Date, by and among the
Credit Parties, the Lenders party thereto and the Administrative Agent.
“First Amendment Effective Date” means May 15, 2024.
“First Amendment Equity Raise” shall mean one or more Investments in cash in exchange for Capital Stock of the Borrower and the contribution
of such Net Cash Proceeds to the Borrower occurring on or prior to the First Amendment Equity Raise Deadline, which, for the avoidance of doubt, shall
not be subject to the mandatory repayment requirements set forth in Section 2.03(e); provided that no Default or Event of Default shall have occurred or be
existing on a First Amendment Equity Raise Date.
“First Amendment Equity Raise Date” means a date that a First Amendment Equity Raise occurs, which shall be on or prior to the First
Amendment Equity Raise Deadline.
“First Amendment Equity Raise Deadline” means May 20, 2024, or such later date as the Administrative Agent reasonably agrees to in writing.
“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance
with the fiscal accounting calendar of the Parent and its Subsidiaries.
“Fiscal Quarter” means each period of three Fiscal Months, commencing on the first day of a Fiscal Year.
“Fiscal Year” means the fiscal year of the Parent and its Subsidiaries for accounting and tax purposes, ending on December 31st.
“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which a Credit Party is resident for tax
purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.
“Foreign Plan” means any employee benefit plan or arrangement (a) maintained or contributed to by a Credit Party or Subsidiary that is not
subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of a Credit Party or Subsidiary.
21
“Fourth Amendment” means that certain Fourth Amendment to Credit Agreement, dated as of the Fourth Amendment Effective Date, by and
among the Credit Parties, the Lenders party thereto and the Administrative Agent.
“Fourth Amendment Capital Raise” means (i) one or more Investments in cash in exchange for Capital Stock of the Borrower and/or the Parent
and the contribution of such Net Cash Proceeds to the Borrower, and/or (ii) the Borrower incurring Fourth Amendment Subordinated Indebtedness, in each
case made after the Fourth Amendment Effective Date and on or prior to March 20, 2025 (or such later date as the Administrative Agent reasonably agrees
to in writing) which in each case, (x) shall result in no less than $5,000,000 in Net Cash Proceeds contributed to the Borrower and (y) for the avoidance of
doubt, shall not be subject to the mandatory repayment requirements set forth in Sections 2.03(e) or (f) as applicable; provided that, with respect to the
waiver of the requirement of Section 2.03(e), no Default or Event of Default shall have occurred or be existing on a Fourth Amendment Capital Raise Date.
“Fourth Amendment Capital Raise Date” means each date that a Fourth Amendment Capital Raise occurs, which shall be after the Fourth
Amendment Effective Date and on or prior to March 20, 2025 (or such later date as the Administrative Agent reasonably agrees to in writing).
“Fourth Amendment Effective Date” means March 10, 2025.
“Fourth Amendment Subordination Agreement” means, collectively, each Fourth Amendment Subordination Agreement, each dated as of the
applicable Fourth Amendment Capital Raise Date on which Fourth Amendment Subordinated Indebtedness shall have been incurred, executed by the
Parent, the Administrative Agent and a Fourth Amendment Subordinated Lender, which expressly subordinates the right of payment of the Fourth
Amendment Subordinated Indebtedness to the prior payment in full of the Obligations.
“Fourth Amendment Subordinated Indebtedness” means unsecured Indebtedness incurred by the Credit Parties constituting a Fourth Amendment
Capital Raise which is expressly subordinated in right of payment to the prior payment in full in cash of the Obligations pursuant to a Fourth Amendment
Subordination Agreement and does not require the cash payment of interest prior to maturity and which is otherwise in form and on terms reasonably
satisfactory to the Administrative Agent.
“Fourth Amendment Subordinated Lender” means any lender party to Fourth Amendment Subordinated Indebtedness.
“FRB” means the Board of Governors of the Federal Reserve System of the United States.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course of its activities.
“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the
circumstances as of the date of determination, consistently applied.
“Governing Documents” means, with respect to any Person, its certificate or articles of incorporation, certificate of change of name (if any),
certificate of formation, or, as the case may be, certificate of limited partnership, its by-laws, memorandum and articles of association, operating agreement
or, as the case may be, partnership agreement or other constitutive documents and all shareholder agreements, voting trusts and similar arrangements
applicable to any of its Capital Stock.
22
“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or
local, municipal or provincial, 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).
“Granting Lender” has the meaning specified in Section 10.06(g).
“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness payable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii) to
purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness of the payment of such
Indebtedness, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the
primary obligor so as to enable the primary obligor to pay such Indebtedness, or (iv) entered into for the purpose of assuring in any other manner the
obligee in respect of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien
on any assets of such Person securing any Indebtedness of any other Person, whether or not such Indebtedness is assumed by such Person (or any right,
contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal
to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term
“Guarantee” as a verb has a corresponding meaning.
“Guarantors” means the Borrower, each other Person party to the Guaranty as a guarantor thereunder and each other Person, if any, that executes a
guaranty or other similar agreement in favor of the Administrative Agent in connection with the transactions contemplated by this Agreement and the other
Loan Documents; provided that no Excluded Subsidiary shall be a Guarantor. As of the Closing Date, in addition to Borrower, the Guarantors are set forth
in Schedule A to the Closing Date Perfection Certificate.
“Guaranty” means as the context may require that certain (a) Guaranty dated as of the Closing Date, entered into by the Guarantors and the
Administrative Agent and/or (b) any other guarantee granted by a Credit Party as required by Section 6.12 which shall be in form and substance reasonably
satisfactory to the Administrative Agent
“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, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;
23
(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services, including, without limitation, purchase
price adjustments, earn out obligations, and similar obligations, in each case, that are recognized as a liability on the balance sheet of such Person
in accordance with GAAP;
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness;
(g) all Disqualified Stock or obligations to purchase, redeem, retire or defease Disqualified Stock; and
(h) all Guarantees of such Person in respect of any of the foregoing.
Notwithstanding the foregoing, in no event shall the following constitute Indebtedness: (i) deferred revenues, liabilities associated with customer
prepayments and deposits (including cash that is received from clients of AdParlor, LLC for media reimbursement and owing to third party media
suppliers), trade payables and accrued expenses incurred in accordance with customary practices and other accrued obligations that constitute transfer
pricing and accruals for payroll and other operating expenses accrued in the ordinary course of business, in each case incurred in the ordinary course of
business, (ii) operating leases, (iii) customary obligations under employment agreements and deferred compensation or (iv) deferred tax liabilities.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is
itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person or unless such Person expressly does not have liability for such obligations of a joint venture or partnership. The amount of
any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any
Capitalized Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such
date.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payments hereunder or any other Loan
Documents and (b) to the extent not otherwise described in clause (a) herein, Other Taxes.
“Indemnitees” has the meaning specified in Section 10.04(b).
“Information” has the meaning specified in Section 10.07.
“Insolvency Proceeding” means, collectively, any corporate action, legal proceedings or other step taken or commenced by or against any Person
under any provision of the Bankruptcy Code or under any Debtor Relief Law.
24
“Intellectual Property” has the meaning provided therefor in the Security Agreement.
“Intellectual Property License” has the meaning provided therefor in the Security Agreement.
“Inventory” means all goods held for sale in which a Credit Party now has or hereafter acquires title to.
“Intercompany Note” means a promissory note evidencing intercompany Indebtedness between and among the Credit Parties, subject to the terms
of a subordination agreement in form and substance reasonably satisfactory to the Administrative Agent.
“Interest Payment Date” means, as to any Loan, (a) the first Business Day of each calendar month, (b) on any date of prepayment, with respect to
the principal amount of Loans being prepaid, and (c) the Maturity Date. For purposes of clarity, Interest Payment Date relates to payment of interest on
account of the prior Interest Period ended immediately prior to (but excluding) such Interest Payment Date.
“Interest Period” means, as to each Loan, the period commencing on the first day of each calendar month and ending on the last day of such
calendar month.
“Investment” means, all expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of Capital Stock, assets that
constitute a business unit or Indebtedness of, or for loans, advances or capital contributions to, or in respect of any Guarantee or assumption of
Indebtedness of, or purchase or other acquisition of any other debt or interest in, another Person (but excluding any prepayments or deposits paid to
customers in the ordinary course of business). In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at the principal amount of the obligations guaranteed and still outstanding; (b) there shall be deducted
in respect of each such Investment any amount received as a return of capital thereon; and (c) there shall not be deducted from the aggregate amount of
Investments any decrease in the value, write-downs or write-offs with respect thereof.
“Investment Grade Rating” shall mean, an Account Debtor on an Account so long as the long-term senior unsecured publicly held debt rating or
corporate family rating of such Account Debtor is equal to or higher than Baa3 (or its equivalent) by Moody’s or BBB (or its equivalent) by S&P.
“IP Security Agreement” means collectively, (a) the Intellectual Property Security Agreement dated as of the Closing Date, made by each Credit
Party thereto in favor of the Administrative Agent, on behalf of itself and the other Secured Parties and (b) each other intellectual property security
agreement, patent security agreement, trademark security agreement and copyright security agreement required to be delivered pursuant to Section 6.12 in
form and substance reasonably satisfactory to the Administrative Agent.
“IRS” means the United States Internal Revenue Service.
“Junior Promissory Note” means that certain Amended and Restated Junior Secured Promissory Note, dated as of March 17, 2023, by and
between Fluent, LLC, a Delaware limited liability company, as Maker, and Freedom Debt Relief, LLC, a Delaware limited liability company, as Payee (as
amended, restated, supplemented or otherwise modified from time to time in a manner not materially adverse to the interests of the Administrative Agent
and the Lenders).
25
“Laws” means, collectively, all international, foreign, Federal, state, provincial and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
“Lender” means (a) at any time on or prior to the Closing Date, any lender that has a Term Loan Commitment and/or a Revolving Credit
Commitment at such time, and (b) at any time after the Closing Date, any lender that holds Term Loans, Revolving Credit Loans, and/or a Revolving Credit
Commitment at such time.
“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire,
or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.
“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).
“Line Cap” means, as of any date of determination, the lesser of (a) the sum of the Revolving Credit Commitments plus the Total Term Loan
Outstandings at such time and (b) the Borrowing Base as of such date of determination.
“Loan” means an extension of credit by a Lender to the Borrower under Article II in the form of a Term Loan, a Revolving Credit Loan or
Protective Advance.
“Loan Account” has the meaning specified in Section 2.16(a).
“Loan Documents” means this Agreement, each Note, each Security Document, the Guaranty, each Borrowing Base Certificate, each Compliance
Certificate, each Second Amendment Subordination Agreement and each other agreement, document or instrument executed and delivered by any Credit
Party in favor of any of the Secured Parties in connection with any Loan Document, whether or not specifically mentioned herein or therein.
“Material Adverse Effect” means a material adverse change in, or a material adverse effect on, (a) the operations, business, assets, properties,
liabilities (actual or contingent) or financial condition of the Credit Parties and their Subsidiaries; (b) the rights and remedies of the Administrative Agent
or any Lender under any Loan Document, or of the ability of the Credit Parties to perform their obligations under any Loan Document; or (c) (i) the
legality, validity, binding effect or enforceability against the Credit Parties of any Loan Document or (ii) the perfection or priority of the liens granted to the
Administrative Agent under any Loan Document.
“Material Agreements” means (a) each document or agreement set forth on Schedule 20 to the Closing Date Perfection Certificate and (b) each
other document or agreement to which a Credit Party is a party involving aggregate consideration payable to or by such Credit Party of $7,500,000 or more
during any Fiscal Year.
“Maturity Date” means April 2, 2029.
“Maximum Rate” has the meaning specified in Section 10.09.
26
“Measurement Period” means, at any date of determination, the most recently completed trailing twelve month period of the Credit Parties and
their Subsidiaries for which financial statements have or should have been delivered in accordance with Section 6.04(a) or 6.04(b).
“Modified Consolidated EBITDA” means for the Credit Parties and their Subsidiaries for the applicable Measurement Period, Consolidated
EBITDA for such trailing twelve month period minus capitalized software development costs for such period.
Notwithstanding the foregoing, for all purposes of this Agreement, Modified Consolidated EBITDA for the historical Fiscal Month periods set
forth in the table below shall be deemed to be the amounts set forth in the table below opposite the relevant period:
Fiscal Month
Modified Consolidated EBITDA
March 2023
$348,397
April 2023
$2,699,533
May 2023
$1,581,166
June 2023
$77,767
July 2023
($1,151,973)
August 2023
($1,784,214)
September 2023
($527,476)
October 2023
($892,630)
November 2023
$837,957
December 2023
$804,062
January 2024
($59,731)
February 2024
($172,990)
“Mortgages” means each mortgage or deed of trust with respect to Real Estate executed and delivered to the Administrative Agent, in each case,
in form and substance reasonably satisfactory to the Administrative Agent.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which a Credit Party or any
ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including a Credit Party or any ERISA Affiliate) at least
two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
27
“Net Cash Proceeds” means, with respect to any event or transaction described in Sections 2.03(c) through (f), the cash proceeds received in
respect of such event or transaction, including (a) any cash received in respect of any non-cash proceeds (including, without limitation, the monetization of
notes receivables), but only as and when received or (b) in the case of a Casualty Event, insurance proceeds, proceeds of a condemnation award or other
compensation payments, in each case, net of the sum of (w) all reasonable actual fees and out-of-pocket expenses (including underwriting discounts and
commissions, appraisals, and brokerage, legal, advisory, banking, title and recording tax expenses and commissions) paid by any Credit Party or a
Subsidiary to third parties (other than Affiliates) in connection with such event (but excluding amounts payable hereunder), (x) all taxes paid or reasonably
estimated by the Borrower to be payable by Parent or any of its Subsidiaries as a result thereof or amounts distributed or expected to be distributed pursuant
to Section 7.04(a) to pay taxes arising therefrom, (y) reserves for indemnities, until such reserves are no longer needed, and (z) in the case of a sale or other
disposition of an asset described Sections 2.03(c) and (d), the amount of all payments required to be made by any Credit Party (or to establish an escrow for
the repayment of) on any Indebtedness by the terms thereof (other than the Obligations) secured by such asset to the extent the lien in favor of the holder of
such Indebtedness is permitted by Section 7.03(a)(viii); provided that such payments made shall not exceed the amount of cash proceed received by such
Credit Party or the aggregate amount of such Indebtedness.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders
or all affected Lenders in accordance with the terms of Section 10.01, and (b) has been approved by the Required Lenders.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.
“Note” means a Term Loan Note or a Revolving Credit Note.
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Credit Party arising under any Loan
Document or otherwise with respect to any Loan (including, without limitation, the Early Termination Premium), whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees (including,
without limitation, the Early Termination Premium) that accrue after the commencement by or against any Credit Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed
claims in such proceeding.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such
Recipient and the jurisdiction imposing such Taxes (other than connections arising from such Recipient having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or
enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing, or similar taxes, charges or levies that arise
from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security
interest under, or otherwise with respect to, any Loan Document, except any such taxes, charges or levies that are Other Connection Taxes imposed with
respect to an assignment (other than an assignment made pursuant to Section 10.13).
“Outstanding Amount” means, with respect to the Term Loans, the Revolving Credit Loans and Protective Advances on any date, the aggregate
outstanding principal amount thereof after giving effect to any Borrowings and any prepayments or repayments of the Term Loans, the Revolving Credit
Loans or Protective Advances occurring on such date.
“Parent” means Fluent, Inc., a Delaware corporation.
“Participant” has the meaning specified in Section 10.06(d).
28
“Participant Register” has the meaning specified in Section 10.06(d).
“Payment Recipient” has the meaning assigned to such term in Section 10.19.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Act” means the Pension Protection Act of 2006.
“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment
thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and
Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304
and 305 of ERISA.
“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is
contributed to by any Credit Party and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code.
“Perfection Certificates” means, collectively, (a) the Closing Date Perfection Certificate and (b) thereafter, the most recent Perfection Certificate
delivered by the Credit Parties following the Closing Date to the Administrative Agent and in a form substantially consistent with the Closing Date
Perfection Certificate or otherwise reasonably acceptable to the Administrative Agent in accordance with this Agreement.
“Permitted Acquisition” means any Acquisition by a Credit Party or any Subsidiary to the extent that such Acquisition has been consented to by
the Administrative Agent and Required Lenders.
“Permitted Discretion” means a determination made in good faith and in the exercise of commercially reasonable (from the perspective of a
secured asset-based lender) credit or business judgment and in accordance with customary business practices for comparable secured asset-based lending
transactions. As it relates to the establishment or adjustment of Reserves (or the modification of eligibility standards and criteria), the exercise of Permitted
Discretion shall require that (a) such establishment, adjustment or imposition after the Closing Date be based on the analysis of facts or events first
occurring or first discovered by the Administrative Agent after the Closing Date or are materially different from the facts or events occurring or known to
the Administrative Agent on the Closing Date, unless the Borrower and the Administrative Agent otherwise agree in writing, (b) the contributing factors to
the imposition of any Reserves shall not duplicate the exclusionary criteria set forth in the eligibility criteria for the assets in the Borrowing Base and vice
versa and (c) the amount of any such Reserve so established or the effect of any adjustment shall be a reasonable quantification (as determined by the
Administrative Agent in its Permitted Discretion) of the incremental impact of the Borrowing Base attributable to the event, condition or other matter that
is the basis for such Reserve or adjustment.
“Permitted Liens” means those Liens permitted by Section 7.03.
“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 within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of a
Credit Party or any ERISA Affiliate or any such Plan to which a Credit Party or any ERISA Affiliate is required to contribute on behalf of any of its
employees.
29
“Pledge Agreements” means, collectively, (a) the Pledge Agreement dated as of the Closing Date, by and among the Credit Parties and the
Administrative Agent and (b) any other pledge agreement granted by any Credit Party as required by Section 6.12 which shall be in form and substance
reasonably satisfactory to the Administrative Agent.
“Prepayment Notice” means the certificate in substantially the form of Exhibit F hereto, or in such other form reasonably acceptable to the
Administrative Agent, to be signed by a Financial Officer of the Borrower and delivered to the Administrative Agent and the Lenders pursuant to Section
2.03 hereof.
“Protective Advances” has the meaning specified in Section 2.15.
“PTO” means the United States Patent and Trademark Office (or any successor office).
“RCRA” has the meaning specified in the definition of “Environmental Laws”.
“Real Estate” means all real property at any time owned by any Credit Party.
“Recipient” means the Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of
any Credit Party hereunder.
“Register” has the meaning specified in Section 10.06(c).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees,
administrators, managers and advisors of such Person and of such Person’s Affiliates.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been
waived.
“Required Lenders” means, as of any date of determination, Lenders having or holding more than 50% of the Total Outstandings and
Commitments. The Total Outstandings and Commitments of any Defaulting Lender shall be excluded for purposes of making a determination of Required
Lenders.
“Reserved Cash” means cash held in the Reserved Cash Account.
“Reserved Cash Account” means a deposit account reasonably acceptable to the Administrative Agent in the name and sole dominion and control
of the Administrative Agent for the deposit of Reserved Cash.
“Reserved Cash Release Notice” means a notice requesting release of Reserved Cash, which shall be substantially in the form of Exhibit J.
“Reserves” means, subject to adjustment from time to time as set forth in Section 2.17, the sum (without duplication) of (a) Dilution Reserves, and
(b) such additional reserves, in amounts and with respect to such matters (whether or not constituting a Default or Event of Default), as the Administrative
Agent in its Permitted Discretion deems necessary or appropriate to impose from time to time, in each case whether before or during the continuance of a
Default or Event of Default. Without limiting the generality of the foregoing, the Administrative Agent may establish Reserves to ensure the payment of (i)
accrued interest expense, (ii) insurance claims, including self-funded insurance claims and credit insurance, (iii) outstanding Taxes, and other charges
imposed by any Governmental Authority, (iv) past-due payables of the Credit Parties and their Subsidiaries to the extent the Administrative Agent, in its
Permitted Discretion, determines would have a negative impact on the business operations of the Credit Parties and their Subsidiaries or the collectability
of Collateral, or (v) other liabilities, including, without limitation, ad valorem taxes, real estate, personal property, intellectual property, sales and other
taxes, or reserves to reflect events, conditions, contingencies or risks which affect the Collateral, or the Administrative Agent’s access to such Collateral, or
its value or the enforceability, perfection, or priority of the Administrative Agent’s security interest in the Collateral or the Administrative Agent’s
judgment that any collateral report or financial information relating to the Credit Parties may be incomplete, inaccurate, or misleading in any material
respect, in each case, subject to the Administrative Agent’s Permitted Discretion.
30
“Restricted Payment” means any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock
of any Credit Party or any Subsidiary, (b) 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 by such Credit Party or Subsidiary of its Capital Stock, or on
account of any return of capital to the stockholders, partners or members (or the equivalent Person thereof) of any Credit Party or any Subsidiary, (c) any
management, advisory, consulting, or similar fees paid to any Affiliate of any Credit Party (other than (x) any such amounts payable to the Credit Parties
and their Subsidiaries and (y) to the extent pursuant to any employment or similar services agreements with employees, directors or officers thereof entered
into in the ordinary course of business), and (d) any payment on account of a Permitted Acquisition.
“Revolving Credit Loan” means an advance made by any Lender under the Revolving Credit Facility.
“Revolving Credit Availability Period” means, in respect of the Revolving Credit Facility, the period from and including the Closing Date to the
earlier of (a) the Maturity Date, (b) the date of termination of the Revolving Credit Facility pursuant to Section 2.04(b), and (c) the date of termination of
the Revolving Credit Commitments of the respective Lenders to make Revolving Credit Loans pursuant to Section 8.02.
“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans made by each of the Lenders pursuant to
Section 2.01(b).
“Revolving Credit Commitments” means, as to each Lender, its obligation to make Revolving Credit Loans to the Borrower during the Revolving
Credit Availability Period pursuant to Section 2.01(b) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth
opposite such Lender’s name on Schedule 2.01 with respect to the Revolving Credit Loans. As of the Closing Date, the Revolving Credit Commitments are
$30,000,000.
“Revolving Credit Exposure” means, as to any Lender at any time, the aggregate Outstanding Amount at such time of its Revolving Credit Loans.
“Revolving Credit Facility” means, at any time, (a) at any time during the Revolving Credit Availability Period in respect of such Revolving
Credit Facility, the sum of (i) the aggregate amount of the Revolving Credit Commitments at such time, and (ii) the aggregate Outstanding Amount of the
Revolving Credit Loans of all Lenders outstanding at such time, and (b) thereafter, the aggregate Outstanding Amount of the Revolving Credit Loans of all
Lenders outstanding at such time.
“Revolving Credit Note” means a promissory note made by the Borrower in favor of a Lender evidencing the Revolving Credit Loans made by
such Lender, substantially in the form of Exhibit B-2.
“Same Day Request” has the meaning assigned to such term in Section 2.02(a).
“Sanction(s)” means any international economic sanction administered or enforced by OFAC, the United Nations Security Council, the European
Union or any member state of the European Union, the governmental institutions and agencies of the United Kingdom (including, without limitation, His
Majesty’s Treasury of the United Kingdom) or other relevant sanctions authority.
31
“Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC and available at, or as otherwise
published from time to time.
“Sanctioned Entity” means (a) a country or territory or a government of a country or territory, (b) an agency of the government of a country or
territory, (c) an organization directly or indirectly controlled by a country or territory or its government, or (d) a Person resident in or determined to be
resident in a country or territory, in each case of clauses (a) through (d) that is a target of Sanctions, including a target of any country sanctions program
administered and enforced by OFAC.
“Sanctioned Person” means (a) a Person named on the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC
available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx, or as otherwise published from time to time, (b) a Person
named on the lists maintained by the United Nations Security Council available at http://www.un.org/sc/committees/list_compend.shtml, or as otherwise
published from time to time, (c) a Person named on the lists maintained by the European Union available at http://eeas.europa.eu/cfsp/sanctions/consol-
list_en.htm, or as otherwise published from time to time, (d) a Person named on the lists maintained by His Majesty’s Treasury available at http://www.hm-
treasury.gov.uk/fin_sanctions_index.htm, or as otherwise published from time to time, or (e) (i) an agency of the government of a Sanctioned Country, (ii)
an organization controlled by a Sanctioned Country, or (iii) a person resident in a Sanctioned Country, to the extent subject to a sanctions program
administered by OFAC.
“SARA” has the meaning specified in the definition of “Environmental Laws”.
“Secured Parties” means, collectively, the Administrative Agent, the Lenders, each co-agent or sub-agent appointed by the Administrative Agent
from time to time pursuant to Section 9.05 and the other Persons the Obligations owing to which are secured by the Collateral under the terms of the
Security Documents.
“Security Agreements” means, collectively, (a) that certain the Security Agreement dated as of the Closing Date, entered into by the Credit Parties
and the Administrative Agent, and (b) any other security agreement granted by any Credit Party as required by Section 6.12 which shall be in form and
substance reasonably acceptable to the Administrative Agent.
“Security Documents” means the Guaranty, the Security Agreements, the IP Security Agreement, the Pledge Agreements, the Mortgages, the
Agency Account Agreements, Uniform Commercial Code financing statements and other equivalent registrations in the U.S., and any other collateral
document required to be executed or delivered pursuant to, or in connection with, this Agreement or any other Loan Document (including without
limitation, account receivables notices or any other notice or documents with respect to Eligible Foreign Accounts), to secure the repayment of the
Obligations or to ensure the validity, attachment, perfection or priority of the Administrative Agent’s lien in all of the Collateral, all in form and substance
reasonably acceptable to the Administrative Agent.
“Second Amendment” means that certain Second Amendment to Credit Agreement, dated as of the Second Amendment Effective Date, by and
among the Credit Parties, the Lenders party thereto and the Administrative Agent.
32
“Second Amendment Capital Raise” means (i) one or more Investments in cash in exchange for Capital Stock of the Parent and the contribution of
such Net Cash Proceeds to the Borrower and/or (ii) the Borrower incurring Second Amendment Subordinated Indebtedness, in each case occurring on or
prior to the Second Amendment Effective Date and which, for the avoidance of doubt, shall not be subject to the mandatory repayment requirements set
forth in Sections 2.03(e) or (f), as applicable.
“Second Amendment Effective Date” means August 19, 2024.
“Second Amendment Follow-on Equity Raise” means one or more Investments in cash in exchange for Capital Stock of the Borrower and/or the
Parent and the contribution of such Net Cash Proceeds to the Borrower, in each case made after November 29, 2024 and on or prior to June 30, 2025 (or
such later date as the Administrative Agent reasonably agrees to in writing) which, for the avoidance of doubt, shall not be subject to the mandatory
repayment requirements set forth in Sections 2.03(e); provided that with respect to the wavier of the requirement of Section 2.03(e), no Default or Event of
Default shall have occurred or be existing on a Second Amendment Follow-on Equity Raise Date.
“Second Amendment Follow-on Equity Raise Date” means each date that a Second Amendment Follow-on Equity Raise occurs, which shall be
after November 29, 2024 and prior to June 30, 2025 (or such later date as the Administrative Agent reasonably agrees to in writing).
“Second Amendment Subordinated Indebtedness” means unsecured Indebtedness incurred by the Credit Parties which is expressly subordinated in
right of payment to the prior payment in full in cash of the Obligations pursuant to a Second Amendment Subordination Agreement and does not require
the cash payment of interest prior to maturity and which is in form and on terms reasonably satisfactory to the Administrative Agent.
“Second Amendment Subordination Agreement” means, collectively, each Second Amendment Subordination Agreement, dated as of the Second
Amendment Effective Date, executed by the Parent, the Administrative Agent and a Second Amendment Subordinated Lender, which expressly
subordinates the right of payment of the Second Amendment Subordinated Indebtedness to the prior payment in full of the Obligations.
“Second Amendment Subordinated Indebtedness Restricted Payment” means any payment on account of Second Amendment Subordinated
Indebtedness, including without limitation, any payment on account of interest, principal, fees or any other similar payment due in connection with, arising
out of or relating to Second Amendment Subordinated Indebtedness, other than reasonable and documented out of pocket expenses of the Second
Amendment Subordinated Lenders.
“Second Amendment Subordinated Lender” means each of (i) Matthew Conlin, (ii) Ryan Schulke, (iii) Frost Gamma Investments Trust, (iv)
Donald Patrick and (v) Ryan Perfit, each in their respective capacity as a subordinated lender in respect of the Second Amendment Subordinated
Indebtedness.
“Senior Management” means with respect to the any of the Credit Parties or any of its Subsidiaries, its chairman, president, Financial Officer,
chief executive officer, chief operating officer, directors or general counsel.
“SLR” means Crystal Financial LLC d/b/a SLR and its successors and permitted assigns.
“SLR Entity” shall mean SLR or any of its Affiliates.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the Term SOFR Administrator.
33
“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as
they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s
property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other
commitments as they mature in the ordinary course of business. 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.
“SPC” has the meaning specified in Section 10.06(g).
“Specified Event of Default” means (i) any Event of Default arising under Sections 8.01(a), (b) (solely relating to a failure to comply with
Sections 6.04(a), 6.04(b), 6.04(c), 6.15, 6.16 or 7.12), (d)(ii), (e), or (m), (ii) acceleration of the Obligation pursuant to Section 8.02 as a result of the
occurrence and continuance of any Event of Default (including by operation of law or otherwise) or (iii) Excess Availability is a negative amount.
“Specified Existing Debt” means all Indebtedness owing under that certain Credit Agreement, dated as of March 31, 2021, by and among the
Borrower, the guarantors thereto, lenders party thereto and Citizens Bank, N.A., as administrative agent (as amended, restated, supplemented or otherwise
modified from time to time prior to the Closing Date).
“Specified Holders” means (a) each of the Persons that are holders of Capital Stock of Parent listed on Schedule 1.01B and (b) in the case of any
Person specified in clause (a) above, (i) his or her or its executor, administrator, testamentary trustee, legatee or beneficiaries or (ii) a trust, the beneficiaries
of which, or a corporation or partnership, the equity holders or partners of which, include only such Persons.
“Subordinated Indebtedness” means the Second Amendment Subordinated Indebtedness and, the Third Amendment Subordinated Indebtedness
and the Fourth Amendment Subordinated Indebtedness.
“Subordinated Indebtedness Payment Conditions” means with respect to a Subordinated Indebtedness Restricted Payment, as to a Second
Amendment Subordinated Indebtedness Restricted Payment, the satisfaction of the conditions set forth either in clause (i) or clause (ii) below and as to a
Subordinated Indebtedness Restricted Payment on account of Third Amendment Subordinated Indebtedness or Fourth Amendment Subordinated
Indebtedness, the satisfaction of the conditions set forth in clause (i):
(i) (a) no Event of Default shall exist before or immediately after giving effect to such Subordinated Indebtedness Restricted Payment, (b)
the Credit Parties shall be in compliance with Section 7.12(a), (c) Excess Availability determined on a pro forma basis after giving effect to such
Subordinated Indebtedness Restricted Payment shall be equal to or greater than $5,000,000, both for the thirty (30) consecutive calendar days prior to such
Subordinated Indebtedness Restricted Payment and at the time of such payment, (d) the Consolidated Fixed Charge Coverage Ratio calculated on a pro
forma basis as of the end of the most recently ended Measurement Period for which the Administrative Agent shall have received the financial statements
described in Section 6.04(b), after giving effect to such Subordinated Indebtedness Restricted Payment, shall be no less than 1.10:1.00, and (e) the
Administrative Agent’s receipt of the financial statements required to be delivered pursuant to Section 6.04(a) for the Fiscal Year ending December 31,
20242025; or
34
(ii) Solely with respect to Second Amendment Follow-on Equity Raises, (a) no Event of Default shall exist before or immediately after giving
effect to such Second Amendment Subordinated Indebtedness Restricted Payment, (b) one or more Second Amendment Follow-on Equity Raises shall
have occurred during the period described in the definition of Second Amendment Follow-on Equity Raise Date and the aggregate amount of Second
Amendment Subordinated Indebtedness Restricted Payments made pursuant to this clause (ii) shall not exceed an amount that equals the positive difference
of (I) the aggregate amount of any Second Amendment Follow-on Equity Raises consummated at or prior to such Second Amendment Subordinated
Indebtedness Restricted Payment minus (II) $7,000,000, (c) the Credit Parties shall be in compliance with Section 7.12(a) and (d) Excess Availability
determined on a pro forma basis after giving effect to such Second Amendment Subordinated Indebtedness Restricted Payment shall be equal to or greater
than $5,000,000, at the time of such payment and on a projected basis for the thirteen week consecutive period following such Second Amendment
Subordinated Indebtedness Restricted Payment. For avoidance of the doubt, no Third Amendment Capital Raise or Fourth Amendment Capital Raise shall
be included in the calculations required pursuant to this clause (ii).
In connection with a Subordinated Indebtedness Restricted Payment under either clause (i) or clause (ii) above, the Borrower shall deliver to the
Administrative Agent a certificate of a Financial Officer of the Borrower in the form attached hereto as Exhibit I as to the compliance of the Subordinated
Indebtedness Payment Conditions with respect to such transaction at least three (3) Business Days prior to consummating such transaction (or such later
date as the Administrative Agent may reasonably agree).
“Subordinated Indebtedness Restricted Payment” means any payment on account of Subordinated Indebtedness, including without limitation, any
Second Amendment Subordinated Indebtedness, or Third Amendment Subordinated Indebtedness, or Fourth Amendment Subordinated Indebtedness and
any payment on account of interest, principal, fees or any other similar payment due in connection with, arising out of or relating to any Subordinated
Indebtedness, other than reasonable and documented out of pocket expenses of the Second Amendment Subordinated Lenders and, the Third Amendment
Subordinated Lenders and Fourth Amendment Subordinated Lenders.
“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of
the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both, by such Person; provided that, notwithstanding anything else herein to the
contrary, TAPP Market Influencers, LLC and TAPP Influencers Corp. shall be deemed not to be Subsidiaries so long as (x) such entities continue to
constitute “variable interest entities” and (y) no Credit Party owns any Capital Stock in TAPP Market Influencers, LLC or TAPP Influencers Corp. Unless
otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Parent.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or
forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms
and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master Agreement.
35
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by
any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the
insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
“Taxes” means 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.
“Term Borrowing” means a borrowing consisting of simultaneous Term Loans made by each of the Lenders pursuant to Section 2.01(a).
“Term Loan” means an advance made by any Lender under the Term Loan Facility.
“Term Loan Commitment” means, as to each Lender, its obligation to make Term Loans to the Borrower on the Closing Date pursuant to Section
2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01
with respect to the Term Loans. As of the Closing Date, the Term Loan Commitments are $20,000,000.
“Term Loan Facility” means (a) on the Closing Date, the aggregate amount of the Term Loan Commitments at such time and (b) thereafter, the
aggregate principal amount of all Term Loans of all Lenders outstanding at such time.
“Term Loan Note” means a promissory note made by the Borrower in favor of a Lender evidencing the Term Loans made by such Lender,
substantially in the form of Exhibit B-1.
“Term SOFR” means for any Determination Date, the Term SOFR Reference Rate for a tenor of three (3) months on the day (such day, the “Term
SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Determination Date, as such rate is
published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Term SOFR Determination Day the
Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator, then Term SOFR will be the Term SOFR
Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which
such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator.
“Term SOFR Adjustment” means 0.26161% per annum.
36
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR
Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Third Amendment” means that certain Third Amendment to Credit Agreement, dated as of the Third Amendment Effective Date, by and among
the Credit Parties, the Lenders party thereto and the Administrative Agent.
“Third Amendment Capital Raise” means (i) one or more Investments in cash in exchange for Capital Stock of the Borrower and/or the Parent and
the contribution of such Net Cash Proceeds to the Borrower, and/or (ii) the Borrower incurring Third Amendment Subordinated Indebtedness, in each case
made after the Third Amendment Effective Date and on or prior to November 29, 2024 (or such later date as the Administrative Agent reasonably agrees to
in writing) which in each case, (x) shall result in no less than $7,500,000 in Net Cash Proceeds contributed to the Borrower and (y) for the avoidance of
doubt, shall not be subject to the mandatory repayment requirements set forth in Sections 2.03(e) or (f) as applicable; provided that, with respect to the
waiver of the requirement of Section 2.03(e), no Default or Event of Default shall have occurred or be existing on a Third Amendment Capital Raise Date.
“Third Amendment Capital Raise Date” means each date that a Third Amendment Capital Raise occurs, which shall be after the Third
Amendment Effective Date and prior to November 29, 2024 (or such later date as the Administrative Agent reasonably agrees to in writing).
“Third Amendment Effective Date” means November 14, 2024.
“Third Amendment Subordinated Indebtedness” means unsecured Indebtedness incurred by the Credit Parties constituting a Third Amendment
Capital Raise which is expressly subordinated in right of payment to the prior payment in full in cash of the Obligations pursuant to a Third Amendment
Subordination Agreement and does not require the cash payment of interest prior to maturity and which is otherwise in form and on terms reasonably
satisfactory to the Administrative Agent.
“Third Amendment Subordination Agreement” means, collectively, each Third Amendment Subordination Agreement, each dated as of the
applicable Third Amendment Capital Raise Date on which Third Amendment Subordinated Indebtedness shall have been incurred, executed by the Parent,
the Administrative Agent and a Third Amendment Subordinated Lender, which expressly subordinates the right of payment of the Third Amendment
Subordinated Indebtedness to the prior payment in full of the Obligations.
“Third Amendment Subordinated Lender” means any lender party to Third Amendment Subordinated Indebtedness.
“Threshold Amount” means $500,000.
“Total Outstandings” means, without duplication, the sum of (a) the Total Term Loan Outstandings and (b) the Total Revolving Credit
Outstandings.
“Total Revolving Credit Outstandings” means the aggregate Outstanding Amount of all Revolving Credit Loans.
“Total Term Loan Outstandings” means the aggregate Outstanding Amount of all Term Loans.
37
“Trade Date” has the meaning specified in Section 10.06(b)(i).
“True North Loyalty Entities” means (a) True North Loyalty, LLC, a Delaware limited liability company, (b) BXY Ventures LLC, a Nevada
limited liability company, (c) Member Services, LLC, a Delaware limited liability company, (d) True Identity, LLC, a Delaware limited liability company,
(e) ClickGen, LLC, a Delaware limited liability company, and (f) Project Peachtree, LLC, a Delaware limited liability company.
“True North Loyalty Sale” means the sale of the Capital Stock in (or all or substantially all of the assets of) the True North Loyalty Entities to an
unaffiliated third-party purchaser.
“Two Day Request” has the meaning assigned to such term in Section 2.02(a).
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or
the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of New York, “Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
“United States” and “U.S.” mean the United States of America.
“Unused Facility Fee” has the meaning specified in Section 2.07(a).
“Unused Revolving Credit Facility Amount” means the daily average amount by which (a) the Revolving Credit Commitments exceeds (b) the
Total Revolving Credit Outstandings, subject to adjustment as provided in Section 2.14.
“U.S. Government Securities Business Day” means any Business Day, except any Business Day on which any of the Securities Industry and
Financial Markets Association, the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business because such day is a
legal holiday under the federal laws of the United States or the laws of the State of New York, as applicable.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 3.01(e)(ii)(B)(III).
38
1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:
(a) 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, (i) any definition of or reference to any agreement, instrument or other document (including any
Governing Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any
other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words
“herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan
Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references
appear, (v) 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, and (vi) 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.
(b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the
words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”
(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.
1.03 Accounting Terms.
(a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial
data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the
Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of determining
compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Credit Parties and their
Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC
470-20 on financial liabilities shall be disregarded.
(b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio, negative covenant or
requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the
Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such
change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio, negative covenant or
requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the
Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio, covenant or requirement made before and after giving effect to such
change in GAAP. Notwithstanding any other provision contained herein, any lease that is treated as an operating lease for purposes of GAAP prior
to the effectiveness of FASB ASC 842 shall continue to be accounted for as operating leases (whether or not such operating lease obligations were
in effect on such date) notwithstanding the fact that such obligations are required in accordance with FASB ASC 842 (on a prospective or
retroactive basis or otherwise) to be treated as Capitalized Leases in the financial statements.
1.04 Rounding. Any financial ratios required to be maintained by any of the Credit Parties pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
39
1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as
applicable). Except as otherwise expressly provided herein, when the payment of any obligation or the performance of any covenant, duty or obligation is
stated to be due or performance required on a day which is not a Business Day, the date of such payment or performance shall extend to the immediately
succeeding Business Day (and such extension of time shall be reflected in computing interest or fees, as the case may be).
1.06 Rates. Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to the continuation
of, administration of, submission of, calculation of or any other matter related to the Base Rate, Adjusted Term SOFR, Term SOFR, any component
definition thereof or rates referred to in the definition thereof or any alternative, successor or replacement rate thereto, including whether the composition or
characteristics of any such alternative, successor or replacement rate will be similar to, or produce the same value or economic equivalence of, or have the
same volume or liquidity as the Base Rate, Adjusted Term SOFR or Term SOFR prior to its discontinuance or unavailability. Administrative Agent and its
affiliates or other related entities may engage in transactions that affect the calculation of the Base Rate, Adjusted Term SOFR, Term SOFR, any
alternative, successor or replacement rate or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower (provided that, for the
avoidance of doubt, nothing in this sentence shall modify or supersede the express terms of this Agreement and the other Loan Documents). Administrative
Agent may select information sources or services in its reasonable discretion to ascertain the Base Rate, Adjusted Term SOFR or Term SOFR, in each case
pursuant to the terms of this Agreement, and shall have no liability to any Credit Party, any Lender or any other person or entity for damages of any kind,
including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and
whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
ARTICLE II
THE COMMITMENTS AND LOANS
2.01 Loans.
(a) Term Loans. Subject to the terms and conditions set forth herein and in reliance upon the representations and warranties of the Credit
Parties contained herein, each Lender, severally and not jointly, agrees to make a single loan to the Borrower on the Closing Date in an aggregate
amount equal to the amount of such Lender’s Term Loan Commitment. Amounts borrowed under this Section 2.01(a) and repaid may not be
reborrowed.
(b) Revolving Credit Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties
of the Credit Parties contained herein, each Lender having a Revolving Credit Commitment severally and not jointly agrees to make its Applicable
Percentage of Revolving Credit Loans to the Borrower from time to time, on any Business Day during the Revolving Credit Availability Period, in
an aggregate amount equal to the lesser of (i) the amount of such Lender’s Revolving Credit Commitment less such Lender’s Applicable
Revolving Credit Percentage of Revolving Credit Exposure, or (ii) such Lender’s Applicable Revolving Credit Percentage of (A) the Borrowing
Base (based upon the Borrowing Base Certificate delivered by the Borrower to the Administrative Agent pursuant to clause (ii) below) less (B) the
Total Outstandings. Amounts borrowed under this Section 2.01(b) and repaid may be reborrowed. No Revolving Credit Loan shall be funded
unless the following terms and conditions are satisfied or waived in writing by the Administrative Agent in its sole discretion with each Revolving
Credit Borrowing:
(i) each of the conditions set forth in Section 4.02 shall have been satisfied as of, and on, the date of such Revolving Credit
Borrowing; and
40
(ii) the proceeds of the Revolving Credit Loans are used for the purposes described in Section 6.11.
The request by the Borrower and acceptance by the Borrower of the proceeds of a Revolving Credit Loan shall be deemed to constitute, as
of the date of the funding of such Revolving Credit Loan, (i) a representation and warranty by the Borrower that the conditions in this Section
2.01(b) are satisfied and (ii) a reaffirmation by each Credit Party of the granting and continuance of the Administrative Agent’s Liens, on behalf of
itself and the Secured Parties, pursuant to the Loan Documents.
2.02 Borrowings of Committed Loans.
(a) Each Borrowing shall be made upon the Borrower’s irrevocable notice to the Administrative Agent via a Borrowing Request Notice
appropriately completed and signed by a member of Senior Management of the Borrower, which may be given by any Electronic Medium. Each
such notice must be received by the Administrative Agent not later than 11:00 a.m. Eastern time two (2) Business Days prior to the requested date
of any Borrowing (each, a “Two Day Request”); provided, however, if the aggregate principal amount of a requested Borrowing for any day is less
than or equal to the Daily Cash Sweep Repayment Amount for the immediately preceding day, such notice must only be received not later than
11:00 a.m. on the requested date of such Borrowing (each, a “Same Day Request”). Each Borrowing Request Notice shall specify (i) the Borrower
requesting such Borrowing, (ii) the requested date of the Borrowing (which shall be a Business Day), (iii) whether such Borrowing is a Two Day
Request or a Same Day Request and (iv) the principal amount of Committed Loans to be borrowed. Only the Borrowing Request Notice relating
to Loans on the Closing Date shall request the making of the Term Loan. The Borrower may not submit more than two (2) Borrowing Request
Notices for Loans during any week except with the consent of the Administrative Agent in its sole discretion. Each Borrowing of any Loans (other
than a Borrowing pursuant to a Same Day Request) shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.
(b) Following receipt of a Borrowing Request Notice, the Administrative Agent shall promptly notify each Lender of the amount of its
Applicable Percentage of the applicable Loans. For each Borrowing, each Lender shall make the amount of its Committed Loan available to the
Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. Eastern time (or such later time
as may be agreed upon by a Lender and the Administrative Agent) on the Business Day specified in the applicable Borrowing Request Notice.
Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Borrowing, Section 4.01), the
Administrative Agent shall make all funds so received available to the applicable Borrower in like funds as received by the Administrative Agent
by transfer of such funds (such transfer to be initiated no later than 6:00 p.m. Eastern time) in accordance with instructions provided to (and
reasonably acceptable to) the Administrative Agent by the Borrower.
41
2.03 Prepayments; Mandatory Repayments.
(a) Voluntary Prepayments of Loans.
(i) Revolving Loans may be borrowed, repaid and prepaid, and reborrowed, in each case without premium or penalty and otherwise
on the terms and conditions set forth in this Agreement.
(ii) The Borrower may, upon notice to the Administrative Agent pursuant to a Prepayment Notice, at any time or from time to time
voluntarily prepay Term Loans in whole or in part; provided that (i) the Borrower shall pay each Lender its Applicable Percentage of the
Early Termination Premium, if applicable, on the amount prepaid concurrently with such prepayment, (ii) such notice must be received by
the Administrative Agent not later than 2:00 p.m. Eastern time three (3) Business Days prior to any such date of prepayment, (iii) any
prepayment of Term Loans shall be in a principal amount of $500,000 or a whole multiple of $500,000 in excess thereof; or, if less, the
entire principal amount thereof then outstanding, and (iv) any prepayment of Term Loans shall be made with a commensurate pro rata
reduction of the Revolving Credit Commitment in accordance with Section 2.04. Each such notice shall specify the date and amount of
such prepayment of the Term Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such
notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the
Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified
therein. Any prepayment of a Term Loan shall be accompanied by the applicable Early Termination Premium, all accrued interest on the
amount prepaid, together with any additional amounts required pursuant to Section 3.04.
(b) Negative Excess Availability; Application of Reserved Cash; Release of Reserved Cash. Subject to Section 2.15, if for any reason at
any time, Excess Availability is less than $0, the Borrower shall immediately (but in any case no later than one (1) Business Day) repay all
outstanding Revolving Credit Loans in an aggregate amount equal to such deficiency; provided, that if the principal amount of all Revolving
Credit Loans have been reduced to zero following such repayment and a deficiency still exists, the Borrower shall immediately provide additional
Reserved Cash to the Reserved Cash Account in such amount that would eliminate such deficiency completely.
Subject to the conditions listed herein, the Borrower may request that the Administrative Agent release Reserved Cash in the Reserved Cash
Account to the Borrower in an amount not to exceed the lesser of (A) the amount of the then existing Reserved Cash Account, and (B) the
difference between (1) an amount equal to one hundred percent (100%) of the then existing Borrowing Base (calculated on a pro forma basis after
giving effect to such proposed release of Reserved Cash), less (2) the Total Outstandings (to the extent such difference under this clause (B) is a
positive number). Each request to release Reserved Cash shall be made upon the Borrower’s irrevocable notice to the Administrative Agent via a
Reserved Cash Release Notice appropriately completed and signed by a member of Senior Management of the Borrower, which may be given by
any Electronic Medium. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. Eastern time two (2) Business
Days prior to the requested date of such release of Reserved Cash. Any such request to release Reserved Cash shall be subject to the following
conditions precedent (the “Cash Release Conditions”): (I) no Default or Event of Default shall have occurred or be existing on the date of and
after giving effect to the release of any Reserved Cash; (II) concurrently with such request, the Borrower shall deliver to the Administrative Agent
an updated Borrowing Base Certificate, which shall set forth the Borrowing Base based on the balances as of the close of business on the prior
Saturday and calculated on a pro forma basis after giving effect to such proposed release of Reserved Cash, and (III) such request shall specify the
amount of Reserved Cash that the Borrower is requesting be released, and shall be accompanied by the calculations and such other information
that Administrative Agent shall reasonably request to confirm compliance with the terms of this paragraph. Upon satisfaction of the Cash Release
Conditions, the Administrative Agent shall arrange for the release of the requested Reserved Cash to the Borrower’s operating account. The
provisions of this Section 2.03(b) shall not be deemed a waiver in any respect of any Event of Default relating to a breach of Section 7.12(a).
42
(c) Asset Dispositions. Within two (2) Business Days of receipt by any Credit Party of Net Cash Proceeds (so long as no Event of Default
shall have occurred and be continuing, in an amount in excess of $150,000), from any asset disposition of Collateral (excluding dispositions of
Inventory in the ordinary course of business), the Borrower shall prepay the Obligations in an aggregate amount equal to the sum of (i) 100% of
such Net Cash Proceeds so received plus (ii) the applicable Early Termination Premium (such prepayments shall be directed to the Collection
Account and applied in accordance with the application of payments specified in Section 2.05(b)(i) and shall result in a pro rata repayment of the
Total Term Loan Outstandings and the Total Revolving Credit Outstandings (together with a permanent reduction of the Revolving Credit
Commitment in an amount commensurate with the amount of Revolving Credit Loans repaid as a result of this clause); provided, that (A) (1) any
Net Cash Proceeds received by any Credit Party as a result of the AdParlor Sale (“AdParlor Sale Proceeds”) may, at the option of the Borrower, be
applied on or prior to the first anniversary of the Closing Date to (x) make a repayment of outstanding Revolving Credit Loans (without any
reduction of the Revolving Credit Commitments) or (y) make a pro rata repayment of the Total Term Loan Outstandings and the Total Revolving
Credit Outstandings (together with a permanent reduction of the Revolving Credit Commitment in an amount commensurate with the amount of
Revolving Credit Loans repaid as a result of this clause (y)) (in the case of clauses (x), without any Early Termination Premium being payable in
connection therewith and in the case of clause (y), with an Early Termination Premium being payable on AdParlor Sale Proceeds in excess of
$10,000,000), (2) if no Revolving Credit Loans are outstanding at such time (including after giving effect to any prepayment made pursuant to the
foregoing clauses (A)(1)(x) or (y)), then any such excess AdParlor Sale Proceeds may be retained by such Credit Party and (3) if an Event of
Default has occurred and is continuing at the time of such prepayment, then the amount of AdParlor Sale Proceeds that may be applied or
otherwise retained pursuant to this clause (A) shall not exceed $10,000,000 (with any amount of AdParlor Sale Proceeds in excess of $10,000,000
being required to be applied pursuant to this Section 2.03(c) without giving effect to this clause (A)) and (B) Net Cash Proceeds received by any
Credit Party as a result of the True North Loyalty Sale after the Closing Date shall be used by the Borrower to repay the Total Revolving Credit
Outstandings (without a permanent reduction of the Revolving Credit Commitment); provided, further, that so long as no Event of Default shall
have occurred and is continuing, at the election of the Borrower, any Credit Party may reinvest any Net Cash Proceeds that are subject to this
Section 2.03(c) (other than Net Cash Proceeds received from the sale of (i) the Capital Stock of the Borrower or its Subsidiaries or (ii) all or
substantially all or a material portion of the assets of any Credit Party or any business line, unit or division of a Credit Party or its Subsidiaries) in
assets used or useful in the business of any other Credit Party within six (6) months after the date of such asset disposition (or, if within such six-
month period, Parent or any of its Subsidiaries enters into a binding commitment to so reinvest such Net Cash Proceeds, then such amounts shall
be required to be reinvested within three (3) months following the initial six-month period during which Parent or any of its Subsidiaries so
committed to such plan of reinvestment), or, in each case, such longer period of time as agreed in writing by the Administrative Agent’s in its sole
discretion, the consummation of such reinvestment to be certified by the Borrower in writing to the Administrative Agent within such period, as
extended hereunder; provided, further, that any Net Cash Proceeds not so reinvested within such six-month period (or, to the extent applicable,
such nine-month period) shall be immediately applied (together with the Early Termination Premium) to the prepayment of the Obligations as set
forth in Section 2.05(c).
43
(d) Casualty Events and Extraordinary Receipts. Within two (2) Business Days of receipt by any Credit Party of Net Cash Proceeds from
any Casualty Event with respect to Collateral or any Extraordinary Receipts (in each case of such Net Cash Proceeds or Extraordinary Receipts, so
long as no Event of Default shall have occurred and be continuing, in an amount in excess of $50,000), the Borrower shall prepay the Obligations
in an amount equal to the sum of (i) 100% of (A) Net Cash Proceeds received by any Credit Party from Casualty Events with respect to Collateral
and (B) all Extraordinary Receipts plus (ii) the applicable Early Termination Premium (in each case, such prepayments shall be directed to the
Collection Account and applied in accordance with the application of payments specified in Section 2.05(b)(i) and shall result in a pro rata
repayment of Total Term Loan Outstandings and the Total Revolving Credit Outstandings (together with a permanent reduction of the Revolving
Credit Commitment in an amount commensurate with the amount of Revolving Credit Loans repaid as a result of this clause); provided that so
long as no Event of Default shall have occurred and is continuing, at the election of the Borrower, any Credit Party may reinvest all or any portion
of such Net Cash Proceeds and/or Extraordinary Receipts, as applicable, in assets used or useful in the business of any other Credit Party within
six (6) months after the date of such Casualty Event or receipt of such Extraordinary Receipt (or, if within such six-month period, Parent or any of
its Subsidiaries enters into a binding commitment to so reinvest such Net Cash Proceeds and/or Extraordinary Receipts, as applicable, then such
amounts shall be required to be reinvested within three (3) months following the initial six-month period during which Parent or any of its
Subsidiaries so committed to such plan of reinvestment), or, in each case, such longer period of time as agreed in writing by the Administrative
Agent’s in its sole discretion and the consummation of such reinvestment to be certified by the Borrower in writing to the Administrative Agent
within such period; provided, however, that any Net Cash Proceeds not so reinvested within such six-month period (or, to the extent applicable,
such 12-month period) shall be immediately applied (together with the Early Termination Premium) to the prepayment of the Obligations as set
forth in Section 2.05(b)(i).
(e) Issuance of Equity. Other than in connection with the First Amendment Equity Raise, the Second Amendment Capital Raise, any
Second Amendment Follow-on Equity Raise, orany Third Amendment Capital Raise, or any Fourth Amendment Capital Raise (provided that no
Default or Event of Default shall have occurred or be existing on a First Amendment Equity Raise Date, a Second Amendment Follow-on Equity
Raise Date, or a Third Amendment Capital Raise Date, or a Fourth Amendment Capital Raise Date), within two (2) Business Days of the sale or
issuance by any Credit Party or any Subsidiaries (other than any sale or issuance to a Credit Party) of any its Capital Stock, the Borrower shall
prepay the Obligations in an amount equal to the sum of (i) 100% of such Net Cash Proceeds so received plus (ii) the applicable Early Termination
Premium (such prepayments shall be directed to the Collection Account and applied in accordance with the application of payments specified in
Section 2.05(b)(i) and shall result in a pro rata repayment of Total Term Loan Outstandings and the Total Revolving Credit Outstandings (together
with a permanent reduction of the Revolving Credit Commitment in an amount commensurate with the amount of Revolving Credit Loans repaid
as a result of this clause).
(f) Incurrence of Indebtedness. Immediately upon the incurrence or issuance by any Credit Party or any of its Subsidiaries of any
Indebtedness (other than Indebtedness permitted pursuant to Section 7.02), the Borrower shall prepay the Obligations in an amount equal to the
sum of (i) 100% of such Net Cash Proceeds so received plus (ii) the applicable Early Termination Premium (such prepayments shall be directed to
the Collection Account and applied in accordance with the application of payments specified in Section 8.03).
(g) Mandatory Prepayment of Revolving Loans. If for any reason, Total Revolving Credit Outstandings exceeds the Revolving Credit
Commitments, including without limitation, as a result of Section 2.04(b), then the Borrower shall immediately prepay Revolving Credit Loans in
an aggregate amount equal to such excess.
44
(h) Mandatory Prepayments Related to Cash Dominion Trigger Event. Upon the occurrence of a Cash Dominion Trigger Event, the
Borrower shall prepay the Obligations, to the extent required by Section 6.16(b) hereof.
2.04 Termination or Reduction of Commitments.
(a) Term Loan Facility. The aggregate Term Loan Commitments of the Lenders on the Closing Date shall be automatically and
permanently reduced to zero upon the making of the Term Loans on the Closing Date.
(b) Revolving Credit Facility. The Borrower may, upon notice to the Administrative Agent from the Borrower, terminate the Revolving
Credit Commitments, or from time to time permanently reduce the Revolving Credit Commitments; provided that (i) any such notice shall be
received by the Administrative Agent not later than 11:00 a.m. three (3) Business Days prior to the date of termination or reduction, (ii) any such
partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall pay
the applicable Early Termination Premium in connection with such termination or reduction as set forth in Section 2.07(d), (iv) the Borrower shall
not terminate or reduce the Revolving Credit Commitments if, after giving effect to any concurrent prepayment or repayment of the Revolving
Credit Loans in accordance with Section 2.03, the sum of the Total Revolving Credit Outstandings exceeds the Revolving Credit Commitments,
and (v) any reduction or termination of Revolving Credit Commitment shall be accompanied by a pro rata repayment of the Term Loan in
accordance with Section 2.03(a)(ii). The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of
the Revolving Credit Commitments. Any reduction of the Revolving Credit Commitments shall be applied to the Revolving Credit Commitment
of each Lender according to its Applicable Revolving Credit Percentage. All fees accrued until the effective date of any termination of the
Revolving Credit Commitments, together with the applicable Early Termination Premium, shall be paid on the effective date of such termination.
2.05 Repayment of Loans; Application of Payments.
(a) Maturity. In addition to the repayment of the Loans pursuant to Section 2.03, the Borrower shall repay to the Lenders on the Maturity
Date, (i) the aggregate principal amount of the Term Loans on such date, together with all other Obligations in respect thereof, (ii) the aggregate
principal amount of Revolving Credit Loans outstanding on such date, together with all other Obligations in respect thereof, and (iii) all other
Obligations. The Borrower hereby unconditionally promises to pay to the Administrative Agent the then unpaid amount of each Protective
Advance on the earlier of the Maturity Date and demand by the Administrative Agent.
(b) Application of Payments.
(i) Application of Payments; Mandatory Prepayments Generally. Subject to clause (c) below, repayments required pursuant to
Sections 2.03(b) through (f) shall be applied to the Obligations as follows:
(A) First, to pay outstanding Protective Advances funded by the Administrative Agent;
45
(B) Second, to pay Obligations owing to the Administrative Agent and Lenders constituting (a) indemnities and expenses then
due and payable under this Agreement and the other Loan Documents and (b) the fees then due and payable under Section 2.07 (b),
ratably among such Persons in proportion to the respective amounts described in this clause payable to them;
(C) Third, to pay Obligations constituting accrued and unpaid interest and fees (including without limitation, the Early
Termination Premium) due and payable to, the Lenders by the Borrower under this Agreement and the other Loan Documents ratably
among them in proportion to the respective amounts described in this clause Third payable to them;
(D) Fourth, to repay principal on the Term Loans and Revolving Credit Loans ratably among the holders thereof in proportion
to the respective amounts described in this clause Fourth payable to them; and
(E) Fifth, thereafter to the Borrower’s operating account.
(ii) Application of Payments Related to Cash Dominion Trigger Event. Subject to clause (c) below, repayments required pursuant
to Section 2.03(h) shall be applied to the Obligations as follows:
(A) First, to pay outstanding Protective Advances funded by the Administrative Agent;
(B) Second, to pay Obligations owing to the Administrative Agent and Lenders constituting (a) indemnities and expenses then
due and payable under this Agreement and the other Loan Documents and (b) the fees then due and payable under Section 2.07(b),
ratably among such Persons in proportion to the respective amounts described in this clause payable to them;
(C) Third, to pay Obligations constituting accrued and unpaid interest and fees (including without limitation, the Early
Termination Premium) due and payable to, the Lenders by the Borrowers under this Agreement and the other Loan Documents
ratably among them in proportion to the respective amounts described in this clause Third payable to them;
(D) Fourth, to repay principal on the Revolving Credit Loans ratably among the holders thereof in proportion to the respective
amounts described in this clause Fourth payable to them;
(E) Fifth, subject to Section 2.03(b), to the Reserved Cash Account; and
(F) Sixth, thereafter to the Borrowers’ operating account.
All payments applied to the Loans pursuant to this Section 2.05 shall (x) be applied to the Loans owing to the Lenders in accordance with their
respective Applicable Percentages, (y) be subject to any applicable Early Termination Premium, and (z) be accompanied by accrued interest to the extent
required by Section 2.06 and Breakage Costs to the extent required by Section 3.04.
46
The Administrative Agent reserves the right in its Permitted Discretion at any time to repay the outstanding Obligations with any or all of the
Reserved Cash or funds held in the Reserved Cash Account and in such event, Reserved Cash or funds held in the Reserved Cash Account shall be applied
as follows: First, to repay the principal balance of the Revolving Credit Loans (but so long as no Default or Event of Default shall have occurred and be
continuing at such time, without any permanent reduction of Revolving Credit Commitments); and Second, to repay the principal balance of the Term
Loans, subject to any applicable Early Termination Premium and, in each case, shall be applied to the principal balance of the Loans based on the pro rata
share of each Lender (for the avoidance of doubt, the remittance of additional Reserved Cash pursuant to Section 2.03(b) above shall not be deemed a
prepayment for the purposes of Section 2.03(b) and any applicable Early Termination Premium unless and until such Reserved Cash is applied to prepay
the Term Loans or results in a Revolving Credit Commitment reduction). The Administrative Agent shall provide notice of such application of Reserved
Cash (which notice may be same day) in writing to the Borrower, unless the Administrative Agent determines in its Permitted Discretion that the provision
of such notice would impair the collectability or repayment of the Obligations.
(c) Application of Payments; Events of Default. Following the occurrence and during the continuance of an Event of Default the
Administrative Agent may (and at the direction of the Required Lenders, shall) apply all funds transferred and credited to the Collection Account
(or otherwise on account of the payment of the Obligations) to the Obligations in accordance with Section 8.03.
2.06 Interest.
(a) Subject to the provisions of subsection (b) below, each Loan shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the Adjusted Term SOFR for such Interest Period plus the Applicable Rate.
(b) Following the occurrence and during the continuance of an Event of Default, the Obligations shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws unless otherwise agreed
to in writing by the Administrative Agent.
(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as
may be specified herein. Interest accruing at the Default Rate shall be due and payable on demand by the Administrative Agent. Interest hereunder
shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.
2.07 Fees.
(a) The Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders (including SLR and its Affiliates), a one-
time closing fee (the “Closing Fee”) in an aggregate amount equal to $750,000. The Closing Fee shall be fully earned and due and payable in full
upon the Closing Date.
(b) The Borrower shall pay an aggregate annual agency fee (the “Agency Fee”) of $50,000 to the Administrative Agent, for the ratable
benefit of the Administrative Agent and its Affiliates, in advance on the Closing Date and on each anniversary thereof, until the Obligations have
been paid and satisfied in full. The Agency Fee shall be fully earned upon becoming due and payable.
47
(c) The Borrower shall pay to the Administrative Agent for the account of the Lenders in accordance with their Applicable Revolving
Credit Percentages, an unused facility fee (the “Unused Facility Fee”) equal to 0.50% times the Unused Revolving Credit Facility Amount for the
applicable calendar month for which such Unused Facility Fee is due. The Unused Facility Fee shall accrue at all times on and following the
Closing Date so long as the Revolving Credit Commitments are outstanding, including at any time during which one or more of the conditions in
Section 4.02 is not met, and shall be due and payable monthly in arrears on the first day of each calendar month, commencing with the first such
date to occur after the Closing Date, and on the Maturity Date. The Unused Facility Fee shall be calculated monthly in arrears and shall be fully
earned upon becoming due and payable.
(d) Upon the occurrence of an Early Termination Premium Trigger Event, the Borrower agrees to pay to the Administrative Agent, for the
ratable benefit of the Lenders, the Early Termination Premium. Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, it is understood and agreed that if the Obligations are accelerated as a result of the occurrence and continuance of any Event of Default
(including by operation of law or otherwise), the Early Termination Premium, if any, determined as of the date of acceleration, will also be due
and payable and will be treated and deemed as though the Term Loans were prepaid and the Revolving Credit Commitments were terminated as of
such date and shall constitute part of the Obligations for all purposes herein. Any Early Termination Premium payable in accordance with this
Section 2.07(d) shall be presumed to be equal to the liquidated damages sustained by the Lenders as the result of the occurrence of the Early
Termination Premium Trigger Event, and each of the Credit Parties agree that it is reasonable under the circumstances currently existing. The
Early Termination Premium shall also be payable in the event the Obligations (and/or this Agreement) are satisfied or released by foreclosure
(whether by power of judicial proceeding), deed in lieu of foreclosure or by any other means. EACH OF THE CREDIT PARTIES EXPRESSLY
WAIVES THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE
COLLECTION OF THE FOREGOING APPLICABLE FEE IN CONNECTION WITH ANY SUCH ACCELERATION. Each of Credit Party
expressly agrees that (A) the Early Termination Premium is reasonable and is the product of an arm’s length transaction between sophisticated
business people, ably represented by counsel, (B) the Early Termination Premium shall be payable notwithstanding the then prevailing market
rates at the time payment is made, (C) there has been a course of conduct between the Lenders and the Credit Parties giving specific consideration
in this transaction for such agreement to pay the Early Termination Premium, (D) the Credit Parties shall be estopped hereafter from claiming
differently than as agreed to in this Section 2.07(d), (E) the agreement of the Credit Parties to pay the Early Termination Premium is a material
inducement to the Lenders to provide the Commitments and make the Loans, and (F) the Early Termination Premium represents a good faith,
reasonable estimate and calculation of the lost profits or damages of the Lenders and that it would be impractical and extremely difficult to
ascertain the actual amount of damages to the Lenders or profits lost by the Lenders as a result of any such Early Termination Premium Trigger
Event.
(e) Each Borrower’s obligation to pay the foregoing fees described in this Section 2.07 will not be subject to counterclaim or setoff for, or
be otherwise affected by, any claim or dispute such Borrower may have. All of the fees described above in this Section 2.07 shall be
nonrefundable for any reason whatsoever and shall be in addition to any other fees, costs and expenses payable pursuant to this Agreement and the
other Loan Documents.
2.08 Computation of Interest and Fees. All computations of fees and interest shall be made on the basis of a 360-day year and actual days
elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which
the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that
is repaid on the same day on which it is made shall, subject to Section 2.10(a), bear interest for one day. Each determination by the Administrative Agent of
an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
48
2.09 Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and
by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so
record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect
to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the
Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon
the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative
Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and
endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.
2.10 Payments Generally; Administrative Agent’s Clawback.
(a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative
Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in
immediately available funds not later than 1:00 p.m. Eastern time on the date specified herein. The Administrative Agent will promptly distribute
to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer
to such Lender’s Lending Office. All payments received by the Administrative Agent after 1:00 p.m. Eastern time shall be deemed received on the
next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(b) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of
such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section
2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower agree to pay to the
Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from
and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in
the case of a payment to be made by such Lender, the greater of Adjusted Term SOFR and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the
Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable
to such Loans made. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period,
the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender
pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Committed Loan
included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that
shall have failed to make such payment to the Administrative Agent.
49
(i) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that
the Borrower will not make such payment, the Administrative Agent may assume that the Borrower have made such payment on such date
in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower
have not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand
the amount so distributed to such Lender, in immediately available funds with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of Adjusted Term SOFR
and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be
conclusive, absent manifest error.
(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by
such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the
Administrative Agent because the conditions to the applicable Loans set forth in Article IV are not satisfied or waived in accordance with the
terms hereof, the Administrative Agent shall return such funds promptly (in like funds as received from such Lender) to such Lender, without
interest.
(d) Obligations of Lenders Several. The obligations of each of the Lenders hereunder to make Term Loans and Revolving Credit Loans,
and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any
such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed
Loan, to purchase its participation or to make its payment under Section 10.04(c).
(e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
2.11 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of the Committed Loans made by it, resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the
Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in
the Committed Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by
the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts
owing them, provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without
interest; and
50
(ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale
of a participation in any of its Committed Loans to any assignee or participant, other than to the Borrower or any Subsidiary of the
Borrower (as to which the provisions of this Section shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
2.12 Collateral and Guarantees.
(a) Collateral. The Loans and the other Obligations shall be secured by valid, first priority (subject to Permitted Liens), perfected and
enforceable Liens in favor of the Administrative Agent, for the benefit of the holders of the Obligations, in all of the Collateral subject to the terms
of this Agreement and the Security Documents.
(b) Guarantees. Payment of the Loans and the other Obligations shall be unconditionally guaranteed by each Guarantor subject to the
terms of the Guaranty.
(c) Further Assurances. Each Credit Party covenants and agrees that it shall comply with all terms and conditions of each of the Security
Documents and that such Credit Party shall at any time and from time to time at the request of the Administrative Agent or the Required Lenders,
execute and deliver such instruments and documents and do such acts and things as the Administrative Agent may reasonably request in order to
provide for, perfect or protect the Lien of the Administrative Agent in the Collateral.
2.13 [Reserved].
2.14 Defaulting Lenders.
(a) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with
respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01.
51
(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent
for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received
by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be
determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the
Administrative Agent hereunder; second, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of
any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by
the Administrative Agent; third, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and
released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this
Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction
obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this
Agreement; fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any
judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting
Lender’s breach of its obligations under this Agreement; and, to such Defaulting Lender or as otherwise directed by a court of competent
jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting
Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 4.02
were satisfied or waived, such payment shall be applied solely to pay the Loans of, owed to, all Non-Defaulting Lenders on a pro rata basis
prior to being applied to the payment of any Loans of, such Defaulting Lender until such time as all Loans are held by the Lenders pro rata
in accordance with the Commitments hereunder. 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 shall be deemed paid to and redirected by such Defaulting Lender, and
each Lender irrevocably consents hereto.
(b) Defaulting Lender Cure. If the Borrower and the Administrative Agent agree in writing that a Lender is no longer a Defaulting
Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any
conditions set forth therein that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take
such other actions as the Administrative Agent may determine to be necessary to cause the Committed Loans to be held on a pro rata basis by the
Lenders in accordance with their Applicable Percentages, whereupon such Lender will cease to be a Defaulting Lender; provided that no
adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a
Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from
Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a
Defaulting Lender.
2.15 Protective Advances.
(a) The Administrative Agent shall be authorized, in its discretion, at any time, whether or not a Default or Event of Default exists or any
of the conditions in Section 4.02 are not satisfied, to make loans, disbursements and advances (“Protective Advances”) to the Borrower, on behalf
of all Lenders, that the Administrative Agent, in its Permitted Discretion, deems are necessary or desirable (i) to preserve or protect any Collateral
or the Credit Parties’ business operations, (ii) to enhance the collectability or repayment of the Obligations, or (iii) to pay any other amount
chargeable to or required to be paid by the Credit Parties pursuant to the terms of this Agreement, including payments of principal, interest, fees,
premiums (including, without limitation, any Early Termination Premium), reimbursable expenses (including costs, fees and expenses as described
in Section 10.04) and other sums payable under the Loan Documents; provided that prior to an Event of Default and absent exigent circumstances,
the Administrative Agent shall use reasonable efforts to notify the Borrower after paying any such amount or taking any such action. All
Protective Advances shall bear interest at the Base Rate (or, during such time as an Event of Default has occurred and is continuing, the Default
Rate). All Protective Advances shall be Obligations secured by the Collateral, shall constitute Loans and shall be payable by the Borrower on
demand by the Administrative Agent. Any funding of Protective Advances shall not constitute a waiver by the Administrative Agent or the
Lenders of any Event of Default. Other than with respect to the notice and consultation rights expressly provided above, in no event shall the
Borrower or any other Credit Party be deemed to be a beneficiary of this Section nor authorized to enforce any of its terms.
52
(b) Upon the making of a Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default or Event
of Default), each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the
Administrative Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its
Applicable Percentage. Each Lender shall transfer (a “Transfer”) the amount of such Lender’s Applicable Percentage of the outstanding principal
amount of the applicable Protective Advance with respect to such purchased interest and participation promptly when requested to the
Administrative Agent, to such account of the Administrative Agent as the Administrative Agent may designate, but in any case not later than 1:00
p.m., Eastern time, on the Business Day notified (if notice is provided by the Administrative Agent prior to 12:00 p.m. Eastern time), and
otherwise on the immediately following Business Day (the “Transfer Date”). Transfers may occur during the existence of a Default or Event of
Default. If any such amount is not transferred to the Administrative Agent by any Lender on such Transfer Date, the Administrative Agent shall be
entitled to recover such amount on demand from such Lender together with interest thereon, for each day from and including the Transfer Date to
but excluding the date of payment to the Administrative Agent, at Adjusted Term SOFR. From and after the date, if any, on which any Lender is
required to fund, and funds, its participation in any Protective Advance purchased hereunder, the Administrative Agent shall promptly distribute to
such Lender, such Lender’s Applicable Percentage of all payments of principal and interest and all proceeds of Collateral received by the
Administrative Agent in respect of such Protective Advance.
2.16 Loan Account.
(a) The Administrative Agent shall maintain in accordance with its usual and customary practices an account or accounts (“Loan
Account”) evidencing the Indebtedness of the Borrower resulting from each Loan from time to time. Any failure of the Administrative Agent to
record anything in the Loan Account, or any error in doing so, shall not limit or otherwise affect the obligation of the Borrower to pay any amount
owing hereunder.
(b) Entries made in the Loan Account shall constitute presumptive evidence of the information contained therein. If any information
contained in the Loan Account is provided to or inspected by any Person, then such information shall be conclusive and binding on such Person
for all purposes absent manifest error, except to the extent such Person notifies the Administrative Agent in writing within thirty (30) days after
receipt or inspection that specific information is subject to dispute.
(c) The Administrative Agent is authorized to, and at its sole election may, charge to the Loan Account on behalf of the Borrower and
cause to be paid all fees, expenses, charges, costs and interest and principal, other than principal of the Committed Loans, then due and payable by
the Borrower under this Agreement or any of the other Loan Documents, even if the amount of such charges would cause Excess Availability to be
less than $0. At the Administrative Agent’s option and to the extent permitted by law, any charges so made shall constitute part of the Obligations
hereunder. The Administrative Agent shall provide reasonable notice to the Borrower of any such charges.
53
2.17 Reserves and Eligibility Criteria. The Administrative Agent may, from time to time in the exercise of its Permitted Discretion, (a)
establish, modify or eliminate Reserves and (b) adjust the eligibility criteria or establish new eligibility criteria with respect to components of the
Borrowing Base; provided that, notwithstanding the foregoing or anything contrary in this Agreement, no Reserves shall be established or changed and no
modifications to eligibility criteria or standards made, in each case, except upon not less than three (3) Business Days’ prior written notice to the Borrower,
which notice shall include a reasonably detailed description of such Reserve being established or the modification to eligibility criteria or standards being
made (during which period (i) the Administrative Agent shall, if requested, discuss any such Reserve, change or modification with the Borrower and (ii)
the Borrower may take such action as may be required so that the event, condition or matter that is the basis for such Reserve, change or modification
thereto no longer exists or exists in a manner that would result in the establishment of a lower Reserve or result in a lesser change or modification thereto,
in a manner and to the extent reasonably satisfactory to the Administrative Agent); provided, further, that such notice period shall not apply (x) in such
circumstances where the Administrative Agent determines in its Permitted Discretion that the provision of such notice would impair the collectability or
repayment of the Obligations (in which case the Administrative Agent shall notify the Borrower as promptly as such circumstances permit) and (y) to
changes to Reserves solely for purposes of correcting mathematical or clerical errors, it being understood that no Default or Event of Default shall be
deemed to result therefrom, if applicable, for a period of one (1) Business Day.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.
(i) Any and all payments by or on account of any obligation of any Credit Party under any Loan Document shall be made without
deduction or withholding for any Taxes, except as required by applicable Laws. If any applicable Laws (as determined in the good faith
discretion of the Administrative Agent) require the deduction or withholding of any Tax from any such payment by the Administrative
Agent or a Credit Party, then the Administrative Agent or such Credit Party shall be entitled to make such deduction or withholding, upon
the basis of the information and documentation to be delivered pursuant to subsection (e) below.
(ii) If any Credit Party or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both
United States Federal backup withholding and withholding taxes, from any payment to a Recipient, then (A) the Credit Party or
Administrative Agent shall withhold or make such deductions as are determined by the Credit Party or Administrative Agent to be required
based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Credit Party or Administrative
Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C)
to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Credit Party
shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions
applicable to additional sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have
received had no such withholding or deduction been made.
54
(iii) If any Credit Party or the Administrative Agent shall be required by any applicable Laws other than the Code to withhold or
deduct any Taxes from any payment to a Recipient, then (A) such Credit Party or the Administrative Agent, as required by such Laws, shall
withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received
pursuant to subsection (e) below, (B) such Credit Party or the Administrative Agent, to the extent required by such Laws, shall timely pay
the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the
withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Credit Party shall be increased as
necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional
sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such
withholding or deduction been made.
(b) Payment of Other Taxes by the Credit Parties. Without limiting the provisions of subsection (a) above, the Credit Parties shall timely
pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse the
Administrative Agent for the payment of, any Other Taxes.
(c) Tax Indemnifications.
(i) The Credit Parties shall, and do hereby, jointly and severally indemnify each Recipient, and shall make payment in respect
thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this Section 3.01) payable or paid by such Recipient or required to be withheld or
deducted from a payment to such Recipient, and any penalties, interest, and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate
as to the amount of such payment or liability delivered to a Credit Party by a Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(ii) Each Lender shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after
demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender (but only to the extent that any
Credit Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the
Credit Parties to do so), (y) the Administrative Agent and the Credit Parties, as applicable, against any Taxes attributable to such Lender’s
failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Administrative
Agent and the Credit Parties, as applicable, against any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by
the Administrative Agent or a Credit Party in connection with any Loan Document, and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent
manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such
Lender, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under
this clause (ii).
55
(d) Evidence of Payments. As soon as practicable after any payment of Taxes by the Credit Parties or by the Administrative Agent to a
Governmental Authority as provided in this Section 3.01, the Credit Parties shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment
or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Status of Lenders; Tax Documentation.
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any
Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or
the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by
applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative
Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding
anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such
documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) 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.
(ii) Without limiting the generality of the foregoing, in the event that a Credit Party is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on
which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal
backup withholding tax (or any substantively comparable subsequent versions thereof or successors thereto);
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative
Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), whichever of the following is applicable:
(I) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party
(x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or W-
8BEN-E (or any substantively comparable subsequent versions thereof or successors thereto) establishing an exemption
from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with
respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E (or any
substantively comparable subsequent versions thereof or successors thereto) establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax
treaty;
56
(II) executed copies of IRS Form W-8ECI (or any substantively comparable subsequent versions thereof or
successors thereto);
(III) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h)
or 881(c) of the Code a certificate substantially in the form of Exhibit G (a “U.S. Tax Compliance Certificate”), as
applicable and duly executed copies of IRS Form W-8BEN or W-8BEN-E (or any substantively comparable subsequent
versions thereof or successors thereto); or
(IV) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY (or any
substantively comparable subsequent versions thereof or successors thereto), accompanied by IRS Form W-8ECI, IRS
Form W-8BEN or W-8BEN-E (or any substantively comparable subsequent versions thereof or successors thereto), a
U.S. Tax Compliance Certificate in the form of Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or
more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate in the form of Exhibit G-4 on behalf of each such direct and
indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative
Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), executed originals of any other form prescribed by applicable Law as a basis for claiming exemption from or
a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed
by applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be
made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by
FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in
Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at
the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent
such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower
and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with
such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes
of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
57
(E) On or prior to the date it becomes a party to this Agreement, the Administrative Agent shall deliver to the Borrower
either (i) a PDF copy of IRS Form W-9, or (ii) if the Administrative Agent is not a U.S. Person (a) two duly completed originals of
IRS Form W-8ECI with respect to payments to be received under the Loan Documents for its own account and (b) with respect to
payments received on account of any Lender, a PDF copy of IRS Form W-8IMY evidencing its agreement with the Borrower to be
treated as a U.S. Person for U.S. federal withholding purposes and assuming primary responsibility for U.S. federal income tax
withholding. Notwithstanding anything to the contrary in this Section 3.01(e)(ii)(E), the Administrative Agent shall not be required
to deliver any documentation pursuant to this Section 3.01(e)(ii)(E) that the Administrative Agent is not legally eligible to deliver as
a result of a Change in Law after the Closing Date.
(iii) Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes
obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.
(f) Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to
file for or otherwise pursue on behalf of a Lender, or have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from
funds paid for the account of such Lender, as the case may be. If any Recipient determines, in its sole discretion exercised in good faith, that it has
received a refund of any Taxes as to which it has been indemnified by any Credit Party or with respect to which any Credit Party has paid
additional amounts pursuant to this Section 3.01, it shall pay to the Credit Party an amount equal to such refund (but only to the extent of
indemnity payments made, or additional amounts paid, by a Credit Party under this Section 3.01 with respect to the Taxes giving rise to such
refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that the Credit Party, upon the request of the Recipient, agrees to repay
the amount paid over to the Credit Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the
Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in
this subsection, in no event will the applicable Recipient be required to pay any amount to the Credit Party pursuant to this subsection the payment
of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the indemnification
payments or additional amounts giving rise to such refund had never been paid. This subsection shall not be construed to require any Recipient to
make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Credit Party or any other Person.
(g) Survival. Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or
any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of
all other Obligations.
58
3.02 Inability to Determine Rates; Illegality
(a) If the Administrative Agent determines (which determination shall be conclusive absent manifest error) in connection with any request
for a Loan that (a) adequate and reasonable means do not exist for determining Adjusted Term SOFR or (b) Adjusted Term SOFR (or such
replacement convention) with respect to a proposed Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the
Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Loans
at an interest rate based on Adjusted Term SOFR (or such replacement convention) shall be suspended until the Administrative Agent (upon the
instruction of the Required Lenders) revokes such notice and during such time, all such outstanding Loans shall bear interest at the Base Rate plus
the Applicable Rate (or at the Default Rate if an Event of Default has occurred that is continuing). Upon receipt of such notice, the Borrower may
revoke any pending request for a Borrowing of Loans bearing interest at Adjusted Term SOFR (or such replacement convention) or, failing that,
will be deemed to have converted such request into a request for a Borrowing of Loans bearing interest at the Base Rate plus the Applicable Rate
(or at the Default Rate if an Event of Default has occurred that is continuing) in the amount specified therein.
(b) If any Lender reasonably determines that any Law has made it unlawful, or that any Governmental Authority has asserted in writing
that it is unlawful, for any Lender or its applicable Lending Office to perform any of its obligations hereunder or make, maintain, fund or charge
interest with respect to any Loan, or to determine or charge interest rates, in each case, based upon Adjusted Term SOFR, or to give effect to its
obligations as contemplated hereby with respect to such Loan, then, on notice thereof by such Lender to the Borrower through the Administrative
Agent, any obligation of such Lender to issue, make, maintain, fund or charge interest with respect to any such Loan or continue Loans shall be
suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no
longer exist. Until such circumstances giving rise to the determination no longer exist, as set forth in a written notice provided by such Lender to
the Administrative Agent and the Borrower, all outstanding Loans of such Lender and Loans thereafter made by such Lender shall bear interest at
the Base Rate plus Applicable Rate plus 2.00% per annum (or at the Default Rate if an Event of Default has occurred that is continuing) in the
amount specified therein.
3.03 Increased Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement
against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the
definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other
obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
59
(iii) impose on any Lender any other condition (other than any condition related to Taxes), cost or expense affecting this
Agreement or Loans made by such Lender or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender, by an amount that such Lender deems to be material, of making or
maintaining any Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender, by an amount that such Lender
deems to be material, or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other
amount) then, upon request of such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender
or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on
such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such
Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but
for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to
capital adequacy), by an amount that such Lender deems to be material, then from time to time the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or
its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive
absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt
thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this
Section shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to
compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine
months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such
Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).
3.04 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall
promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of (a) any continuation,
payment or prepayment of any Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, or automatic, by
reason of acceleration or otherwise); (b) any failure by a Credit Party (for a reason other than the failure of such Lender to make a Loan) to prepay or
borrow any Loan on the date or in the amount notified by the Borrower e or (c) any assignment of a Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Borrower pursuant to Section 10.13, including any loss of anticipated profits but including any loss or
expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from
which such funds were obtained (all of such losses, costs or expenses, together with any administrative fees referred to in the following sentence, are
referred to herein collectively as the “Breakage Costs”). The Borrower shall also pay any customary administrative fees charged by such Lender in
connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.04, each Lender shall be
deemed to have funded each Loan made by such Lender through a matching deposit for a comparable amount and for a comparable period, whether or not
such Loan was in fact so funded.
60
3.05 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.03, or requires a Credit Party to pay
any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section
3.01, or if any Lender gives a notice pursuant to Section 3.03, then at the request of the Borrower such Lender shall use reasonable efforts to
designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable
pursuant to Section 3.01 or 3.03, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.03, as applicable, and
(ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender
as the case may be (it being understood that the Borrower shall be given a reasonable opportunity to reimburse such costs or expenses). The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under Section 3.03, or if the Borrower is required to pay any
Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01
and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.05(a), the Borrower
may replace such Lender in accordance with Section 10.13.
3.06 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment
of all other Obligations hereunder and resignation of the Administrative Agent.
ARTICLE IV
CONDITIONS PRECEDENT TO LOANS
4.01 Conditions to the Closing Date. The obligation of each Lender to make its initial Loans hereunder is subject to satisfaction of the
following conditions precedent to the Administrative Agent satisfaction:
(a) The Administrative Agent receipt of the following, each of which shall be originals or facsimile or other electronic image transmission
(e.g., “PDF” or “TIF” via electronic mail) (followed promptly by originals) unless otherwise specified, each properly executed by a member of the
Senior Management of the signing Credit Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date
before the Closing Date) and each in form and substance reasonably satisfactory to the Administrative Agent:
(i) (A) executed counterparts of this Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and
the Credit Parties, and (B) executed counterparts of each Security Document sufficient in number for distribution to the Administrative
Agent and the Credit Parties, and an executed Note for each Lender who requests a Note;
61
(ii) an officer’s certificate of each Credit Party executing a Loan Document, (A) certifying and attaching true, correct and complete
copies of: (1) the certificate of formation, certificate of incorporation, articles of incorporation (or such equivalent thereof) of such Credit
Party, and, where applicable, certified as of a recent date from the Secretary of State (or applicable Governmental Authority) of the
jurisdiction in which such Credit Party is incorporated or formed, (2) the by-laws, limited liability company agreement, articles of
association, partnership agreement or other applicable Governing Document of such Credit Party, and (3) the resolutions or votes of the
board of directors or board of managers or partners (or equivalent thereof) of such Credit Party, authorizing such Credit Party’s entry into
the Loan Documents to which it is a party; and (B) certifying the incumbency of members of the Senior Management of such Credit Party
authorized to act in connection with this Agreement and the other Loan Documents to which such Credit Party is a party and providing a
specimen signature of such members of the Senior Management of such Credit Party who will be signing Loan Documents on the Closing
Date and thereafter;
(iii) such documents and certifications as the Administrative Agent may require to evidence that each Credit Party executing a
Loan Document is validly existing and in good standing (where applicable) in its jurisdiction of incorporation or formation, as applicable;
(iv) a favorable legal opinion of Willkie Farr & Gallagher LLP, special New York counsel to the Credit Parties, addressed to the
Administrative Agent and each Lender, as to matters concerning the Credit Parties and the Loan Documents as the Administrative Agent
may reasonably request; and
(v) a certificate of a member of the Senior Management of the Borrower certifying that (1) the condition specified in Sections
4.02(b) has been satisfied, (2) there has been no event or circumstance since December 31, 2023 that has had or could be reasonably
expected to have, either individually or in the aggregate, a Material Adverse Effect, and (3) all consents, licenses, and approvals required in
connection with the execution, delivery and performance by each Credit Party and the validity against each Credit Party of the Loan
Documents to which such Credit Party is a party have been obtained.
(b) The Administrative Agent shall have received duly executed Agency Account Agreements, signed by each of the applicable parties
thereto, for each deposit account or securities account required to be subject to an Agency Account Agreement pursuant to the terms of Section
6.16 hereof.
(c) The Administrative Agent shall have received a duly completed Borrowing Base Certificate together with such supporting materials as
requested by the Administrative Agent, dated as of the Closing Date, demonstrating that Excess Availability is equal to or greater than $3,500,000
more than the greater of (i) $3,000,000 and (ii) 7.5% of the Line Cap as of the Closing Date after giving effect to (A) the funding of the Term Loan
hereunder and (B) the consummation of the transactions and payment of all fees and expenses in connection therewith, with a certification that all
accounts payable, lease payments, payments due under Indebtedness (other than the Obligations) and taxes, in each case which are due and
payable at such time have been paid current and excluding good faith disputes and any other items disclosed to the Administrative Agent in
writing prior to the Closing Date and approved by the Administrative Agent.
(d) The Administrative Agent shall have received certificates of insurance from an independent insurance broker naming the
Administrative Agent as additional insured or lender’s loss payee thereunder, identifying insurers, types of insurance, insurance limits, and policy
terms, and otherwise describing the insurance obtained in accordance with the provisions of this Agreement and the other Loan Documents, which
shall be in amounts, types and terms and conditions reasonably satisfactory to the Administrative Agent.
62
(e) The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first priority
security interest in and Lien upon the Collateral.
(f) The Administrative Agent shall have received from each Credit Party executing a Loan Document, a completed and executed Closing
Date Perfection Certificate and the results of UCC and intellectual property searches with respect to the Collateral, indicating no Liens other than
Permitted Liens and otherwise in form and substance reasonably satisfactory to the Administrative Agent.
(g) The Administrative Agent shall have received a payoff letter in form and substance satisfactory to the Administrative Agent
evidencing that the Specified Existing Debt has been or concurrently with the Closing Date shall be repaid in full, together with such other
financing statement terminations, notices of termination and releases, requested by the Administrative Agent.
(h) The Administrative Agent shall have received an officer’s certificate of the Borrower dated as of the Closing Date and signed by a
Financial Officer as to the Solvency of the Credit Parties and their Subsidiaries, on a consolidated basis, immediately after giving effect to the
Loans hereunder and the other transactions contemplated hereby occurring on the Closing Date.
(i) The Administrative Agent shall have received a business plan and integrated multi-year projections of the Parent and its Subsidiaries
on a consolidated basis, including forecasts prepared by management of the Parent and the other Credit Parties, in form and substance acceptable
to the Administrative Agent, of (i) Excess Availability and (ii) consolidated balance sheets and statements of income or operations and cash flows
of the Parent and its Subsidiaries through the Fiscal Year ending December 31, 2023 and 2024 on a month-by-month basis and quarterly for each
Fiscal Year thereafter through and including the Fiscal Year ending December 31, 2028.
(j) The Administrative Agent shall have been satisfied with results of all business and legal due diligence, including, without limitation:
(i) the capital structure of the Credit Parties and their Affiliates;
(ii) the results of commercial finance examinations (including a “bring down” commercial field exam);
(iii) the financial statements and projections referred to in Section 5.02;
(iv) all background checks on Senior Management, documentation and other information required by regulatory authorities under
applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Act and the Beneficial
Ownership Regulation, in each case, to the Administrative Agent’s reasonable satisfaction; and
(v) to the extent a Credit Party constitutes a “legal entity customer” under the Beneficial Ownership Regulation and to the extent
requested by any Lender, a completed Beneficial Ownership Certification in relation to each such Credit Party.
63
(k) The Administrative Agent shall have received evidence to its satisfaction of the closure of all of the Credit Parties’ bank accounts
other than those listed on Schedule 10 to the Closing Date Perfection Certificate.
(l) [Reserved].
(m) The Administrative Agent shall have received (i) an initial Borrowing Request Notice and disbursement instructions from the
Borrower, indicating how the proceeds of the Term Loans are to be disbursed and (ii) a sources and uses and funds flow memorandum, in each
case, in form, scope and substance reasonably satisfactory to the Administrative Agent.
(n) Any fees required to be paid under the Loan Documents on or before the Closing Date shall have been paid.
(o) The Borrower shall have paid out of the proceeds of the initial funding of the Term Loans all fees, charges and disbursements of
counsel to the Administrative Agent, the Lenders and the Arranger to the extent invoiced prior to the Closing Date, plus such additional amounts
of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be
incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the
Borrower and the Administrative Agent, the Lenders and the Arranger).
Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this
Section 4.01, 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 reasonably acceptable or satisfactory to such Person unless the
Administrative Agent shall have received notice from such Person prior to the proposed Closing Date specifying its objection thereto.
4.02 Conditions to all Loans. The obligation of each Lender to honor any Borrowing Request Notice is subject to the following conditions
precedent:
(a) The representations and warranties of the Borrower and each other Credit Party contained in Article V and any other Loan Document,
shall be true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of the date of such Loans,
except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all
material respects (but without any duplication of any materiality qualifications) as of such earlier date, and except that for purposes of Section
4.02, the representations and warranties contained in Section 5.02 shall be deemed to refer to the most recent statements furnished pursuant to
clauses (a) and (b), respectively of Section 6.04.
(b) No Default or Event of Default shall exist or would result from such proposed Borrowing or from the application of the proceeds
thereof (including, without limitation, as to Section 7.12).
(c) The Borrower shall have delivered to the Administrative Agent a Borrowing Request Notice in accordance with the requirements
hereof and a Borrowing Base Certificate (such Borrowing Base Certificate to be the most recent Borrowing Base Certificate delivered to the
Administrative Agent pursuant to Section 6.04(c) modified to reflect Total Outstandings on such date).
64
Each Borrowing Request Notice submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in
Sections 4.02(a), (b), and (c) have been satisfied on and as of the date of the applicable Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each Credit Party signatory hereto represents and warrants to the Lenders and the Administrative Agent for itself and on behalf of its Subsidiaries
as follows:
5.01 Corporate Authority, Etc.
(a) Existence, Qualification and Power. Each Credit Party and each Subsidiary thereof (i) is duly organized, incorporated or formed,
validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (ii) has all requisite
power and authority and all requisite governmental licenses, authorizations, consents and approvals to (A) own or lease its assets and carry on its
business and (B) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (iii) is duly qualified and is
licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license; except in each case referred to in clauses (a)(ii) and (iii) of this Section 5.01, to the
extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b) Authorization; No Contravention. The execution, delivery and performance by each Credit Party of each Loan Document to which
such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene the
terms of any of such Person’s Governing Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien
(other than a Permitted Lien) under, or require any payment to be made under (A) any Material Agreement to which such Person is a party or
affecting such Person or the properties of such Person or any of its Subsidiaries or (B) any order, injunction, writ or decree of any Governmental
Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any Law; except in each case referred to in clauses
(b)(ii) and (iii) of this Section 5.01, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
(c) Governmental Authorization; Other Consents. Except as could not reasonably be expected to result in a Material Adverse Effect,
no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is
necessary or required in connection with (i) the execution, delivery or performance by, or enforcement against, any Credit Party of this Agreement
or any other Loan Document, (ii) the grant by any Credit Party of the Liens granted by it pursuant to the Security Documents, (iii) the perfection
or maintenance by any Credit Party of the Liens created under the Security Documents (including the first priority nature thereof), or (iv) the
exercise of the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to
the Security Documents, except, in each case, for (x) approvals, consents, exemptions, authorizations, actions, notice and filing which have been
duly obtained, taken, given or made and are in full force and effect and (y) filings which are necessary to perfect the security interests created
under the Security Documents.
65
(d) Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed
and delivered by each Credit Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Credit Party, enforceable against each Credit Party that is party thereto in accordance with
its terms, subject to applicable Debtor Relief Laws and general principles of equity relating to enforceability (whether considered in a proceeding
at law or in equity) but such principles do not make the remedies afforded by the Loan Documents inadequate for the practical realization of the
principal benefits intended to be provided thereby.
5.02 Financial Statements; Projections.
(a) There has been furnished to the Administrative Agent (for distribution to each of the Lenders) a consolidated balance sheet of the
Parent and its Subsidiaries as of December 31, 2023 in draft form, which is in form and substance satisfactory to the Administrative Agent, and a
consolidated statements of income or operations, cash flows and shareholders’ equity of the Parent and its Subsidiaries for the Fiscal Year then
ended, which financial statements (i) have been prepared in accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein, (ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and
the results of operations for the Fiscal Year then ended and their results of operations, cash flows and changes in shareholders’ equity for the
period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as expressly noted therein,
and (iii) show all material Indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including
liabilities for all federal and other material Taxes, material commitments and Indebtedness.
(b) There has been furnished to the Administrative Agent (for distribution to each of the Lenders) an unaudited consolidated balance sheet
of the Parent and its Subsidiaries as of the close of the Fiscal Month ending January 31, 2024, and unaudited consolidated statements of income or
operations and cash flow of the Parent and its Subsidiaries as of the close of such Fiscal Month, in each case, certified by a Financial Officer of the
Parent. Such balance sheet and statement of income or operations and cash flows have been prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly noted therein, and fairly present the financial condition of the Parent
and its Subsidiaries as of the date thereof and the results of operations, cash flows and changes in shareholders’ equity for the period covered
thereby, subject to the absence of foot notes and to normal year-end audit adjustments. There are no contingent liabilities of the Parent or any
Subsidiary as of such date involving material amounts, known to the officers of the Parent or any Subsidiary, required to be disclosed in such
balance sheet and the notes related thereto in accordance with GAAP which were not disclosed in such balance sheet and the notes related thereto.
(c) There has been furnished to the Administrative Agent (for distribution to each of the Lenders) integrated multi-year projections of (x)
Excess Availability and (y) the consolidated balance sheets and statements of income or operations and cash flows of the Parent and its
Subsidiaries for each Fiscal Month following the Closing Date through and including the Fiscal Year ending December 31, 2024 and for each
Fiscal Quarter thereafter. Such projections have been prepared on a pro forma basis after giving effect to the transactions contemplated hereby.
Such projections were prepared in good faith and based on assumptions that are believed in good faith to be reasonable in light of the facts and
circumstances known on and as of the Closing Date (it being understood and agreed that such projections are as to future events and are not to be
viewed as facts, subject to significant uncertainties and contingencies, many of which are beyond control, no assurance can be given that the
projections will be realized, and actual results may materially differ from the projections).
5.03 Solvency. After giving effect to the Loans hereunder, the other transactions contemplated hereby, the Credit Parties and their Subsidiaries,
on a consolidated basis, are Solvent.
66
5.04 No Material Adverse Change. Since December 31, 2023, there has occurred no Material Adverse Effect.
5.05 Ownership of Property; Liens. Each of the Credit Parties and each Subsidiary has good record and marketable title in fee simple to, or
valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for any defects in such title in fee simple as
could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property of the Credit Parties and their
Subsidiaries is subject to no Liens, other than Permitted Liens.
5.06 Franchises, Patents, Copyrights, etc. Each Credit Party possesses or has a license or other right to use all Intellectual Property reasonably
necessary for the conduct of its business without known material infringement or misappropriation of any rights of others, except as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Closing Date Perfection Certificate sets forth a true, correct and
complete list of all U.S. Intellectual Property registrations and applications owned by each Credit Party as of the Closing Date. As of the Closing Date, the
Credit Parties do not possess any Intellectual Property registered in a jurisdiction other than the United States. When delivered as required pursuant to
Section 6.04(j), the most recently delivered Perfection Certificate sets forth a true, correct and complete list of the Intellectual Property registration and
applications owned by each Credit Party as of such date.
5.07 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Credit Parties, threatened in
writing, at law, in equity, in arbitration or before any Governmental Authority, by or against the Credit Parties, any of its Subsidiaries or any member of the
Senior Management of any Credit Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this
Agreement or any other Loan Document, or any of the transactions contemplated hereby or (b) could reasonably be expected, either individually or in the
aggregate, to result in a Material Adverse Effect, except as specifically disclosed in Schedule 17 to the Closing Date Perfection Certificate.
5.08 No Default. Except as set forth on Schedule 5.08, neither any Credit Party nor any Subsidiary thereof is in default under or with respect to
any Material Agreement that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan
Document.
5.09 Compliance with Laws. Each Credit Party and each Subsidiary thereof is in compliance with the requirements of all Laws and all orders,
writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, in each case, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.10 Tax Status. The Credit Parties (i) have filed or caused to be filed all federal state, foreign, provincial and income and all other tax returns,
reports and declarations required by any jurisdiction to which any of them is subject and (ii) have paid all federal and all other material Taxes (including
withholdings) required to have been paid including in their capacity as tax withholding agents, except those being contested in good faith and by
appropriate proceedings and for which the Credit Parties have set aside on their books reasonably adequate provisions therefor in accordance with GAAP
(unless foreclosure or other similar enforcement action has been commenced in respect thereof or any Lien has been filed or otherwise perfected therefor,
in which case such exception does not apply). There is no proposed tax assessment or other claim against and no tax audit with respect to any Credit Party
or any Subsidiary except (i) those being actively contested by a Credit Party or any Subsidiary in good faith and by appropriate actions diligently taken and
for which adequate reserves have been provided in accordance with GAAP or (ii) those which would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all
periods in compliance with all applicable and federal, state and material local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities.
67
5.11 Insurance. The properties of the Credit Parties are insured with financially sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Credit Parties operate, including without limitation and for the avoidance of doubt, business interruption
insurance.
5.12 Investment Company Acts. None of any Credit Party, any Person controlling any Credit Party, or any Subsidiary of any Credit Party is or
is required to be registered as an “investment company” under the Investment Company Act of 1940.
5.13 ERISA Compliance.
(a) Except as would not reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Federal or state laws. Each Pension Plan that is intended to be a qualified plan under
Section 401(a) of the Code, along with its corresponding trust, either has received a favorable determination letter or is subject to an applicable
opinion or advisory letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related
thereto has been determined by the IRS to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter
is currently being processed by the IRS. To the best knowledge of each Credit Party, nothing has occurred that would prevent or cause the loss of
such tax-qualified status that would reasonably be expected to result in a Material Adverse Effect.
(b) There are no pending or, to the best knowledge of each Credit Party, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan that would reasonably be expected to have a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or would reasonably be expected
to result in a Material Adverse Effect.
(c) Except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (i) no
ERISA Event has occurred, and neither any Credit Party nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably
be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) each Credit Party and each ERISA Affiliate has met all
applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under
the Pension Funding Rules has been applied for or obtained; (iii) as of the most recent valuation date for any Pension Plan, the funding target
attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and neither any Credit Party nor any ERISA Affiliate knows
of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such Pension Plan to
drop below 60% as of the most recent valuation date; (iv) neither any Credit Party nor any ERISA Affiliate has incurred any liability with respect
to any Pension Plan to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are
unpaid; (v) neither any Credit Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c)
of ERISA; and (vi) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has
occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension
Plan.
68
(d) Neither any Credit Party nor any ERISA Affiliate maintains or contributes to, or has any unsatisfied obligation to contribute to, or
liability under, any active or terminated Pension Plan.
5.14 Regulations U and X. The proceeds of the Loans shall be used solely for the purposes specified in Section 6.11. No portion of any Loan is
to be used for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
5.15 Jurisdiction of Organization; Chief Executive Office. Subject to any notices provided by the Credit Parties pursuant to Section 6.02,
Schedule A to the Closing Date Perfection Certificate lists each Credit Party’s jurisdiction of organization, legal name and the location of such Credit
Party’s chief executive office.
5.16 Fiscal Year. The Credit Parties have a fiscal year ending as set forth in the definition of “Fiscal Year”.
5.17 Subsidiaries, etc. As of the Closing Date, the Credit Parties do not have any Subsidiaries except as set forth on Schedule 8(a) to the
Closing Date Perfection Certificate and, as of the Closing Date, all of the outstanding Capital Stock in such Subsidiaries have been validly issued, fully
paid and with respect to Subsidiaries that are corporations, nonassessable (except to the extent of such rights that may exist pursuant to non-waivable
provisions of applicable Laws) in the amounts specified on Schedule 8(a) to the Closing Date Perfection Certificate, free and clear of all Liens (other than
Permitted Liens).
5.18 Environmental Compliance. Except as specifically disclosed in Schedule 5.17, each Credit Party and each Subsidiary thereof is, and
within the period of all applicable statutes of limitation have been, in compliance with the requirements of all Environmental Laws applicable to the
business, operations and properties of such Credit Party and its Subsidiaries except where the failure to so comply could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Credit Parties and their Subsidiaries hold all Environmental Permits (each of
which is in full force and effect) required for any of their current operations or for any property owned, leased or otherwise operated by any of them, and
are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits, in each case, except for
such failures to hold or comply with such Environmental Permits could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.19 Labor Contracts. Except as set forth on Schedule 5.20, as of the Closing Date, none of the Credit Parties is party to any collective
bargaining agreement. There are no material grievances, disputes or controversies with any union or other organization of any Credit Party’s employees, or
threats of strikes or work stoppages that would reasonably be expected to result in a Material Adverse Effect.
5.20 Disclosure. Each Credit Party has disclosed to the Administrative Agent all agreements, instruments and corporate or other restrictions to
which it or any of its Subsidiaries is subject, and all other matters known to it, that, in each case, individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect. No report, financial statement, certificate or other written information (other than projections, forecasts and
other forward-looking information and information of an economic or industry-wide nature) furnished by or on behalf of any Credit Party to the
Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of
fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not
materially misleading.
69
5.21 Anti-Corruption Laws; Sanctions Laws; Beneficial Ownership Certification.
(a) Each Credit Party, its Subsidiaries and their respective Related Parties are in compliance with applicable Anti-Corruption Laws in all
material respects. Each Credit Party and each of its Subsidiaries has implemented and maintains in effect policies and procedures reasonably
designed to ensure compliance by the Credit Party, its Subsidiaries and their respective Related Parties with applicable Anti-Corruption Laws. No
Loan, use of the proceeds of any Loan or other transactions contemplated hereby, in each case, made or taken by a Credit Party or its Subsidiaries
will violate Anti-Corruption Laws.
(b) No Credit Party, nor, to the knowledge of the Credit Parties, any director, officer, employee or agent thereof, is entity Person that is, or
is owned or controlled by any Person that is (i) currently the subject of any applicable Sanctions, (ii) located, organized or residing in any
Designated Jurisdiction, (iii) included on OFAC’s List of Specially Designated Nationals, HMT’s Consolidated List of Financial Sanctions Targets
and the Investment Ban List or any similar list enforced by any other relevant sanctions authority, or (iv) or has been (within the previous five (5)
years) engaged in any transaction with any Person who is now or was then the subject of applicable Sanctions or who is located, organized or
residing in any Designated Jurisdiction. Neither any Credit Party, nor any Subsidiary nor, to the knowledge of any Credit Party, any Affiliate of
any Credit Party (x) is a Sanctioned Person, or (y) has any of its assets in Sanctioned Countries. No Loan, nor the proceeds from any Loan, has
been used to lend, contribute, provide or has otherwise made available to fund any activity or business in any Designated Jurisdiction or to fund
any activity or business of any Person located, organized or residing in any Designated Jurisdiction or who is the subject of any applicable
Sanctions, or in any other manner that will result in any violation by any Person (including any Lender, the Arranger, or the Administrative Agent)
of applicable Sanctions.
(c) As of the Closing Date, the information included in the Beneficial Ownership Certification, if applicable, is true and correct in all
respects.
5.22 Borrowing Base Certificates. Each Borrowing Base Certificate is true, complete and correct in all material respects.
5.23. Eligible Accounts. As to each Account that is identified by Borrower as an Eligible Account in a Borrowing Base Certificate submitted to
the Administrative Agent, such Account is (a) a bona fide existing payment obligation of the applicable Account Debtor created by rendition of services to
such Account Debtor in the ordinary course of a Credit Party’s business, (b) owed to a Credit Party without any known defenses, disputes, offsets,
counterclaims, or rights of return or cancellation, and (c) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any
Administrative Agent-discretionary criteria) set forth in the definition of Eligible Accounts.
5.24. Bank Accounts. The Closing Date Perfection Certificate sets forth the true, correct and complete account numbers and location of all bank
accounts of the Credit Parties as of the Closing Date.
70
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Credit Party signatory hereto covenants and agrees for itself and on behalf of its Subsidiaries that, so long as any Lender shall have any
Commitment hereunder, or any Loan or other Obligation remains outstanding:
6.01 Punctual Payment. Each Credit Party will duly and punctually pay or cause to be paid when due all principal and interest on the Loans,
the fees and all other Obligations and amounts provided for in this Agreement and the other Loan Documents to which it is a party and will cause to be paid
any amounts owing by any Credit Party, all in accordance with the terms of this Agreement and such other Loan Documents.
6.02 Maintenance of Office; Certain Changes. Each Credit Party shall furnish to the Administrative Agent prior written notice of any change
in (i) any Credit Party’s legal name and (ii) any Credit Party’s organizational structure or jurisdiction of incorporation or formation, no later than ten (10)
days (or such shorter period as the Administrative Agent may agree to in its sole discretion) prior to, and the acknowledgement of the Administrative Agent
that all actions required by the Administrative Agent to continue the perfection of its Liens, shall have been completed, before any change in its name, or
the type of its organization or jurisdiction of organization. Each Credit Party agrees not to effect or permit any change referred to in the preceding sentence
until the Administrative Agent has confirmed in writing that all filings, publications and registrations have been made under the UCC or other applicable
Law that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected first priority
security interest in all the Collateral (subject only to Permitted Liens) for its own benefit and the benefit of the other Secured Parties. Each Credit Party will
furnish to the Administrative Agent written notice of any change in (i) the location of any Grantor’s chief executive office, its principal place of business,
any office in which it maintains books or records relating to any Collateral included in the Borrowing Base owned by it or any office or facility at which
any Collateral included in the Borrowing Base owned by it is located (including the establishment of any such new office or facility) or location from
which Accounts are invoiced or paid and (ii) any Credit Party’s Federal Taxpayer Identification Number or organizational identification number, if any
required on the financing statement to be filed against such Credit Party, in each case, not less than ten (10) calendar days (or such shorter period as the
Administrative Agent may agree to in its sole discretion) after the occurrence of clauses (i) and (ii) of this sentence. Each Credit Party shall take any other
action required to continue the perfection of the Administrative Agent’s Liens on the Collateral.
6.03 Records and Accounts. Each Credit Party will (a) keep true and accurate records and books of account in which full, true and correct
entries will be made in accordance with, and all financial statements provided for herein shall be prepared in accordance with GAAP consistently applied;
(b) maintain adequate accounts and reserves for all federal and all other material taxes (including income taxes, depreciation, depletion, obsolescence and
amortization of its properties, contingencies and other reserves); and (c) at all times, maintain independent certified public accountants as the Credit
Parties’ accountants which shall be reasonably satisfactory to the Administrative Agent (provided that Grant Thornton, BDO, EisnerAmper, RMP
Accounting and any of the “Big Four” accounting firms are deemed to be satisfactory to the Administrative Agent).
71
6.04 Financial Statements, Certificates and Information. The Credit Parties will deliver to the Administrative Agent (for distribution to the
Lenders):
(a) as soon as available, and in any event within one hundred (100) days after the close of each Fiscal Year, (i) balance sheets as of the end
of such Fiscal Year and the related statements of income, cash flow and shareholders’ equity for such Fiscal Year, on a consolidated basis for the
Parent and its Subsidiaries, which consolidated statements shall be audited and certified without qualification by the Credit Parties’ independent
certified public accountants (except for any such qualification (x) relating to changes in accounting principles or practices reflecting changes in
GAAP and required or approved by Parent’s independent certified public accountants or (y) as to the audit for the Fiscal Year ended December 31,
2023 and December 31, 2024, any potential inability to satisfy a financial covenant set forth in Section 7.12 on a future date or in a future period, a
future date or in a future period) and shall set forth in comparative form corresponding figures for the preceding Fiscal Year and other information
reasonably acceptable to the Administrative Agent (provided that any such financial statements containing information of the type and scope
consistent with the financial statements for the Fiscal Year ended December 31, 2022 shall be deemed to be reasonably acceptable to the
Administrative Agent) and (ii) a Compliance Certificate duly executed by a Financial Officer of the Parent, which (A) attaches and certifies to the
foregoing consolidated financial statements, (B) certifies that the information contained in such consolidated financial statements fairly presents in
all material respects the financial condition of the Parent and its Subsidiaries on the dates indicated therein, (C) setting forth a calculation of
Consolidated EBITDA and Modified Consolidated EBITDA on a trailing twelve month basis at the end of such Fiscal Year, (D) appends
computations evidencing the Consolidated Fixed Charge Coverage Ratio for the Measurement Period ended as of the last day of such Fiscal Year,
to the extent such computations differ from those provided pursuant to Section 6.04(b), (E) appends computations relative to Section 7.12 and
specifying whether the Parent and its Subsidiaries have complied with Section 7.12, to the extent such computations differ from those provided
pursuant to Section 6.04(b), (F) includes a management discussion and analysis (with reasonable detail and specificity) of the results of operations
for such Fiscal Year and (G) states that such Financial Officer has reviewed this Agreement and the other Loan Documents and has no knowledge
of any Default or Event of Default during such Fiscal Year, or if such Financial Officer has such knowledge, specifying each Default or Event of
Default and the nature thereof;
(b) as soon as available, and in any event within thirty (30) days after the end of each Fiscal Month, including for the last Fiscal Month of
the Fiscal Year (subject to subsequent audit adjustments and, in the case of the last Fiscal Month of each Fiscal Quarter, any subsequent
adjustments delivered within forty-five (45) days after the end of such Fiscal Month) (i) unaudited balance sheets as of the end of such month and
the related statements of income and cash flow for such month and for the portion of the Fiscal Year then elapsed, on a consolidated basis for the
Parent and its Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year (for such month and for the
portion of the Fiscal Year then elapsed) and certified by a Financial Officer of the Parent as prepared in accordance with GAAP and fairly
presenting the financial position and results of operations for such month and period, subject to normal year-end adjustments and the absence of
footnotes, and (ii) a Compliance Certificate duly executed by a Financial Officer of the Parent, which, (A) attaches and certifies to the foregoing
financial statements, (B) certifies that the information contained in such financial statements fairly presents in all material respects the financial
condition of the Parent and its Subsidiaries on the date thereof (subject to year-end adjustments and the absence of footnotes), (C) sets forth in
comparative form the results for and through such Fiscal Month (and for the portion of the Fiscal Year then elapsed) with the most recent
projections delivered to the Administrative Agent pursuant to Section 6.04(d), (D) appends computations evidencing the Modified Consolidated
EBITDA and Consolidated Fixed Charge Coverage Ratio for the Measurement Period ended as of the last day of such Fiscal Month, (E) appends
computations relative to Section 7.12(a) and specifying whether the Parent and its Subsidiaries have complied with Section 7.12(a) as of the end of
such Fiscal Month, and (F) states that such Financial Officer has reviewed this Agreement and the other Loan Documents and has no knowledge
of any Default or Event of Default during such Fiscal Month, or if such Financial Officer has such knowledge, specifying each Default or Event of
Default and the nature thereof to the Administrative Agent’s reasonable satisfaction;
72
(c) not later than the fifteenth (15th) day following the end of each Fiscal Month, (i) a Borrowing Base Certificate with respect to the
Collateral of the Credit Parties as of the close of business of the last day of such previous Fiscal Month, accompanied by such supporting detail,
documentation and information related thereto as the Administrative Agent shall reasonably request, and (ii) an accounts receivable aging report,
and an accounts payable aging report, in each case, as of the close of business on the last day of such previous Fiscal Month, in each case,
accompanied by such supporting detail, documentation and information as the Administrative Agent shall reasonably request, and such other data
or information as the Administrative Agent may request; provided that during an Enhanced Collateral Reporting Period, the Borrower shall furnish
such information on a weekly basis no later than on the Wednesday following the close of business of the immediately preceding week, with such
information as of the Saturday of such preceding week;
(d) (i) not later than thirty (30) days after the end of each Fiscal Year, the annual budget for the following Fiscal Year, in form reasonably
satisfactory to the Administrative Agent, of consolidated balance sheets and results of operations and cash flows of the Parent and its Subsidiaries
on a monthly basis for such Fiscal Year (including the Fiscal Year in which the Maturity Date occurs), and (ii) promptly upon availability, any
material revisions to such forecast with respect to such Fiscal Year, projections of Excess Availability and the Consolidated Fixed Charge
Coverage Ratio for the next Fiscal Year on a month by month basis and on a quarterly basis, respectively;
(e) on a bi-weekly basis, not later than the Wednesday of every other week commencing on August 21, 2024 and until March 31, 2025, a
rolling thirteen-week cash flow forecast for the Credit Parties and its Subsidiaries, in scope, form and substance reasonably satisfactory to the
Administrative Agent;
(f) promptly following any Lender’s request therefor, all documentation and other information that such Lender reasonably requests in
order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering or terrorist financing rules and
regulations, including the Patriot Act and the Beneficial Ownership Regulation;
(g) promptly upon receipt thereof, copies of any detailed audit reports, financial control reports, management letters or recommendations
submitted to the board of directors or other governing body (or the audit committee of the board of directors or other governing body) of the
Credit Parties by independent accountants or internal auditors in connection with any audit of any of them;
(h) promptly, and in any event within three (3) Business Days after receipt by a member of Senior Management thereof by any Credit
Party or any Subsidiary thereof, copies of each notice or other correspondence received from any Governmental Authority concerning any
material investigation or possible material investigation or other material inquiry by such agency regarding financial or other operational results of
any Credit Party or any Subsidiary;
(i) (i) promptly following the reasonable request of the Administrative Agent, a report summarizing the insurance coverage in effect for
each Credit Party (which may be in a form that is substantially consistent with Schedule 18 to the Closing Date Perfection Certificate) and (ii)
within 30 days following the modification, renewal, replacement of any insurance policy of any Credit Party, updated insurance certificates and
endorsements evidencing such coverage; and
73
(j) no later than thirty (30) days following the end of the Fiscal Year (or more frequently at the election of the Credit Parties), an updated
Perfection Certificate as to each Credit Party in substantially the same form as the Perfection Certificate most recently delivered to the
Administrative Agent (with such scope and detail as the Administrative Agent’s may reasonably require) or a certificate confirming that there has
been no change in such information since the Perfection Certificate delivered on the Closing Date or the most recent Perfection Certificate
delivered pursuant to this Section 6.04);
(k) unless the Administrative Agent has “viewer access” with respect to each and all deposit accounts (including the Concentration
Account), all securities accounts and all commodities accounts (other than Excluded Accounts) pursuant to Section 6.16 hereof, on Wednesday of
each week, the Credit Parties shall provide the Administrative Agent a report with respect to all cash and Cash Equivalents held by the Credit
Parties as of the immediately preceding Saturday or any more recent date (including, without limitation, all amounts thereof, and where such cash
and Cash Equivalents are held); and
(l) (i) as and when required under the terms of any credit risk insurance policy maintained with respect to Eligible Foreign Accounts or
Eligible Unbilled Foreign Accounts, a copy of any reporting required to be delivered to the insurance provider under such credit risk insurance
policy, and (ii) proof of payment of each quarterly premium payment required to be made under such credit risk insurance policy by the due date
for such payment.
6.05 Notices.
(a) Defaults. The Credit Parties will notify the Administrative Agent and each Lender in writing of the occurrence of any Default or
Event of Default promptly after the occurrence thereof (but in any event within three (3) Business Days of the occurrence thereof (or, in the case
of a Default under Section 8.01(c), within three (3) Business Days of Senior Management obtaining actual knowledge of the occurrence of such
Default).
(b) Material Adverse Effect. The Credit Parties shall promptly (but in any event within three (3) Business Days) disclose in writing to
the Administrative Agent (for distribution to each Lender) of any matter (including matters relating to litigation against the Credit Parties or
violations of Environmental Law) that has resulted or would reasonably be expected to result in a Material Adverse Effect.
(c) ERISA Events and Plans. The Credit Parties shall promptly disclose in writing to the Administrative Agent the occurrence of any
ERISA Event that could reasonably be expected to result in a Material Adverse Effect and, promptly after the sending or filing thereof, upon
request, shall provide the Administrative Agent with copies of any annual report filed in connection with each Plan or Foreign Plan;
(d) Change in Accounting Policies or Financial Reporting. The Credit Parties shall promptly disclose in writing to the Administrative
Agent notice of (i) any material change in accounting policies or financial reporting practices by the Credit Parties or any Subsidiary of a Credit
Party; provided, that no such change shall alter the accounting methodology for Accounts (including the aging of Accounts) without prior written
consent of the Administrative Agent or (ii) discharge by any Credit Party of its independent accountants or any withdrawal or resignation by such
independent accountants.
74
(e) Notice of Tax Claims, Litigation and Judgments. The Credit Parties will give notice to the Administrative Agent in writing within
three (3) Business Days of any written notice of proposed assessment or written notice of the commencement of any material audit by any
Governmental Authority for unpaid Taxes of any Credit Party or any Subsidiary that are due and payable, any commencement of any
investigation, litigation or proceedings affecting any Credit Party or any Subsidiary to which any Credit Party or any Subsidiary of any Credit
Party is or becomes a party involving any claim against any Credit Party that has resulted in or would reasonably be expected to result in (i)
liabilities of more than the Threshold Amount that are not covered by insurance policies maintained in accordance with Section 6.07 against any
Credit Party or any Subsidiary or (ii) a Material Adverse Effect. The Credit Parties will promptly give notice to the Administrative Agent and each
Lender, in writing, in form and detail reasonably satisfactory to the Administrative Agent, of any judgment not covered by insurance, final or
otherwise, against any Credit Party (x) affecting or with respect to this Agreement, any other Loan Document or any security interest or Lien
created thereunder or (y) that would reasonably be expected to have a Material Adverse Effect.
(f) Notification of Claim against Collateral. The Credit Parties will, promptly notify the Administrative Agent in writing of any (a) Lien
made or asserted against any of the Collateral (other than Permitted Liens), or (b) setoff, written demand, claims, withholdings or other defenses in
amounts greater than the Threshold Amount to the extent not covered by insurance policies maintained in accordance with Section 6.07, or
defenses to the Administrative Agent’s rights with respect to the Collateral.
(g) Notification of Additional Intellectual Property Rights. Concurrently with the delivery of financial statements with respect to the
last Fiscal Month of any Fiscal Quarter, the Credit Parties will notify the Administrative Agent in writing of any patents, or patent applications
filed with the PTO during such Fiscal Quarter, registered copyrights or mask works registered with the United States Copyright Office (or any
successor agency thereto) during such Fiscal Quarter, applications for registration of copyrights or mask works filed with the United States
Copyright Office (or any successor agency thereto) during such Fiscal Quarter and trademark and service mark registrations with the PTO during
such Fiscal Quarter, and trademark and service mark registration applications filed with the PTO during such Fiscal Quarter, in each case owned
by a Credit Party and which qualify as Collateral and in each case to the extent not listed on the Perfection Certificate most recently delivered to
the Administrative Agent in accordance with this Agreement.
(h) Environmental Events. The Credit Parties will promptly give notice to the Administrative Agent and each Lender (a) of any
violation of any Environmental Law that any Credit Party reports in writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any Governmental Authority and (b) upon any member of Senior Management of any Credit
Party becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential
Environmental Liability, of any Governmental Authority that, in the case of clauses (a) or (b) above, would reasonably be expected to result in a
Material Adverse Effect.
(i) Prepayment Events. Promptly following the occurrence of any event for which the Borrower is required to make a prepayment under
Sections 2.03(c) through (f), together with all supporting information reasonably requested by the Administrative Agent.
(j) Change in CEO or CFO. The Credit Parties shall provide to the Administrative Agent prompt written notice of any change in any
Credit Party’s chief executive officer or chief financial officer and such change in chief executive officer or chief financial officer shall be
reasonably satisfactory to the Administrative Agent.
75
(k) Fundamental Changes. The Credit Parties shall provide to the Administrative Agent promptly written notice of the occurrence of
any event described in Section 7.05(a).
Delivery by the Credit Parties to the Administrative Agent of any and all notices required to be delivered to the Lenders as herein required shall be
deemed made upon receipt of such notices by the Administrative Agent.
6.06 Legal Existence; Maintenance of Properties.
(a) Except as permitted by Section 7.05, each Credit Party will do all things necessary to (i) maintain in full force and effect its legal
existence and good standing under the laws of its jurisdiction of organization or incorporation, (ii) maintain its qualification to do business in each
state or other jurisdiction in which the failure to do so would result in a Material Adverse Effect, and (iii) maintain all of its rights and franchises,
except where the failure to maintain such right or franchise would not result in a Material Adverse Effect.
(b) Each Credit Party (i) will cause all of its properties used or useful in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment, subject to ordinary wear and tear or except where the failure to do
so would not reasonably be expected to have a Material Adverse Effect and (ii) will cause to be made all necessary repairs, renewals and
replacement thereof, all as in the judgment of the Credit Parties may be necessary so that the business carried on in connection therewith may be
properly conducted at all times; provided that nothing in this Section 6.06(b) shall prevent any Credit Party from discontinuing the operation and
maintenance of any of its properties if such discontinuance is permitted by Section 7.05(b).
6.07 Insurance. Each Credit Party will maintain with financially sound and reputable insurers insurance (a) with respect to its properties and
business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar
geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the
terms of the Security Documents, (b) business interruption insurance, and (c) so long as required to maintain the eligibility of Eligible Foreign Accounts or
Eligible Unbilled Foreign Accounts included in the Borrowing Base unless otherwise agreed in writing by the Administrative Agent in its Permitted
Discretion, credit insurance in form, substance, amounts, periods, and by an insurer, as reasonably satisfactory to the Administrative Agent; provided that
the Administrative Agent agrees that the insurance in place on the Closing Date with respect to clauses (a) and (b) above is with financially sound and
reputable insurers. Such policies of insurance in respect of the preceding clause (a) and (c) shall name the Administrative Agent as an additional insured or
lender’s loss payee, as applicable and each Credit Party shall use commercially reasonable efforts to cause such policies of insurance to provide for not less
than 30 days’ prior notice (or not less than 10 days’ in the case of the non-payment of premium) to the Administrative Agent of termination, lapse or
cancellation of such insurance.
6.08 Taxes. Each Credit Party will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all federal
and all other material Taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or
upon the income or profits therefrom, as well as all material claims for labor, materials, or supplies that if unpaid might by law become a Lien or charge
upon any of its property; provided that any such Taxes, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall be
contested in good faith by appropriate proceedings and such Credit Party shall have set aside on its books adequate reserves in accordance with GAAP with
respect thereto; and provided further that the Credit Parties will (a) pay all such Taxes, assessments, charges, levies or claims forthwith upon the
commencement of any proceedings to foreclose or otherwise enforce any Lien that may have attached as security therefor, (b) will withhold from each
payment to be made to any of its past or present employees, officers or directors, and to any non-resident of the country in which it is a resident, the amount
of all Taxes and all other deductions or withholdings required to be withheld therefrom and pay the same to the proper taxing authority within the time
required under any applicable Law, and (c) collect from all Persons the amount of all Taxes required by applicable Law to be collected from them and remit
the same to the proper taxing authority within the time required under any applicable Law, except in each case to the extent that the failure to do so could
not reasonably be expected to have a Material Adverse Effect; provided that (i) the Administrative Agent may, without limiting the generality of its
discretionary rights with respect to Reserves, impose Reserves with respect to such Lien and (ii) the Credit Parties shall promptly provide the
Administrative Agent written notice of the commencement of any such proceeding to foreclose or enforce such Lien. Each Credit Party shall file or cause
to be filed all federal, state and all material local and foreign income tax returns, and all other tax returns, reports, and declarations required by any
jurisdiction to which it is subject as required by applicable Law.
76
6.09 Compliance with Laws, Contracts, Licenses, Permits. Each of the Credit Parties will comply with (a) the applicable Laws wherever its
business is conducted, including, without limitation, all Environmental Laws, (b) the provisions of its Governing Documents, (c) all agreements and
instruments (including, without limitation, any lease agreements) by which it or any of its properties may be bound, and (d) all applicable decrees, orders,
and judgments, provided, that in each case, such compliance shall be required by this Agreement only where noncompliance with this Section 6.09(a), (c)
or (d) would result in a Material Adverse Effect. If any authorization, consent, approval, permit or license from any Governmental Authority or any central
bank or other fiscal or monetary authority shall become necessary or required in order that any Credit Party may fulfill any of its obligations hereunder or
any of the other Loan Documents to which such Credit Party is a party or to conduct its business in any jurisdiction in which it operates, each Credit Party
will promptly take or cause to be taken all reasonable steps within the power of such Credit Party to obtain such authorization, consent, approval, permit or
license, and upon the reasonable request of the Administrative Agent, to furnish the Administrative Agent and the Lenders with evidence thereof. In the
event a Credit Party is unsuccessful in obtaining such authorization, consent, approval, permit or license, the Administrative Agent may without limiting
the generality of its discretionary rights with respect to Reserves, impose Reserves in its Permitted Discretion with respect to any Collateral held by such
Person which the Administrative Agent reasonably determines is affected by such failure to obtain such authorization, consent, approval, permit or license.
6.10 Capital Raises.
(a) 6.10 Third Amendment Capital Raise. The Credit Parties shall cause the aggregate Third Amendment Capital Raise(s) to occur no
later than November 29, 2024.
(b) The Credit Parties shall cause the aggregate Fourth Amendment Capital Raise(s) to occur no later than March 20, 2025.
6.11 Use of Proceeds. The proceeds of the Loans shall be used solely for (a) working capital and general corporate purposes, in each case
subject to the restrictions set forth in this Agreement, (b) the payment of fees and expenses incurred in connection with the negotiation, execution and
delivery of this Agreement and the other Loan Documents and (c) to repay the Specified Existing Debt in full.
6.12 Covenant to Guarantee Obligations and Give Security.
(a) Upon the formation or acquisition of any new direct or indirect Subsidiary (other than any Excluded Subsidiary) after the Closing Date
by any Credit Party (or upon any Subsidiary ceasing to constitute an Excluded Subsidiary), then the Credit Parties shall, at the Credit Parties’
expense, within thirty (30) days after such formation or acquisition (or such longer period acceptable to the Administrative Agent in its sole
discretion):
(i) cause such Subsidiary to duly execute and deliver to the Administrative Agent a Guarantee guaranteeing the other Credit
Parties’ obligations under the Loan Documents,
77
(ii) furnish to the Administrative Agent a description of the real and personal properties of such Subsidiary, in detail reasonably
satisfactory to the Administrative Agent;
(iii) cause such Subsidiary to duly execute and deliver to the Administrative Agent the Security Documents required to be so
executed and delivered pursuant to the terms of the Loan Documents to secure payment of all the Obligations of such Subsidiary under the
Loan Documents by granting Liens on all such real and personal properties of such Subsidiary that constitute Collateral,
(iv) cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to take whatever
action (including the filing of Uniform Commercial Code financing statements or similar filing in any applicable jurisdiction or such other
actions as are necessary or desirable under any applicable Law) may be necessary or advisable in the reasonable opinion of the
Administrative Agent to vest in the Administrative Agent valid and subsisting Liens on the Collateral, enforceable against all third parties
in accordance with their terms, and
(v) deliver to the Administrative Agent, upon the request of the Administrative Agent in its reasonable discretion, a signed copy of
a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Credit Parties reasonably
acceptable to the Administrative Agent as to the matters contained in clauses (i), (iii) and (iv) above, and as to such other matters as the
Administrative Agent may reasonably request.
(b) Upon the acquisition of any property constituting Collateral (excluding any Excluded Assets) by any Credit Party following the
Closing Date and upon the acquisition of any material assets located in any jurisdiction outside of the United States, if such property, in the
judgment of the Administrative Agent, shall not already be subject to a perfected first priority security interest in favor of the Administrative
Agent for the benefit of the Secured Parties (unless such property is specifically excluded as Collateral by the terms of the Security Documents),
then the Credit Parties shall, at the Credit Parties’ expense, within thirty (30) days after such acquisition (or such longer period acceptable to the
Administrative Agent in its sole discretion):
(i) furnish to the Administrative Agent a description of the property so acquired in detail reasonably satisfactory to the
Administrative Agent,
(ii) cause the applicable Credit Party to duly execute and deliver to the Administrative Agent the Security Documents (to the extent
not already delivered) required to be so executed and delivered pursuant to the terms of the Loan Documents to secure payment of all the
Obligations of the applicable Credit Party under the Loan Documents and constituting Liens on all such properties, and
(iii) deliver to the Administrative Agent, upon the request of the Administrative Agent in its reasonable discretion, a signed copy of
a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Credit Parties reasonably
acceptable to the Administrative Agent as to the matters contained in clause (ii) above, and as to such other matters as the Administrative
Agent may reasonably request.
78
(c) within sixty (60) days after such acquisition (or such longer period acceptable to the Administrative Agent in its sole discretion) of any
Real Estate (other than Excluded Assets) not subject to the Administrative Agent’s first priority lien, cause the applicable Credit Party to take
whatever action (including the recording of Mortgages in respect of fee owned real property, the delivery of title insurance, surveys and
environmental reports, the filing of Uniform Commercial Code financing statements or similar filing in any applicable jurisdiction, the giving of
notices and the endorsement of notices on title documents or such action necessary or desirable under applicable Law) may be necessary or
advisable in the opinion of the Administrative Agent to vest in the Administrative Agent valid and subsisting Liens on such Real Estate,
enforceable against all third parties, and deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a
signed copy of a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Credit Parties
reasonably acceptable to the Administrative Agent as to the matters contained herein and as to such other matters as the Administrative Agent may
reasonably request.
(d) At any time upon request of the Administrative Agent, promptly (i) execute and deliver any and all further instruments and documents
and take all such other action as the Administrative Agent may deem necessary or desirable in obtaining the full benefits of, or (as applicable) in
perfecting and preserving the Liens of, such Security Documents, and (ii) execute and deliver any and all further instruments and documents and
take all such other action as the Administrative Agent may deem necessary or desirable with respect to any interests of the Credit Parties (as of the
Closing Date or thereafter) in any Accounts owed by Account Debtors headquartered outside the United States.
6.13 Conduct of Business. Except as permitted by Section 7.05, each Credit Party will not engage in any business materially different than the
businesses engaged in by such Credit Party on the Closing Date, or such businesses as are reasonably related to the businesses engaged in by such Credit
Party on the Closing Date.
6.14 Further Assurances. Each Credit Party will cooperate with the Administrative Agent and the Lenders execute such further instruments and
documents as the Administrative Agent or the Lenders shall reasonably request to carry out to their reasonable satisfaction the transactions contemplated by
this Agreement and the other Loan Documents.
6.15 Inspections; Collateral Reports, etc.
(a) General. No more than on one occasion in any 12-month period (or any number of occasions to the extent an Event of Default has
occurred and is continuing), each Credit Party shall permit the Administrative Agent, at the Credit Parties’ expense, to visit and inspect any of the
properties of any Credit Party, to examine the books of account of such Credit Party’s files and records regarding the Accounts, and other
Collateral (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of such Credit Party with, and to
be advised as to the same by, its and their officers, in each case, at such reasonable times and with prior notice as the Administrative Agent may
reasonably request.
79
(b) Commercial Field Exams. From time to time upon the request of the Administrative Agent or the Required Lenders, at the Credit
Parties’ expense, the Credit Parties will cooperate with the Administrative Agent in the Administrative Agent’s obtaining, a commercial field
examination of an independent collateral auditor reasonably satisfactory to the Administrative Agent with respect to Accounts and other
Collateral, which report shall indicate whether or not the information set forth in the Borrowing Base Certificates delivered to the Administrative
Agent and Lenders are accurate and complete in all material respects based upon a review by such auditors of the Accounts (including verification
with respect to the amount, aging, identity and credit of the respective account debtors and the billing practices of the applicable Credit Parties),
Reserves, and other Collateral, and which shall indicate the adequacy of the Credit Parties’ systems, processes and procedures with respect to the
Collateral; provided that the Credit Parties shall not be required to incur, in any twelve (12) month period, the costs and expenses of more than two
(2) such commercial field examinations unless an Event of Default has occurred and is continuing, in which case, there shall be no limit on the
number of commercial field examinations made at the expense of the Credit Parties. For purposes of this Section 6.15(b), it is understood and
agreed that a single field examination may consist of examinations conducted at multiple relevant sites, both domestic and international, and
involve one or more relevant Credit Parties and their assets.
(c) [Reserved].
(d) Communications with Accountants. Each Credit Party authorizes the Administrative Agent and the Lenders to communicate
directly with such Credit Party’s independent certified public accountants and authorizes such accountants to disclose to the Administrative Agent
and the Lenders any and all financial statements and other supporting financial documents and schedules including copies of any management
letter with respect to the business, financial condition and other affairs of such Credit Party. At the request of the Administrative Agent or any
Lender, each Credit Party shall deliver a letter addressed to such accountants authorizing them to communicate directly with the Administrative
Agent and the Lenders in accordance with the foregoing. It is understood that notwithstanding such authorization from the Credit Parties, such
accountants may decline to communicate directly with the Administrative Agent and the Credit Parties shall only be required to use commercially
reasonable efforts to cause such accountants to do so.
(e) Accounts. The Administrative Agent shall have the right to analyze and verify the Accounts in any manner and through any medium
that it reasonably considers necessary in its Permitted Discretion, and the Credit Parties shall furnish all such assistance and information as the
Administrative Agent may reasonably require in connection therewith. At any time a Specified Event of Default (or, in the case of any Account
Debtors located outside of the United States or Canada, an Event of Default) has occurred and is continuing, the Administrative Agent may in its
own name or in the name of others (including a Credit Party) communicate with Account Debtors on the Accounts to inform such Account
Debtors of the Administrative Agent’s payment instructions, in each case to the extent in compliance with all applicable Laws.
6.16 Cash Management.
(a) General. The Credit Parties shall, in each case, subject to Section 6.16(b) below, (i) instruct all account debtors of the Credit Parties to
remit all cash proceeds of Accounts, check and other items of payment directly to depository accounts with financial institutions which have
entered into Agency Account Agreements in form and substance reasonably satisfactory to the Administrative Agent (“Concentration Accounts”),
and (ii) at all times ensure that all other cash, cash proceeds, checks and other items of payment of the Credit Parties not contained in Excluded
Accounts, including (A) proceeds of any Collateral or any Net Cash Proceeds required to be applied to prepay the Loans pursuant to Sections
2.03(b) through (f) and (B) and amounts received by the Credit Parties in respect of the Accounts, in each case, be immediately deposited directly
into a Concentration Account. The Credit Parties shall use commercially reasonable efforts to ensure that the Administrative Agent shall at all
times have “viewer access” with respect to each and all Concentration Accounts (other than Excluded Accounts) to view in real time the balances
and transactions relating to each such account via the relevant depositary bank’s online systems and internet banking platforms, and the Credit
Parties agree to use commercially reasonable efforts to take all such actions as may be required or reasonably requested by the Administrative
Agent to effect the foregoing.
80
(b) Agency Account Agreements. Each Agency Account Agreement shall require that, following the occurrence of a Cash Dominion
Trigger Event and upon instruction of the Administrative Agent, each depositary bank party to such Agency Account Agreement transfer all cash
receipts and other collections by ACH or wire transfer no less frequently than daily to an account in the name of the Administrative Agent
designated by the Administrative Agent (the “Collection Account”); provided that so long as any Obligations are then outstanding, for the
purposes of calculating interest, one Business Day shall be deemed added to the date such transfer is received. The Credit Parties hereby
acknowledge and agree that (i) the Credit Parties have no right of withdrawal from the Collection Account, (ii) the funds on deposit in the
Collection Account shall at all times be collateral security for all of the Obligations and (iii) following the occurrence of a Cash Dominion Trigger
Event, the funds on deposit in the Collection Account may be applied as provided in Section 2.05 (b)(ii) and (c). In the event that, notwithstanding
the provisions of this Section 6.16(a) or (b), any Credit Party receives or otherwise has dominion and control of any such proceeds or collections
described above, such proceeds and collections shall be held in trust by such Credit Party for the Administrative Agent, and shall, not later than
the Business Day after such Credit Party’s knowledge of receipt thereof, be deposited into a Concentration Account, or following the occurrence
of a Cash Dominion Trigger Event, the Collection Account, or dealt with in such other fashion as such Credit Party may be reasonably instructed
by the Administrative Agent.
(c) Other Accounts. The Credit Parties shall cause all deposit accounts, all securities accounts and all commodities accounts (other than
Excluded Accounts) of the Credit Parties to be subject to Agency Account Agreements as of the Closing Date (or, in the case of any such accounts
opened after the Closing Date or that no longer constitute Excluded Accounts, within 30 days of the date such account has been opened or no
longer constitutes an Excluded Account, as applicable (or such longer period acceptable to the Administrative Agent in its sole discretion) and, in
any case, prior to depositing any funds or other assets therein).
6.17 Post-Closing Obligations. Each Credit Party agrees that it will complete each of the actions described on Schedule 6.17 as promptly as
practicable, and in any event within the time periods set forth therein with respect to such action (or, in each case, such later date as the Administrative
Agent reasonably agrees to in writing).
6.18 Financial Advisor.
(a) The Credit Parties shall engage the Financial Advisor on or prior to the First Amendment Effective Date and shall continue to retain
the Financial Advisor until the Second Amendment Effective Date. The retention of the Financial Advisor shall be on terms and conditions
(including as to scope of engagement) reasonably satisfactory to the Administrative Agent (provided that the terms and conditions set forth in the
Financial Advisor Engagement Letter as of the First Amendment Effective Date are satisfactory to the Administrative Agent). The Financial
Advisor shall be retained by and at the sole cost and expense of the Credit Parties and solely on behalf of the Credit Parties at all times. The
Financial Advisor Engagement Letter shall not be amended, restated, replaced, supplemented or otherwise modified without the consent of the
Administrative Agent.
81
(b) The Credit Parties shall use commercially reasonable efforts to cooperate with the Financial Advisor in all material respects. The
Credit Parties hereby (i) authorize the Administrative Agent (or its respective agents or advisors) to communicate directly with the Financial
Advisor regarding any and all matters related to the Credit Parties and their Affiliates, including, without limitation, all financial reports and
projections developed, reviewed or verified by the Financial Advisor and all additional information, reports and statements reasonably requested
by the Administrative Agent, and (ii) authorize and direct the Financial Advisor to provide the Administrative Agent (or its respective agents or
advisors) with copies of reports and other information or materials prepared or reviewed by such Financial Advisor as the Administrative Agent
may reasonably request; provided that (A) any such materials or information provided to the Administrative Agent by the Financial Advisor shall
be substantially concurrently provided to the Borrower (to the extent not already in its possession) and (B) the Financial Advisor shall not be
required to disclose materials or information (or any portion thereof) to the Administrative Agent if such disclosure would compromise any good
faith attorney-client privilege afforded to attorney work product; provided further that such information may be redacted, solely to the extent that
the Financial Advisor or any Credit Party, as applicable, determines in good faith that such exclusion or redaction, as the case may be, is required
to preserve the attorney-client privilege.
(c) From time to time upon the reasonable request of the Administrative Agent, the Credit Parties shall conduct, and financial officers of
the Credit Parties shall participate in (and the Credit Parties shall use commercially reasonable efforts to cause the Financial Advisor to participate
in), status calls with the Administrative Agent to discuss (i) the financial operations and performance of the Credit Parties’ business or (ii) such
other matters relating to the Credit Parties as the Administrative Agent (or their respective agents or advisors) shall reasonably request (in each
case, subject to protection consistent with clause (B) of the proviso to Section 6.18(b)).
ARTICLE VII
NEGATIVE COVENANTS
Each Credit Party signatory hereto covenants and agrees for itself and on behalf of its Subsidiaries that, so long as any Lender shall have any
Commitment hereunder or any Loan or other Obligation remains outstanding:
7.01 Investments. None of the Credit Parties nor any of its Subsidiaries will make any Investment in any Person, except for Investments which
consist of:
(a) Investments (i) comprised of notes payable, or stock or other securities issued by account debtors (that is not an Affiliate) to such
Credit Parties with respect to settlement of such account debtor’s accounts in the ordinary course of business or (ii) receivables owing to the Credit
Parties or any of their Subsidiaries or any receivables and advances to suppliers, in each case if created, acquired or made in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(b) Capital Stock (i) issued and outstanding on the Closing Date in its Subsidiaries in existence on the Closing Date, or (ii) issued to a
Credit Party following the Closing Date by another Person that will become a Credit Party promptly following such issuance or capital
contribution between such Persons;
82
(c) Investments (i) by and among Credit Parties, or by any Subsidiary that is not a Credit Party in any Credit Party, in each case, so long
as, to the extent consisting of intercompany loans, the Administrative Agent has a first priority, perfected Lien in such intercompany loans and has
received an Intercompany Note evidencing such intercompany loans, together with transfer powers executed in blank in connection therewith, (ii)
by and among Subsidiaries that are not Credit Parties and (iii) so long as no Specified Event of Default exists, by the Credit Parties in Subsidiaries
that are not Credit Parties in an aggregate amount not exceeding $1,500,000 in any Fiscal Quarter and in an aggregate amount not exceeding
$6,000,000 in any Fiscal Year;
(d) Investments consisting of any Credit Party Guaranteeing (i) the Obligations of the Credit Parties and (ii) other Indebtedness if such
Credit Party would be permitted to directly incur such Indebtedness under Section 7.02;
(e) Investments in cash or Cash Equivalents;
(f) Investments consisting of loans or advances to its respective employees on an arm’s-length basis in the ordinary course of business for
travel expenses, relocation costs and similar purposes (or such other purposes as would be consistent with past practices) up to a maximum of
$50,000 per employee at any one time outstanding and $250,000 in the aggregate at any one time outstanding;
(g) Investments existing as of the Closing Date and set forth on Schedule 7.01;
(h) Permitted Acquisitions;
(i) Investments consisting of non-cash loans made by the Borrower to officers, directors and employees of the Borrower or any of its
Subsidiaries which are used by such Persons to simultaneously purchase equity interests of the Parent in an amount not exceeding $1,000,000 in
the aggregate at any one time outstanding;
(j) Investments of the Borrower or any of its Subsidiaries in connection with the repurchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Parent held by any employee, director, consultant or officer (or any spouses, former spouses, other immediate
family members, successors, executors, administrators, heirs, legatees, estates, wealth management vehicles, or distributees of any of the
foregoing) of the Borrower, any Credit Party or any Subsidiary of any Credit Party pursuant to any employee equity subscription agreement, stock
option agreement or stock ownership arrangement approved by the board of directors of the Parent (including any treasury buybacks upon the
vesting of any restricted stock units) or upon the death, disability, retirement or termination of employment of such employee, director, consultant
or officer in an amount not exceeding $1,000,000 in the aggregate per Fiscal Year.
(k) other Investments in an aggregate outstanding amount not exceeding $500,000 at any time outstanding during the term of this
Agreement.
Notwithstanding anything to the contrary set forth herein, (1) no Intellectual Property (or the identifiable products or the proceeds of any of the
foregoing) shall be the subject of any Investment permitted pursuant to this Section 7.01 from any Credit Party in any non-Credit Party and (2) no other
assets included in the determination of the Borrowing Base (for the avoidance of doubt, excluding any cash and Cash Equivalents that do not constitute
Reserved Cash) shall be the subject of any Investment in or to any non-Credit Party as provided in this Section 7.01.
83
7.02 Restrictions on Indebtedness. None of the Credit Parties nor any of its Subsidiaries will incur, assume, guarantee or be or remain liable,
contingently or otherwise, with respect to any Indebtedness other than:
(a) Indebtedness of the Credit Parties consisting of the Obligations under the Loan Documents;
(b) Indebtedness of any Credit Party outstanding as of the Closing Date and reflected on Schedule 7.02 hereto and any refinancing thereof
or amendments or modifications thereof that do not have the effect of increasing the principal amount thereof, changing the amortization thereof
(other than to extend the same), decreasing the weighted average life thereof, accelerating the maturity date thereof or increasing the cash pay
interest thereof and that are otherwise on terms and conditions no less favorable as a whole to such Credit Party, the Administrative Agent or any
other Secured Party, as determined by the Administrative Agent than the terms of the Indebtedness being refinanced, amended or modified;
(c) Indebtedness in respect of Swap Contracts entered into not for speculative purposes;
(d) Indebtedness consisting of intercompany loans and advances permitted by Section 7.01(c);
(e) Guarantees by any Credit Party of Indebtedness of any other Credit Party permitted by this Section 7.02;
(f) Indebtedness consisting of (i) contingent liabilities under surety bonds and similar instruments incurred in the ordinary course of
business or (ii) letters of credit that are consistent with past practice in an aggregate amount not exceeding $1,600,000 at any time outstanding;
(g) Indebtedness in the ordinary course of business in respect of (i) services provided from time to time to any Credit Party or Subsidiary
in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including netting services, automatic
clearinghouse, controlled disbursement, depository, electronic funds transfer, foreign currency conversion, information reporting, lockbox, stop
payment, overdraft and/or wire transfer services and all other treasury and cash management services, (ii) commercial credit card, purchase card
and merchant card services and (iii) other similar banking products or services as may be requested by any Credit Party or Subsidiary from time to
time;
(h) to the extent constituting Indebtedness, obligations in respect of agreements for the deferred payment of premiums or to finance the
deferred payment of premiums owing by any Credit Party under any insurance policies entered into in the ordinary course of business that are
either (i) unsecured or (ii) secured by a Lien permitted under Section 7.03(a)(x);
(i) Indebtedness of the Credit Parties and their Subsidiaries consisting of Capitalized Leases or Indebtedness incurred to provide all or a
portion of the purchase price or cost of construction of an asset; provided that (i) such Indebtedness when incurred shall not exceed the purchase
price or cost of construction of such asset; (ii) no such Indebtedness shall be renewed, refinanced or extended for a principal amount in excess of
the principal balance outstanding thereon at the time of such renewal, refinancing or extension (other than by an amount equal to all accrued and
unpaid interest thereon, any premium required to be paid in connection therein and all reasonable expenses incurred in connection therewith); and
(iii) the total amount of all such Indebtedness shall not exceed $1,500,000 at any time outstanding;
84
(j) Second Amendment Subordinated Indebtedness subject to a Second Amendment Subordination Agreement;
(k) Third Amendment Subordinated Indebtedness subject to a Third Amendment Subordination Agreement; and
(l) Fourth Amendment Subordinated Indebtedness subject to a Fourth Amendment Subordination Agreement; and
(m) (l) other unsecured Indebtedness in an aggregate principal amount not to exceed $500,000 at any time outstanding during the term of
this Agreement.
7.03 Restrictions on Liens.
(a) Permitted Liens. None of the Credit Parties nor any of its Subsidiaries will create or incur or suffer to be created or incurred or to
exist any Lien upon any of their respective property or assets of any character whether now owned or hereafter acquired, or upon the income or
profits therefrom other than:
(i) Liens of landlords, carriers, warehousemen, repairmen, mechanics and materialmen and other like Liens created in the ordinary
course of business, for amounts overdue by not more than thirty (30) days or which are being contested in good faith by appropriate
proceedings and as to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP (it being
understood that the Administrative Agent may impose Reserves in its Permitted Discretion with respect to such Liens);
(ii) Liens, pledges or deposits made or incurred in connection with worker’s compensation, employee benefit plans, unemployment
or other insurance, old age pensions, or other Social Security benefits, in connection with statutory obligations or leases to which it is a
party or to secure, or in lieu of, surety, penalty or appeal bonds, performance bonds, letters of credit and other similar obligations or arising
as a result of progress payments under government contracts or contracts with public utilities, in each case, in the ordinary course of
business;
(iii) minor defects, irregularities, encumbrances, easements, zoning restrictions, rights of way, and clouds on title as normally exist
with respect to similar properties which do not materially interfere with the present or proposed use or value of the applicable Credit Party’s
real property;
(iv) Liens in favor of the Administrative Agent and the other Secured Parties securing the Obligations, including, to the extent
constituting a Lien, Liens on the Administrative Agent’s interest in Reserved Cash;
(v) Liens in existence on the Closing Date and listed on Schedule 7.03; provided that (i) the Lien does not extend to any additional
property and (ii) to the extent such amount secured constitutes Indebtedness, such Indebtedness is permitted by Section 7.02(b), and
extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(vi) Liens securing judgments for the payment of money not constituting an Event of Default so long as the enforcement of such
Lien has been effectively stayed and so long as such Lien is junior to the Lien in favor of the Administrative Agent granted under the
Security Documents;
85
(vii) Liens in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and
which are within the general parameters customary in the banking industry to secure usual and customary fees, returned items and other like
exposure with respect to such account relating to deposit or securities accounts maintained by any Credit Party with such banking
institution;
(viii) Liens for Taxes not yet due and payable or which are being contested in accordance with Section 6.08;
(ix) Liens on unearned insurance premiums securing the payment of financed insurance premiums; provided that such Liens extend
only to such insurance premiums or loss payment or similar payment from any insurance provider in an amount not in excess of any unpaid
financed premiums;
(x) to the extent constituting a Lien, non-exclusive licenses of Intellectual Property (other than to the extent such licenses would
restrict the ability of any Credit Party or the Administrative Agent to sell or license the subject Intellectual Property or impair the security
interests granted to the Administrative Agent) in the ordinary course of business not interfering with the business of any Credit Party;
(xi) Liens securing purchase money Indebtedness or Capitalized Lease obligations (and refinancings thereof) to the extent
permitted under Section 7.01(i); provided that (i) such Lien attaches to such property concurrently with or within ninety (90) days after the
acquisition thereof and (ii) such Lien attaches solely to the property so acquired in such transaction;
(xii) Liens arising from precautionary uniform commercial code financing statements (or equivalent filings or registrations in
foreign jurisdictions) filed under any real property or equipment lease permitted by this Agreement;
(xiii) Liens consisting of cash collateral securing Indebtedness permitted under Section 7.02(f)(ii); and
(xiv) other Liens so long as the amount of Indebtedness secured by such Liens does not exceed $250,000 in the aggregate at any
time outstanding.
(b) Restrictions on Negative Pledges and Upstream Limitations. No Credit Party shall nor shall it permit any Subsidiary to (i) enter
into or permit to exist any arrangement or agreement (excluding this Agreement and the other Loan Documents) which directly or indirectly
effectively prohibits any Credit Party or any Subsidiary from creating, assuming or incurring any Lien upon its properties, revenues or assets
whether now owned or hereafter acquired, as security for the Obligations, or from making Guarantees of the Obligations or (ii) enter into any
agreement, contract or arrangement (excluding this Agreement and the other Loan Documents) restricting the ability of any Subsidiary of any
Credit Party to pay or make dividends or distributions in cash or kind to any Credit Party, to make loans, advances or other payments of
whatsoever nature to any Credit Party, or to make transfers or distributions of all or any part of its assets to any Credit Party in each case other
than customary anti-assignment provisions contained in leases, licensing agreement and other agreements restricting the assignment thereof
entered into by any Credit Party or any Subsidiary in the ordinary course of its business.
86
7.04 Restricted Payments; Payments on Other Debt.
(a) Restricted Payments. No Credit Party nor any Subsidiary shall make any Restricted Payment, other than:
(i) Restricted Payments to the Parent or any other Credit Party from any direct or indirect Subsidiary of the Parent or such other
Credit Party, or, in the case of any Subsidiary that is not a wholly-owned Subsidiary of the Borrower, such Subsidiary may make dividends
and distributions ratably to any other holders of such Subsidiary’s Capital Stock with respect to their Capital Stock;
(ii) Restricted Payments payable solely in common Capital Stock of such Person;
(iii) the repurchase or redemption of Capital Stock of the Parent from the holders of restricted stock units of the Parent granted
through stock incentive plans approved by the Parent’s board of directors, in amounts necessary to satisfy the tax obligations of such
holders pursuant to the vesting of such restricted stock units; and
(iv) to the extent constituting a Restricted Payment, any transaction that is otherwise permitted pursuant to Section 7.01.
Notwithstanding anything to the contrary set forth herein, no Intellectual Property or any asset included in the determination of any Borrowing
Base (other than cash and Cash Equivalents) shall be the subject of any Restricted Payment to any non-Credit Party without the prior written
consent of the Administrative Agent.
(b) Repayments; Prepayments. No Credit Party nor any Subsidiary shall pay, prepay, redeem, purchase, defease or otherwise satisfy
prior to the scheduled maturity thereof in any manner any Indebtedness, other than (i) the Obligations to the extent permitted hereunder, (ii)
regularly scheduled payments of principal and interest due on the Junior Promissory Note pursuant to the terms thereof (but not any voluntary
prepayments of the Junior Promissory Note), (iii) Indebtedness permitted pursuant to Sections 7.02(c), (d) (solely with respect to Indebtedness due
to a Credit Party or due to a non-Credit Party by a non-Credit Party, in each case subject to the terms of any Intercompany Note) or (i) and (iv)
payments of principal that are Subordinated Indebtedness Restricted Payments if the Subordinated Indebtedness Payment Conditions are satisfied.
7.05 Merger, Consolidation and Disposition of Assets.
(a) Mergers and Acquisitions. None of the Credit Parties nor any Subsidiary will become a party to any merger, dissolution, liquidation
or consolidation, except for the merger and/or consolidation of (i) one or more of the Credit Parties (other than the Borrower) with and into a
Credit Party and (ii) one or more non-Credit Parties with and into (x) a Credit Party, so long as such Credit Party is the surviving entity, or (y) any
other non-Credit Party.
(b) Disposition of Assets. No Credit Party nor any Subsidiary shall dissolve, liquidate or sell, transfer, convey, license, lease, assign,
factor or otherwise dispose of any of its properties or other assets, any Capital Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise), any of its Accounts or any of its other Investments, or cease to own and control legally and beneficially Capital Stock of
the Subsidiaries owned on the Closing Date representing 100% of the combined voting power of all of Capital Stock entitled to vote for members
of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such Capital Stock that
such Person has the right to acquire pursuant to any option right), other than:
(i) the sale of Inventory in the ordinary course of business;
87
(ii) dispositions of obsolete or worn out equipment or fixtures no longer useful in the business, whether now owned or hereafter
acquired, in the ordinary course of business;
(iii) so long as no Event of Default has occurred which is continuing or would result therefrom, sales of equipment now owned or
hereafter acquired by any Credit Party in an aggregate amount not in excess of $250,000 during the term of this Agreement;
(iv) (A) non-exclusive licenses of Intellectual Property in the ordinary course of business (other than to the extent such licenses
would materially impair the security interests granted to the Administrative Agent, taken as a whole), or (B) the abandonment, cancellation,
allowance to lapse or be dedicated to the public domain, any Intellectual Property (1) which are no longer material to the business of any
Credit Party as determined in the good faith reasonable business judgment of the Credit Parties, or (2) as otherwise determined in such
Credit Party’s good faith reasonable business judgment;
(v) the AdParlor Sale;
(vi) the True North Loyalty Sale;
(vii) dispositions or transfers constituting (x) a Restricted Payment permitted by Section 7.04(a) and (y) an Investment permitted
by Section 7.01;
(viii) Notwithstanding anything to the contrary contained in this Section 7.05, the sale, lease, transfer or other disposition of
property or assets not to exceed $250,000 in the aggregate in any Fiscal Year of Parent; provided that (A) such sale, lease, transfer or other
disposition shall be for fair market value (as determined by the management of the Borrower), (B) at least 75% of the consideration
received therefor by the Credit Parties or any such Subsidiary shall be in the form of cash or Cash Equivalents and (C) no Event of Default
shall exist or shall result therefrom; and
(ix) other such dispositions (i) from a Credit Party or any Subsidiary to a Credit Party (so long as any such disposition from a non-
Credit Party to a Credit Party is for no greater than fair market value), (ii) among non-Credit Parties or (iii) from a Credit Party to a non-
Credit Party so long as the aggregate value thereof does not exceed $100,000 in the aggregate in any Fiscal Year of Parent.
Notwithstanding anything to the contrary set forth herein, (A) except between Credit Parties, no Intellectual Property shall be the subject of any
dissolutions, liquidations, sales, transfers, conveyances, licenses, leases, assignments or other dispositions permitted pursuant to this Section 7.05 (other
than as set forth in clause (iv) above) and (B) no other asset included in the determination of the Borrowing Base shall be the subject of any dissolutions,
liquidations, sales, transfers, conveyances, licenses, leases, assignments or other dispositions to any non-Credit Party as provided in this Section 7.05.
7.06 Sale and Leaseback. No Credit Party nor any Subsidiary shall engage in any sale-leaseback or similar transaction or incur any Synthetic
Lease obligations involving any of its assets.
88
7.07 Accounting Changes; Change of Fiscal Year. No Credit Party nor any Subsidiary will make any change in (a) accounting policies or
reporting practices, except as permitted by GAAP or (b) their Fiscal Year.
7.08 Transactions with Affiliates. No Credit Party nor any Subsidiary will engage in any transaction with any Affiliate, whether or not in the
ordinary course of business, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or from any such Affiliate, on terms less favorable to such Credit Party or
Subsidiary or Affiliate than would have been obtainable on an arm’s-length basis with a non-Affiliate; provided that the foregoing restriction shall not
apply to (i) transactions solely among the Credit Parties otherwise permitted hereunder, (ii) any Restricted Payment permitted under Section 7.04, (iii)
transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 7.08 or any amendment thereto that is not materially
adverse to any Lender, (iv) payment of the fees of members of any board of directors, board of managers or advisory board of the Credit Parties or any
Subsidiary in an amount not to exceed $750,000 in the aggregate in any Fiscal Year of Parent, and reimbursement of actual out-of-pocket expenses incurred
in connection with attending meetings of the board of directors, board of managers or advisory board and (v) the transactions in respect of the First
Amendment Equity Raise, the Second Amendment Capital Raise, the Second Amendment Follow-on Equity Raise, and, to the extent applicable, the Third
Amendment Capital Raise and the Fourth Amendment Capital Raise.
7.09 Change in Terms of Governing Documents. No Credit Party nor any Subsidiary shall change or amend, modify, supplement or waive the
terms of any of its Governing Documents, except amendments, modifications, supplements or waivers that do not adversely affect the rights or interests of
the Administrative Agent or the Lenders.
7.10 Change in Nature of Business. No Credit Party nor any Subsidiary shall engage in any line of business substantially different from those
lines of business conducted by such Credit Party on the Closing Date.
7.11 Margin Regulations. No Credit Party shall use the proceeds of any Loan, whether directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose
of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.
7.12 Financial Covenants.
(a) Minimum Excess Availability. The Credit Parties and their Subsidiaries shall maintain Excess Availability at all times equal or greater
than the greater of (i) $3,000,000 and (ii) 7.5% of the Line Cap. Notwithstanding the foregoing, on and after the First Amendment Effective Date,
the Credit Parties and their Subsidiaries shall maintain Excess Availability (i) at all times equal or greater than (A) the greater of (i) $3,000,000
and (ii) 7.5% of the Line Cap, plus (B) $3,000,000.
89
(b) Minimum Modified Consolidated EBITDA/Consolidated Fixed Charge Coverage Ratio.
(i) The Credit Parties and their Subsidiaries shall maintain Modified Consolidated EBITDA calculated as of the last day of each
Fiscal Quarter set forth below for the Measurement Period ending on such date of not less than the amount set forth opposite such Fiscal
Quarter under the column “Minimum Modified Consolidated EBITDA” (provided that, for the avoidance of doubt, compliance with this
clause (b)(i) shall not be required commencing with the Fiscal Quarter ending March 31, 2026):
Fiscal Quarter ending
Minimum Modified Consolidated
EBITDA
March 31, 2024
($1,500,000)
June 30, 2024
($10,900,000)
September 30, 2024
($9,600,000)
December 31, 2024
($11,550,000)
March 31, 2025
($12,200,00019,000,000)
June 30, 2025
($8,000,00014,400,000)
September 30, 2025
($5,800,00012,100,000)
December 31, 2025
$505,000(900,000)
Provided as to each Minimum Modified Consolidated EBITDA level ended March 31, 2025, June 30, 2025, September 30, 2025,
and December 31, 2025, to the extent the aggregate Fourth Amendment Capital Raise is in excess of $5,000,000 of Net Cash
Proceeds, the respective Minimum Modified Consolidated EBITDA levels for each such period will be decreased on a dollar for
dollar basis by the amount of such excess of Net Cash Proceeds, with no such adjustment permitted in an amount greater than
$2,500,000.
(ii) Commencing with the Fiscal Quarter ending March 31, 2026, calculated as of the last day of such Fiscal Quarter and each
Fiscal Quarter thereafter, the Credit Parties and their Subsidiaries shall maintain a Consolidated Fixed Charge Coverage Ratio for the
Measurement Period ending on such date of no less than 1.10:1.00.
7.13 Sanctions. The Credit Parties shall not permit any Loan or the proceeds of any Loan, directly or indirectly, to be lent, contributed or
otherwise made available to any Subsidiary, joint venture partner, or other individual or entity, to fund any activities of or business with any individual or
entity in any Designated Jurisdiction that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by
any individual or entity (including any individual or entity participating in the transaction, whether as a Lender, Arranger, or the Administrative Agent) of
any Sanctions.
7.14 Holding Company. The Parent will not engage to any extent in any business whatsoever other than the business of owning and managing,
directly, beneficially and of record, 100% of the issued and outstanding Capital Stock of the Borrower and activities directly related thereto and, in
furtherance and without limitation thereof, will not create or acquire any Subsidiary (other than the Borrower or any Subsidiary of the Borrower).
7.15 Subordinated Indebtedness. Neither the Second Amendment Subordinated Indebtedness nor the Third Amendment Subordinated
Indebtedness nor the Fourth Amendment Subordinated Indebtedness nor any documents evidencing the same may be amended or modified in any manner
that adversely affects the rights or interests of the Administrative Agent or the Lenders without the prior written consent of the Administrative Agent.
90
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default. Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this
Agreement:
(a) Non-Payment. Any Credit Party shall fail to (i) pay any principal of the Loans when the same shall become due and payable, whether
at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment (including, without limitation, Section
2.03(b)) or (ii) pay any interest on the Loans, the fees or other sums due hereunder or under any of the other Loan Documents, when the same
shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment,
and, in the case of this clause (ii), such failure to pay any interest on the Loans shall continue unremedied for two (2) Business Days or such
failure to pay any other amounts under this clause (ii) shall continue unremedied for three (3) Business Days; or
(b) Specific Covenants. Any Credit Party shall fail to comply with any of its covenants contained in Section 2.03(b), Sections 6.04(a), (b)
or (c), 6.05(a) or 6.06 (solely with respect to maintenance of existence), 6.10, 6.11, 6.15, 6.16, 6.17, 6.18 or Article 7; or
(c) Other Defaults. Any Credit Party shall fail (or, to the extent applicable, fail to cause its Subsidiaries) to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 8.01), and such failure
continues for thirty (30) days; or
(d) Representations and Warranties.
(i) Generally. Any representation or warranty of any Credit Party in this Agreement or any of the other Loan Documents or in any
other document or instrument delivered pursuant to or in connection with this Agreement shall prove to have been false in any material
respect (but without any duplication of any materiality qualifications) upon the date when made or deemed to have been made or repeated;
or
(ii) Borrowing Base Certificates. Without duplication of the foregoing contained in clause (i) above, any information contained in
any Borrowing Base Certificate is untrue, incorrect or misleading (other than (i) inadvertent errors not exceeding $50,000 in the aggregate
so long as the Administrative Agent receives a corrected Borrowing Base Certificate no later than one (1) Business Day after (x) the receipt
of such Borrowing Base Certificates containing such errors if such error(s) would have caused an Event of Default under Section 7.12 or (y)
actual knowledge of the Senior Management of any Credit Party to the extent such error would not have caused an Event of Default under
Section 7.12 or (ii) errors understating the Borrowing Base); or
91
(e) Inability to Pay Debt; Insolvency Proceedings; Etc. Any Credit Party or any of its Subsidiaries shall make an assignment for the
benefit of creditors, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of such Credit Party or such
Subsidiary or of any substantial part of the assets of any Credit Party or such Subsidiary or shall commence any case or other proceeding relating
to any Credit Party or such Subsidiary under any Debtor Relief Law, now or hereafter in effect, or shall take any action to authorize or in
furtherance of the foregoing, or if any such petition or application (including a bankruptcy application) shall be filed or any such case or other
proceeding shall be commenced against any Credit Party or such Subsidiary and such Credit Party or such Subsidiary shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed or stayed within sixty (60) days
following the filing thereof; a decree or order (including a bankruptcy order) is entered appointing any such trustee, custodian, liquidator or
receiver or adjudicating any Credit Party or any Subsidiary bankrupt or insolvent, or approving a petition or a bankruptcy application in any such
case or other proceeding, or a decree or order (including a bankruptcy order) for relief is entered in respect of any Credit Party or any Subsidiary
in an involuntary case under any Debtor Relief Laws; or
(f) Judgments. There shall remain in force for more than thirty (30) days any final, non-appealable judgment against any Credit Party
(considered collectively) that exceeds in the aggregate the Threshold Amount which is not covered by insurance policies as to which the insurer is
rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage, unless such judgment has been
discharged, satisfied, bonded or stayed pending appeal; or
(g) ERISA Event. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of the Credit Parties under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC,
(ii) a Credit Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with
respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan or (iii) with respect to any Foreign Plan a termination,
wind-up, withdrawal or non-compliance with applicable Law or plan terms, or a Credit Party amends any Foreign Plan, or incurs or assumes any
liabilities under any Foreign Plan, which, in each case of clauses (i) through (iii) above, could either individually or in the aggregate reasonably be
expected to result in a Material Adverse Effect; or
(h) Indebtedness. Any Credit Party shall fail to pay at maturity, or within any applicable period of grace, any obligation for Indebtedness
in excess of the Threshold Amount, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it
is bound evidencing or securing Indebtedness in excess of the Threshold Amount for such period of time as would permit (assuming the lapse of
time and/or giving of appropriate notice if required and assuming such breach has not been cured within the applicable grace period thereunder)
the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; or
(i) Invalidity of Loan Documents; Etc. If any of the Loan Documents shall be cancelled, terminated, revoked, rescinded or otherwise
ceases to be in full force and effect other than in accordance with their terms; or the Administrative Agent’s security interests, mortgages or Liens
in the Collateral shall cease to be valid and perfected, or shall cease to have the priority contemplated by the Security Documents, other than in
accordance with the terms thereof or with a consent or approval obtained in accordance with Section 10.01; or any action at law, suit or in equity
or other legal proceeding to cancel, revoke, rescind or declare void any of the Loan Documents shall be commenced by or on behalf of any Credit
Party, any Subsidiary or any of their respective equity holders; or any court or any other Governmental Authority shall make a determination that,
or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof; or
(j) Change of Control. A Change of Control shall occur; or
92
(k) Labor Matters; Force Majeure; Etc. There shall occur any strike, lockout, labor dispute, embargo, condemnation, expropriation, act of
God or public enemy, or other casualty, which in any such case causes the cessation or substantial curtailment of revenue producing activities at
any facility of any Credit Party for more than ten (10) consecutive days if such event or circumstance is not covered by business interruption
insurance and would have a Material Adverse Effect; or
(l) Conduct of Business. Except as otherwise expressly permitted hereunder, any Credit Party shall (i) take any action, or shall make a
determination, whether or not yet formally approved by any Credit Party’s management or board of directors (or equivalent governing body), to (i)
suspend the operation of all or a material portion of the business of the Credit Parties taken as a whole or (ii) be enjoined, restrained or in any way
prevented by the order of any Governmental Authority from conducting any part of their business, unless such order would not have a Material
Adverse Effect; or
(m) Criminal Actions. Any Credit Party, any of its Subsidiaries shall be indicted or convicted for a state or federal crime or any other
criminal action having the force of law for a felony that would reasonably be expected to materially impair any rights or remedies of the
Administrative Agent or any Lender under any Loan Document.
(n) Subordination Provisions. The Second Amendment Subordination Agreement, Third Amendment Subordination Agreement, Fourth
Amendment Subordination Agreement or any subordination provision thereof shall, in whole or in part, terminate (other than in accordance with
its terms) or otherwise fail or cease to be valid and binding on, or enforceable against, any Credit Party, the Second Amendment Subordinated
Lenders or, the Third Amendment Subordinated Lenders, the Fourth Amendment Subordinated Lenders (or any Credit Party or the Second
Amendment Subordinated Lenders or, the Third Amendment Subordinated Lenders, or the Fourth Amendment Subordinated Lenders, shall so
state in writing).
8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent may, or at the request of the
Required Lenders, shall take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans to be terminated, including, without limitation, the Revolving Credit
Commitments, whereupon such commitments and obligation shall be terminated and any applicable Early Termination Premium shall be
immediately due and payable;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and payable (including, without limitation, any applicable Early
Termination Premium), without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Credit
Parties; and
(c) exercise on behalf of itself and the other Secured Parties all rights and remedies available to it and the other Secured Parties under the
Loan Documents;
provided, however, that upon the occurrence of an Event of Default under Section 8.01(e), the obligation of each Lender to make Loans shall automatically
terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable,
without further act of the Administrative Agent or any Lender. No termination of the commitments hereunder shall relieve any Credit Party of any of the
Obligations.
93
8.03 Event of Default Application of Funds. In the event that, following the occurrence and during the continuance of any Event of Default,
the Administrative Agent or any Lender, as the case may be, receives any monies in connection with the enforcement of any of the Loan Documents, or
otherwise with respect to the realization upon any of the Collateral (including, without limitation, Reserved Cash), the Administrative Agent may apply
(and shall apply at (a) the request of the Required Lenders or (b) following the exercise of remedies pursuant to Section 8.02, including without limitation,
pursuant to the proviso thereof) such monies as follows (and each Lender shall comply with the instructions of the Administrative Agent in the case of any
such monies received by any Lender):
(i) First, to payment of outstanding Protective Advances funded by the Administrative Agent;
(ii) Second, to payment of Obligations owing to the Administrative Agent constituting (A) indemnities and expenses due and
payable under this Agreement and the other Loan Documents (including fees, charges and disbursements of counsel to the Administrative
Agent) and (B) the fees due and payable under Section 2.07(b);
(iii) Third, to payment of Obligations constituting indemnities and expenses (including fees, charges and disbursements of counsel
to Lenders and amounts payable under Article III) due and payable to the Lenders under this Agreement and the other Loan Documents,
ratably among such Persons in proportion to the respective amounts described in this clause Third payable to them;
(iv) Fourth, to payment of that portion of the Obligations constituting accrued and unpaid interest and fees (including, without
limitation, any applicable Early Termination Premium) due and payable to the Lenders under this Agreement and the other Loan
Documents ratably among them in proportion to the respective amounts described in this clause Fourth payable to them;
(v) Fifth, to the payment of that portion of the Obligations constituting unpaid principal of the Loans ratably among them in
proportion to the respective amounts described in this clause Fifth;
(vi) Sixth, to the payment of all other Obligations ratably among the holders thereof in proportion to the respective amounts
described in this clause Sixth; and
(vii) Seventh, the balance, if any, after all of the Obligations have been indefeasible paid in full, to the Borrower or as otherwise
required by Law.
All payments applied to the Loans pursuant to this Section 8.03 shall be applied to the Loans owing to the Lenders in accordance with their
respective Applicable Percentages.
Any prepayment of the principal balance of the Term Loan as a result of the application of Reserved Cash shall be subject to any applicable Early
Termination Premium and shall be applied to the principal balance of the Term Loans based on the Applicable Percentage of each Lender. Any reduction of
the Revolving Credit Commitments as a result of the application of Reserved Cash to repay Revolving Credit Loans shall be subject to any applicable Early
Termination Premium and shall be applied to the principal balance of the Revolving Credit Loans based on the Applicable Percentage of each Lender.
94
ARTICLE IX
ADMINISTRATIVE AGENT
9.01 Appointment and Authority.
(a) Each of the Lenders hereby irrevocably appoints SLR to act on its behalf as the Administrative Agent hereunder and under the other
Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of
this Article (other than Sections 9.06 and 9.10) are solely for the benefit of the Administrative Agent and the Lenders and neither the Borrower nor
any other Credit Party shall have rights as a third party beneficiary of any of such provisions.
(b) The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders hereby
irrevocably appoints and authorizes the Administrative Agent to act as the collateral agent and security trustee (as applicable) of such Lender for
purposes of acquiring, holding directly or on trust (as applicable) and enforcing any and all Liens on Collateral granted by any of the Credit Parties
to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the
Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to
Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for
exercising any rights and remedies thereunder at the direction of the Administrative Agent, shall be entitled to the benefits of all provisions of this
Article IX and Article X (as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if
set forth in full herein with respect thereto.
9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual
capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with the Credit Parties or any Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent hereunder and without any duty to account therefor to the Lenders.
9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in
the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties (whether implied by contract or by law), regardless of whether a Default
has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents),
provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose it to
liability or that is contrary to any Loan Document or applicable Law, including, for the avoidance of doubt, any action that may be in violation of
the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in
violation of any Debtor Relief Laws; and
95
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for
the failure to disclose, any information relating to the Credit Parties or any of their Affiliates that is communicated to or obtained by the Person
serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders
(or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary,
under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction in a final non-appealable order. The Administrative Agent shall be deemed not to have knowledge of any Default or Event
of Default unless and until notice describing such Default or Event of Default is given to the Administrative Agent by a Credit Party or a Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to
be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or
elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
9.04 Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it
to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the
Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the
contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel, independent accountants and other
experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or
experts.
9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or
under any other Loan Document by or through any one or more sub agents appointed by the Administrative Agent. The Administrative Agent and any such
sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions
of this Article shall apply to any such sub agent and to the Related Parties of the Administrative Agent and any such sub agent, and shall apply to their
respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The
Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent a court of competent jurisdiction
determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such
sub-agents.
96
9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders and the
Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower, to appoint a
successor, which shall be an Affiliate of any Lender or other bank or financial institution with an office in the United States. If no such successor shall have
been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders appoint a successor meeting the qualifications set forth above;
provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on
behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as
a successor Administrative Agent is appointed) and (2) except for any indemnity payments or other amounts then owed to the retiring Administrative
Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to
each Lender directly, until such time as the Required Lenders appoint a successor as provided for above in this Section. Upon the acceptance of a
successor’s appointment hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring
(or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the
other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the
retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue
in effect for the benefit of such retiring Administrative Agent its sub agents and its respective Related Parties in respect of any actions taken or omitted to
be taken by any of them prior to such resignation.
9.07 Non-Reliance. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or
any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to
make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.
9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, neither the Arranger hereof shall have no powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender
hereunder.
9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other
judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Loan 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, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other
Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the
Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the
Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative
Agent under Sections 2.09 and 10.04) allowed in such judicial proceeding; and
97
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any
Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
9.10 Collateral and Guarantee Matters. Each of the Lenders irrevocably authorize the Administrative Agent to and upon the request of the
Borrower (and at its sole cost and expense) with reasonable advance notice, the Administrative Agent hereby agrees,
(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of
the Aggregate Commitments and payment in full in cash of all Obligations (other than contingent indemnification obligations for which no claim
has then been asserted), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder (other than sales among Credit
Parties), or (iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required Lenders; and
(b) to release any Guarantor from its obligations under the Security Documents and release any related Collateral if such Person ceases to
be a Subsidiary as a result of a transaction permitted by Section 7.05 or is or becomes an Excluded Subsidiary.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to
release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guarantees pursuant to
this Section 9.10.
The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the
existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate
prepared by any Credit Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor
or maintain any portion of the Collateral.
9.11 Second Amendment Subordination Agreement. Each Lender irrevocably appoints, designates and authorizes the Administrative Agent
to enter into the Second Amendment Subordination Agreement on its behalf and to take such action on its behalf pursuant to the provisions of the Second
Amendment Subordination Agreement. Each Lender agrees to be bound by the terms of the Second Amendment Subordination Agreement. In the event of
any conflict between the terms of this Agreement and the terms of the Second Amendment Subordination Agreement, the terms of the Second Amendment
Subordination Agreement shall govern.
98
9.12 Third Amendment Subordination Agreement. Each Lender irrevocably appoints, designates and authorizes the Administrative Agent to
enter into the Third Amendment Subordination Agreement on its behalf and to take such action on its behalf pursuant to the provisions of the Third
Amendment Subordination Agreement. Each Lender agrees to be bound by the terms of the Third Amendment Subordination Agreement. In the event of
any conflict between the terms of this Agreement and the terms of the Third Amendment Subordination Agreement, the terms of the Third Amendment
Subordination Agreement shall govern.
9.13 Fourth Amendment Subordination Agreement. Each Lender irrevocably appoints, designates and authorizes the Administrative Agent
to enter into the Fourth Amendment Subordination Agreement on its behalf and to take such action on its behalf pursuant to the provisions of the Fourth
Amendment Subordination Agreement. Each Lender agrees to be bound by the terms of the Fourth Amendment Subordination Agreement. In the event of
any conflict between the terms of this Agreement and the terms of the Fourth Amendment Subordination Agreement, the terms of the Fourth Amendment
Subordination Agreement shall govern
ARTICLE X
MISCELLANEOUS
10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any
departure by the Borrower or any other Credit Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the
applicable Credit Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the
written consent of such Lender;
(b) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest (other than default
interest), fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of
each Lender directly affected thereby; provided that for the avoidance of doubt, mandatory prepayments pursuant to Section 2.03 may be
postponed, delayed, reduced, waived or modified with the consent of the Required Lenders;
(c) reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (v) of the second proviso to this
Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document relating to the Loans, without the written consent
of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the
definition of “Default Rate” (so long as such amendment does not result in the Default Rate being lower than the interest then applicable) or to
waive any obligation of the Borrower to pay interest at the Default Rate;
(d) (i) change Section 2.11 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby or the order of
the application of payments thereunder, in each case, without the written consent of each Lender directly affected thereby or (ii) change the order
of application of any reduction in the Commitments or any prepayment of Loans set forth in the applicable provisions of Section 2.03, in any
manner that materially and adversely affects a Lender without the written consent of the Required Lenders;
99
(e) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent
hereunder (other than the definitions specified in clause (ii) below) without the written consent of each Lender;
(f) (i) release all or substantially all of the Collateral in any transaction or series of related transactions, (ii) release all or substantially all
of the Guarantors party to the Guarantees or release the Borrower, (iii) subordinate the Obligations hereunder to any other Indebtedness or (iv)
except as provided by operation of applicable Law, subordinate the Liens on all or substantially all of the Collateral granted in favor of the
Administrative Agent for itself and the other Secured Parties under the Security Documents to any other Lien, in each case, without the written
consent of each Lender;
(g) (i) increase the advance rates set forth in or otherwise amend the definition of “Borrowing Base” (including component definitions
therein) without the written consent of each Lender, (ii) amend the definition of “Reserves” (including component definition thereof) without the
written consent of each Lender, (iii) make less restrictive the eligibility criteria contained in the definitions of “Eligible Domestic Accounts”,
“Eligible Domestic Investment Grade Accounts”, “Eligible Domestic Non-Investment Grade Accounts”, “Eligible Unbilled Domestic Accounts”,
“Eligible Unbilled Foreign Accounts”, “Eligible Foreign Accounts” or “Protective Advance” without the written consent of each Lender, or (iv)
amend Section 2.15 without the consent of each Lender in each case, in a manner which would result in a greater amount of credit being made
available to the Borrower (it being understood and agreed that nothing in this clause (g) shall limit, restrict or impair the rights of the
Administrative Agent to impose or establish any and all Reserves, and thereafter to reduce or eliminate such Reserves or to determine the
eligibility of Collateral for inclusion in the calculation of the Borrowing Base); or
(h) without the prior written consent of each Lender, impose any materially greater restriction on the ability of any Lender to assign any
of its rights or obligations hereunder;
provided further, however, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to
the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (ii) Section 10.06(g)
may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an
SPC at the time of such amendment, waiver or other modification; (iii) Section 2.07(b) may be amended, or rights or privileges thereunder waived, in a
writing executed only by the Borrower and the Administrative Agent; (iv) typographical or scrivener’s errors may be corrected solely with the consent of
the Borrower or any other applicable Credit Party and the Administrative Agent, and (v) no amendment, waiver or consent which has the effect of enabling
the Borrower to satisfy any condition to a Borrowing contained in Section 4.02 hereof which, but for such amendment, waiver or consent would not be
satisfied, shall be effective to require the Lenders to make any additional Revolving Credit Loans, unless and until the Required Lenders (or, if applicable,
all Lenders) shall have approved such amendment, waiver or consent.
100
10.02 Notices; Effectiveness; Electronic Communication.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except
as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand
or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrower, any other Credit Party, or the Administrative Agent, to the address, facsimile number, electronic mail address
or telephone number specified for such Person on Schedule 10.02; and
(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its
Administrative Questionnaire.
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 facsimile 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 sent delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such
subsection (b).
(b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic
communication (including through any Electronic Medium) pursuant to procedures approved by the Administrative Agent, provided that the
foregoing shall not apply to notices to any pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to
accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that
approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, notices and other communications sent to an e-mail address shall be deemed received upon
the sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other written acknowledgement, but expressly
excluding use of “return receipt requested” functions or features), provided that if such notice or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the
recipient.
(c) Change of Address, Etc. Each of the Borrower and the Administrative Agent may change its address, facsimile or telephone number
for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, facsimile or
telephone number for notices and other communications hereunder by notice to the Borrower and the Administrative Agent. In addition, each
Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address,
contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii)
accurate wire instructions for such Lender.
101
(d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any
notices (including telephonic Borrowing Request Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not
made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, each
Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative
Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
10.03 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person
in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder
and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in
connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the
benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights
and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from
exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.11), or (c) any Lender from filing proofs of claim or appearing
and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any Debtor Relief Law; and provided, further,
that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall
have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d)
of the preceding proviso and subject to Section 2.11, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available
to it and as authorized by the Required Lenders.
10.04 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative
Agent, the Arranger, and their respective Affiliates (limited, in the case of legal expenses, to the legal reasonable fees, charges and disbursements
of one primary counsel to all such Persons and, if reasonably necessary, one local counsel in any relevant jurisdiction (which may include a single
firm of counsel acting in multiple jurisdictions)), in connection with the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arranger, and the Lenders (limited, in the case of legal expenses, to
one primary counsel to the Administrative Agent, Arrangers and Lenders to be retained by the Administrative Agent and, if reasonably necessary,
one local counsel in any relevant jurisdiction (which may include a single firm of counsel acting in multiple jurisdictions) and, in the case of an
actual or perceived conflict of interest where any such Person affected by such conflict informs the Borrower of such conflict, of a single
additional firm of counsel in each relevant jurisdiction for all similarly situated affected Persons) in connection with the enforcement or protection
of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection
with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of
such Loans.
102
(b) Indemnification by the Credit Parties. The Credit Parties shall indemnify the Administrative Agent (and any sub-agent thereof), the
Arranger, each Lender and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (limited, in the case of legal expenses, to one
primary counsel to the Administrative Agent, Arrangers and Lenders and their Related Parties to be retained by the Administrative Agent and, if
reasonably necessary, one local counsel in any relevant jurisdiction (which may include a single firm of counsel acting in multiple jurisdictions)
and, in the case of an actual or perceived conflict of interest where any Indemnitee affected by such conflict informs the Borrower of such conflict,
of a single additional firm of counsel in each relevant jurisdiction for all similarly situated affected Indemnitees), incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by the Borrower or any other Credit Party arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated
hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this
Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by the Borrower or any other Credit Party, or any Environmental
Liability related in any way to the Borrower or any other Credit Party, or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the
Borrower or any other Credit Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not be
available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by
final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of any Indemnitee or any of its Related Parties
or by reason of any material breach of the obligations of such Indemnitee under this Agreement or the other Loan Documents, (y) result from a
claim brought by the Borrower or any other Credit Parties against an Indemnitee for breach in bad faith of such Indemnitee’s or any of its Related
Parties obligations hereunder or under any other Loan Document, if the Borrower or such other Credit Parties has obtained a final and non-
appealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (z) that is brought by an Indemnitee against
another Indemnitee (other than claims against the Administrative Agent solely in its capacity as such or in its fulfilling such role). Without limiting
the provisions of Section 3.01(c), this Section 10.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims,
damages, etc. arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that any Credit Party for any reason fails to pay any amount required under subsection (a) or
(b) of this Section to be paid by it to the Administrative Agent (and any sub-agent thereof) or any Related Party of the Administrative Agent, each
Lender severally agrees to pay to the Administrative Agent (and any sub-agent thereof) or such Related Party, as the case may be, such Lender’s
pro rata share of the Aggregate Commitments (determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the
case may be, was incurred by or asserted against the Administrative Agent (and any sub-agent thereof) in its capacity as such, or against any
Related Party of any of the foregoing acting for the Administrative Agent (and any sub-agent thereof) in connection with such capacity. The
obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.10(d).
103
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, no party hereto (and no Indemnitee or any
Subsidiary or Affiliate of Parent) shall assert, and each party hereto hereby waives, any claim against any other party hereto (and any Indemnitee
and any Subsidiary or Affiliate of Parent) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in
subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed
by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby.
(e) Payments. All amounts due under this Section shall be payable not later than ten (10) Business Days after demand therefor.
(f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.
10.05 Payments Set Aside. To the extent that any payment by or on behalf of any Credit Party is made to the Administrative Agent or any
Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the
Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any
Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the
Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in
effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of
this Agreement.
10.06 Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement and each other Loan Document shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Credit Party (except to the extent
permitted by Section 7.05(a) to the extent a transaction permitted thereby would constitute an assignment) may assign or otherwise transfer any of
its rights or obligations hereunder or thereunder, as applicable, without the prior written consent of the Administrative Agent and each Lender and
no Lender may assign or otherwise transfer any of its rights or obligations hereunder except, subject to subsection (h): (i) to an assignee in
accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of
this Section, (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (e) of this Section, or (iv) to an SPC
in accordance with the provisions of subsection (g) of this Section (and any other attempted assignment or transfer by any party hereto shall be
null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under
or by reason of this Agreement.
104
(b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignee all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such
assignment shall be subject to the following conditions:
(i) Minimum Amount. Except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment
and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the
Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment,
determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if
“Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $2,000,000 in the case of any
assignment, unless the Administrative Agent otherwise consents; provided, however, that concurrent assignments to members of an
Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee
and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has
been met.
(ii) Partial Assignment. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitments assigned.
(iii) Required Consents.
(A) Unless an Event of Default has occurred that is continuing, the consent of the Borrower (such consent not to be
unreasonably withheld or delayed) shall be required (1) for assignments in respect of any Commitment if such assignment is to a
Person that is not an existing Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender and (2) to the
extent required by subsection (b)(i) of this Section; provided that the Borrower shall be deemed to have consented to any such
assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having
received notice thereof.
(B) The consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required (1)
for assignments in respect of any Commitment if such assignment is to a Person that is not an existing Lender, an Affiliate of such
Lender or an Approved Fund with respect to such Lender and (2) to the extent required by subsection (b)(i) of this Section.
(iv) Assignment Fee. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and
Assumption, together with a processing and recordation fee in the amount of $3,500 payable to the Administrative Agent; provided,
however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any
assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
105
(v) No Assignments to Affiliates, Defaulting Lenders, or Natural Persons. No such assignment shall be made (A) to any Credit
Party or any Affiliate or Subsidiary of any Credit Party, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon
becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person (or a
holding company, investment vehicle or trust for, or owned and operated for the benefit of a natural person).
(vi) Maintenance of Pro Rata Shares. In connection with any assignment of rights and obligations of any Defaulting Lender
hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to
the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution
thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other
compensating actions, including funding, with the consent of the Administrative Agent, the applicable pro rata share of Loans previously
requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to
(x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder
(and interest accrued thereon) and (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.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of
an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party
hereto) but shall continue to be entitled to the benefits and obligations of Sections 3.01, 3.05, 3.06, and 10.04 with respect to facts and circumstances
occurring prior to the effective date of such assignment; provided that except to the extent otherwise expressly agreed by the affected parties, no assignment
by a Defaulting Lender will constitute waiver or release of any claim of any party hereunder arising from that Lender having been a Defaulting Lender.
Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with subsection (d) of this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower (and such agency being
solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. In addition, the Administrative Agent shall maintain on the
Register information regarding the designation, and revocation of designation, of any Lender as a Defaulting Lender. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.
106
(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person, a Defaulting Lender or any Credit Party or any Affiliate or Subsidiary of any Credit
Party) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its
Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.04(c) without
regard to the existence of any participation.
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, waiver or other modification described
in the first proviso to Section 10.01 that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01,
3.05 and 3.06 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section (it being
understood that the documentation required under Section 3.01(e) shall be delivered to the Lender who sells the participation) to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section; provided that such Participant (A) agrees to be subject
to the provisions of Sections 3.05 and 10.13 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater
payment under Sections 3.01 or 3.05, with respect to any participation, than the Lender from whom it acquired the applicable participation would have
been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant
acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to
cooperate with the Borrower to effectuate the provisions of Section 3.05 with respect to any Participant. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.11 as
though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower (solely for tax
purposes), maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such
disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the
United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice
to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as such) shall have no responsibility for maintaining a Participant
Register.
107
(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this
Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute
any such pledgee or assignee for such Lender as a party hereto.
(f) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the
extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New
York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
(g) Special Purpose Funding Vehicles. Notwithstanding any provision to the contrary, any Lender (a “Granting Lender”) may assign to
one or more special purpose funding vehicles (each, an “SPC”) all or any portion of its funded Loans (without, in the case of Revolving Credit
Loans, the corresponding Revolving Credit Commitment), without the consent of any Person or the payment of a fee, by execution of a written
assignment agreement in a form agreed to by such Granting Lender and such SPC, and may grant any such SPC the option, in such SPC’s sole
discretion, to provide the Borrower all or any part of any Loans that such Lender would otherwise be obligated to make pursuant to this
Agreement. Such SPCs shall have all the rights which a Lender making or holding such Loans would have under this Agreement, but no
obligations. The Granting Lender making such assignment shall remain liable for all its original obligations under this Agreement, including its
Commitment (although the unused portion thereof shall be reduced by the principal amount of any Loans held by an SPC). Notwithstanding such
assignment, the Administrative Agent and Borrower may deliver notices to the Granting Lender making such assignment (as agent for the SPC)
and not separately to the SPC unless the Administrative Agent and Borrower are requested in writing by the SPC (or its agent) to deliver such
notices separately to it. The Borrower shall, at the request of any such Granting Lender, execute and deliver to such Person as such Lender may
designate, a Note in the amount of such Granting Lender’s original Note to evidence the Loans of such Granting Lender and related SPC.
(h) Assignment by SLR Entities. Notwithstanding anything in this Agreement or the other Loan Documents, (x) no SLR Entity shall be
required to comply with Section 10.06(b) in connection with any transaction involving any other SLR Entity or any of its or their lenders or
funding or financing sources, none of the foregoing shall be considered an assignee hereunder and no SLR Entity shall have any obligation to
disclose any such transaction to any Person, and (y) there shall be no limitation or restriction on (I) the ability of any SLR Entity to assign or
otherwise transfer its rights and/or obligations under this Agreement or any other Loan Document, any Commitment, or any Obligation to any
other SLR Entity or any lender or financing or funding source of a SLR Entity or (II) any such lender’s or funding or financing source’s ability to
assign or otherwise transfer its rights and/or obligations under this Agreement or any other Loan Document, any Commitment, or any Obligation;
provided, however, that with respect to any assignment by SLR pursuant to clauses (x) and (y) hereof, SLR shall continue to be liable as a
“Lender” under this Agreement and the other Loan Documents unless such other Person complies with the provisions of this Agreement to
become a “Lender.”
108
10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ Related
Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over such Person or
its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by
applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (g) to the extent such
Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any
Lender, or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.
For purposes of this Section, “Information” means all information received from the Borrower, or any other Credit Party or the Financial Advisor
relating to the Borrower or any Credit Party or any of their respective businesses, other than any such information that is available to the Administrative
Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any Credit Party. 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.
Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning
the Borrower or a Credit Party, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c)
it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.
Notwithstanding anything to the contrary contained in this Section 10.07, each Credit Party consents to the publication by the Administrative
Agent of any press releases, tombstones, advertising or other promotional materials (including, without limitation, via any Electronic Medium) relating to
the financing transactions contemplated by this Agreement using such Credit Party’s name, product photographs, logo or trademark. No party hereto shall
or shall permit any of its Affiliates to, issue any press release or other public disclosure relating to the closing of the credit facilities provided for herein
using the name, logo or otherwise referring to SLR or of any of its Affiliates or the Loan Documents to which SLR or any of its affiliates are a party to
without the prior written consent (including via e-mail) of such Person (not to be unreasonably withheld, delayed or conditioned) except to the extent
required to do so under applicable Law and then, only after consulting with such Persons unless prohibited from doing so under applicable Law.
10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby
authorized at any time and from time to time after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by
applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held
and other obligations (in whatever currency) at any time owing by such Lender, or any such Affiliate to or for the credit or the account of any Credit Party
against any and all of the obligations of any Credit Party now or hereafter existing under this Agreement or any other Loan Document to such Lender,
irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations
of such Credit Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such
deposit or obligated on such indebtedness, 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 2.10 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 and their respective Affiliates under this Section
are in addition to other rights and remedies (including other rights of setoff) that such Lender or their respective Affiliates 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.
109
10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be
paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the
Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal
of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by
the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the
other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements
and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it
shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or
other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.
Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made
by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or
knowledge of any Default at the time of any Loan, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied.
10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction
shall not invalidate or render unenforceable such provision in any other jurisdiction.
110
10.13 Replacement of Lenders. If the Borrower is entitled to replace a Lender pursuant to the provisions of Section 3.05, or if any Lender is a
Defaulting Lender or a Non-Consenting Lender, then (x) the Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent and (y) the Administrative Agent may upon notice to such Lender, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights
to payments pursuant to Sections 3.01 and 3.03) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrower shall have paid (or caused to be paid) to the Administrative Agent the assignment fee (if any) specified in Section
10.06(b);
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon,
accrued fees (other than any Early Termination Premium) and all other amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 3.04) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts);
(c) in the case of any such assignment resulting from a claim for compensation under Section 3.03 or payments required to be made
pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;
(d) such assignment does not conflict with applicable Laws; and
(e) in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the Administrative Agent shall have
consented to such assignment and the applicable assignee shall have consented to the applicable amendment, waiver or consent.
provided that the failure by any Lender to execute and deliver an Assignment and Assumption in connection with any of the foregoing
assignments shall not impair the validity of the removal of such Lender and the mandatory assignment of such Lender’s Commitments and
outstanding Loans pursuant to this Section 10.13 shall nevertheless be effective without the execution by such Lender of an Assignment and
Assumption.
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 = to require such assignment and delegation cease to apply.
10.14 Governing Law; Jurisdiction; Etc.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW (OTHER THAN
THE NEW YORK GENERAL OBLIGATIONS LAW §5-1401)).
111
(b) SUBMISSION TO JURISDICTION. EACH PARTY HERETO EACH IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW
YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY
LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AGAINST THE BORROWER, THE OTHER CREDIT PARTIES SIGNATORY HERETO OR THEIR RESPECTIVE
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) WAIVER OF VENUE. EACH PARTY HERETO EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION (B) OF THIS SECTION. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY
HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(e) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY 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 OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON 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 AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
10.15 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined), the Administrative Agent (for itself and not
on behalf of any Lender) hereby notifies the Credit Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Credit Parties and their Subsidiaries, which
information includes the name and address of the Credit Parties and their Subsidiaries and other information that will allow such Lender or the
Administrative Agent, as applicable, to identify the Credit Parties and their Subsidiaries in accordance with the Act. The Credit Parties shall, promptly
following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such
Lender requests in order to comply with its ongoing obligations under applicable “know your customer” an anti-money laundering rules and regulations,
including the Act.
112
10.16 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IN THE EVENT OF ANY
EXPRESS CONFLICT OR INCONSISTENCY BETWEEN THE TERMS OF THIS AGREEMENT AND THE TERMS OF ANY OTHER LOAN
DOCUMENT, THE TERMS OF THIS AGREEMENT SHALL GOVERN. IT BEING UNDERSTOOD THAT PROVISIONS OF OTHER LOAN
DOCUMENTS THAT SUPPLEMENT THE TERMS OF THIS AGREEMENT SHALL NOT BE DEEMED TO BE INCONSISTENT BECAUSE OF
THEIR NATURE AS SUPPLEMENTARY PROVISIONS.
10.17 No Advisory or Fiduciary Responsibility. 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), each Credit Parties acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent,
the Arranger and the Lenders are arm’s-length commercial transactions between the Credit Parties and their respective Affiliates, on the one hand, and the
Administrative Agent, the Arranger and the Lenders, on the other hand, (B) each Credit Party has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate, and (C) each Credit Party is capable of evaluating, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, the Arranger and each Lender 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 any Credit Party or any of its Affiliates, or any other Person and (B) none of the Administrative Agent, any Arranger or any
Lender has any obligation to any Credit Party 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 (iii) the Administrative Agent, the Arranger, the Lenders and their respective Affiliates
may be engaged in a broad range of transactions that involve interests that differ from those of Credit Parties and their Affiliates, and none of the
Administrative Agent, the Arranger nor any Lender have any obligation to disclose any of such interests to the Credit Parties or any of their Affiliates. To
the fullest extent permitted by law, the Credit Parties hereby waive and release any claims that they may have against the Administrative Agent and the
Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
10.18 Joint and Several Liability of the Credit Parties. The obligations of the Credit Parties hereunder and under the other Loan Documents
are joint and several. The obligations of the Credit Parties under the Loan Documents may be enforced by the Administrative Agent and the other Secured
Parties against any Credit Party or all Credit Parties in any manner or order selected by the Administrative Agent in its sole discretion. Each Credit Party
hereby irrevocably waives (i) any rights of subrogation and (ii) any rights of contribution, indemnity or reimbursement, in each case, that it may acquire or
that may arise against any other Credit Party due to any payment or performance made under this Agreement, in each case until all Obligations (other than
unasserted contingent obligations) shall have been fully satisfied. Without limiting the foregoing provisions of this Section 10.18, each Credit Party
acknowledges and agrees that:
(a) its obligations under this Agreement shall remain enforceable against it even though such obligations may be unenforceable or not
allowable against any other Credit Party due to the existence of any proceeding under any Debtor Relief Laws involving any other Credit Party;
113
(b) its obligations under this Agreement are independent of the obligations of any other Credit Party, and a separate action or actions
may be brought and prosecuted against it in respect of such obligations irrespective of whether any action is brought against any other Credit Party
or any other Credit Party is joined in any such action or actions;
(c) it hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:
(d) any lack of validity or enforceability of this Agreement or any agreement or instrument relating thereto in respect of any other
Credit Party;
(e) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of any other Credit Party
under or in respect of this Agreement, or any other amendment or waiver of or any consent to departure from this Agreement, in respect of any
other Credit Party;
(f) any change, restructuring or termination of the structure or existence of any other Credit Party;
(g) the failure of any other Person to execute or deliver any other agreement or the release or reduction of liability of any other Person
with respect to any obligations of the Credit Parties under this Agreement; or
(h) any other circumstance (including any statute of limitations but other than the Obligations having been fully satisfied) or any
existence of or reliance on any representation by any other Person that might otherwise constitute a defense available to, or a discharge of, any
other Credit Party;
(i) its obligations under this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of
any such obligations is rescinded or must otherwise be returned by any Person upon the institution of any proceeding under any Debtor Relief
Laws of any other Credit Party, all as though such payment had not been made; and
(j) it hereby unconditionally and irrevocably waives any right to revoke its joint and several liability under the Loan Documents and
acknowledges that such liability is continuing in nature and applies to all obligations of the Credit Party under the Loan Documents, whether
existing now or in the future.
114
10.19 Erroneous Payments.
(a) If the Administrative Agent notifies a Lender or Secured Party, or any person who has received funds on behalf of a Lender or
Secured Party (any such Lender, Secured Party or other recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole
discretion that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted
to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Secured Party or other
Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees,
distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion
thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be held in trust for the benefit of the
Administrative Agent, and such Lender or Secured Party shall (or, with respect to any Payment Recipient who received such funds on its behalf,
shall cause such Payment Recipient to) promptly, but in no event later than two (2) Business Days thereafter, return to the Administrative Agent
the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so
received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was
received by such Payment Recipient to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal
Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to
time in effect. A notice of the Administrative Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error. If a
Payment Recipient receives any payment, prepayment or repayment of principal, interest, fees, distribution or otherwise and does not receive a
corresponding payment notice or payment advice, such payment, prepayment or repayment shall be presumed to be in error absent written
confirmation from the Administrative Agent to the contrary.
(b) Each Lender or Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time
owing to such Lender or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such
Lender or Secured Party from any source, against any amount due to the Administrative Agent under immediately preceding clause (a) or under
the indemnification provisions of this Agreement.
(c) For so long as an Erroneous Payment (or portion thereof) has not been returned by any Payment Recipient who received such
Erroneous Payment (or portion thereof) (such unrecovered amount, an “Erroneous Payment Return Deficiency”) to the Administrative Agent after
demand therefor in accordance with immediately preceding clause (a), (i) the Administrative Agent may elect, in its sole discretion on written
notice to such Lender or Secured Party, that all rights and claims of such Lender or Secured Party with respect to the Loans or other Obligations
owed to such person up to the amount of the corresponding Erroneous Payment Return Deficiency in respect of such Erroneous Payment (the
“Corresponding Loan Amount”) shall immediately vest in the Administrative Agent upon such election; after such election, the Administrative
Agent (x) may reflect its ownership interest in Loans in a principal amount equal to the Corresponding Loan Amount in the Register, and (y) upon
five business days’ written notice to such Lender or Secured Party, may sell such Loan (or portion thereof) in respect of the Corresponding Loan
Amount in accordance with Section 10.06 of this Agreement, and upon receipt of the proceeds of such sale, the Erroneous Payment Return
Deficiency owing by such Lender or Secured Party shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the
Administrative Agent shall retain all other rights, remedies and claims against such Lender or Secured Party (and/or against any Payment
Recipient that receives funds on its behalf), and (ii) each party hereto agrees that, except to the extent that the Administrative Agent has sold such
Loan, and irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually
subrogated to all the rights and interests of such Lender or Secured Party with respect to the Erroneous Payment Return Deficiency. For the
avoidance of doubt, no vesting or sale pursuant to the foregoing clause (i) will reduce the Commitments of any Lender and such Commitments
shall remain available in accordance with the terms of this Agreement.
(d) The parties hereto agree that an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations
owed by the Borrower or any other Credit Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the
amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Credit Party.
115
(e) No Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any
claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for
the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar
doctrine.
(f) Each party’s obligations, agreements and waivers under this Section 10.19 shall survive the resignation or replacement of the
Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Commitments and/or the
repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.
[Remainder of this Page Left Intentionally Blank. Signature Pages Omitted]
116
Exhibit 19.1
FLUENT, INC.
INSIDER TRADING POLICY
Updated November 16, 2023
This Insider Trading Policy (this “Policy”) provides guidelines to employees, officers, directors, consultants and their respective Family Members and
Controlled Entities (as defined herein) (collectively, “Covered Individuals” or “you”) of Fluent, Inc. (“Fluent” or “we”) regarding transactions in Fluent’s
securities. We have adopted this policy to help prevent insider trading and to assist Covered Individuals in complying with their obligations under the
federal securities laws. All Covered Individuals are individually responsible to understand and comply with this Policy.
Federal and state securities laws prohibit the purchase or sale of a company’s securities by anyone who is aware of material information about that
company that is not generally known or available to the public. These laws also prohibit anyone who is aware of Material Nonpublic Information (as
defined below) from disclosing this information to others who may trade in Fluent securities. Companies and their controlling persons may also be subject
to liability if they fail to take reasonable steps to prevent insider trading by company personnel.
It is important that you understand the breadth of activities that constitute illegal insider trading and the consequences, which can be severe and include
possible civil and criminal liability as well as potential disciplinary action by Fluent which may include termination of employment. You may have to
forego a proposed transaction in Fluent’s securities even if you planned to make the transaction before learning of the Material Nonpublic Information and
even though you believe you may suffer an economic loss or forego anticipated profit by waiting. Covered Individuals who have anticipated needs for
liquidity from their Fluent securities should strongly consider adopting a Rule 10b5-1 trading plan (see below).
Cases have been successfully prosecuted against trading by associates through foreign accounts, trading by Family Members and friends, and trading
involving only a small number of shares. Both the U.S. Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority
investigate and are very effective at detecting insider trading. Both the SEC and the U.S. Department of Justice pursue insider trading violations vigorously.
Purpose and Applicability of Policy
Fluent has established this Policy in order to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic
information, and to protect Fluent from appearances of impropriety, external scrutiny, reputational harm and potential costs of regulatory investigations
(including diversion of management resources). In that regard, certain transactions may be of concern not only because of actual illegality, but also because
of the potential reactions from investors, regulators and others and the potential costs that may be incurred by the Company addressing such reactions.
This Policy applies to all transactions in Fluent securities, including common stock, restricted stock, restricted stock units, options and warrants to purchase
common stock and any other debt or equity securities Fluent may issue from time to time, such as bonds, preferred stock and convertible debentures, as
well as to derivative securities relating to Fluent securities, whether or not issued by Fluent, such as exchange-traded options. It applies to all employees,
officers and directors of Fluent and members of their immediate families who reside with them or anyone else who lives in their household and family
members who live elsewhere but whose transactions in Fluent securities are directed by such employees, officers and directors or subject to their influence
and control (collectively referred to as “Family Members”).
300 Vesey Street, 9th floor, New York, NY 10282 | 646-669-7272 | www.fluentco.com
This Policy also applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively referred to as
“Controlled Entities”), and transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if
they were for your own account. This Policy also imposes specific black-out period and pre-clearance procedures on all Covered Individuals and on
officers, directors and certain other designated employees who receive or have access to Material Nonpublic Information regarding Fluent and/or are
subject to the reporting provisions and trading restrictions of Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”).
Definition of Material Nonpublic Information
It is not possible to define all categories of material information. However, information should be regarded as material if there is a substantial likelihood
that it would be considered important to a reasonable investor in making an investment decision to buy, hold or sell securities. Any information that could
be expected to affect the market price of Fluent’s securities, whether such information is positive or negative, should be considered material. Because
scrutinized trades will be evaluated after the fact with the benefit of hindsight, questions as to the materiality of particular information should be resolved in
favor of materiality, with trading accordingly avoided.
While it may be difficult under this standard to determine whether particular information is material, there are various categories of information that are
particularly sensitive and, generally, should always be considered material. Examples of such information may include:
●
Financial results;
●
Projections of future earnings or losses;
●
Proposals, plans or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations, strategic alliances,
licensing arrangements, or purchases or sales of significant assets;
●
Actions of regulatory agencies;
●
News of a pending or proposed acquisition or disposition of a subsidiary;
●
Impending bankruptcy or financial liquidity problems;
●
Gain or loss of a significant customer or supplier;
●
Stock splits and stock repurchase programs;
●
New equity or debt offerings;
●
Significant litigation exposure due to actual or threatened litigation;
●
A significant cybersecurity incident, such as a data breach, or any other significant disruption in Fluent’s operations or loss, potential loss, breach
or unauthorized access of its property or assets, whether at its facilities or through its information technology infrastructure; or
●
Changes in senior management or the board of directors.
Information should be considered nonpublic if it has not been disclosed in Fluent’s reports filed with the SEC, has not been the subject of a widely
disseminated press release or has not been widely reported in the media.
In this policy, we refer to information that is both material and nonpublic as “Material Nonpublic Information.”
General Policy
It is Fluent’s policy to oppose the unauthorized disclosure of any nonpublic information acquired in the workplace, the use of Material Nonpublic
Information in securities trading and any other violation of applicable securities laws.
Specific Policies
Trading on Material Nonpublic Information. A Covered Individual or a Family Member shall not engage in any transaction involving a purchase or sale
of Fluent’s securities, including any offer to purchase or offer to sell (other than pursuant to a trading plan that complies with Rule 10b5-1 promulgated
under the Exchange Act (“Rule 10b5-1”) pre-cleared by Fluent’s Insider Trading Compliance Officer—currently, Dan Barsky), during any period
commencing with the date that he or she possesses Material Nonpublic Information concerning Fluent and ending at the close of business on the second
Trading Day (as defined below) following the date of public disclosure of that information, or when such nonpublic information is no longer material.
As used in this Policy, the term “Trading Day” means a day when national stock exchanges are open for trading. If, for example, Fluent were to make an
announcement while markets are open on a Monday, Covered Individuals may not trade in Fluent’s securities until Wednesday.
Tipping. A Covered Individual may not disclose or pass on (“tip”) Material Nonpublic Information to any other person, including a Family Member or
friend, nor shall such person make recommendations or express opinions based on Material Nonpublic Information as to trading in Fluent’s securities.
Confidentiality of Nonpublic Information. Nonpublic information relating to Fluent is Fluent’s property and the unauthorized disclosure of such
information is forbidden.
Mandatory Guidelines
Trading Blackout Periods. To ensure its employees are aligned with Fluent’s financial goals, Fluent provides its employees with weekly financial pacing
of its revenue and gross profit measures. To ensure compliance with this Policy and applicable federal securities laws, and to avoid even the appearance of
trading based on inside information, Fluent requires that all Covered Individuals refrain from buying or selling Fluent’s securities during the Blackout
Periods established below.
Each of the following periods will constitute a “Blackout Period”:
●
Quarterly Blackout Periods: The period commencing on the fifteenth calendar day of the third fiscal month of each fiscal quarter (i.e. March 15th,
June 15th, September 15th and December 15th, as applicable) and, in each case, ending at the close of business on the second Trading Day
following the date of public disclosure of the financial results for such fiscal quarter (which is generally 30 to 75 days after the end of such
quarter).
If public disclosure occurs on a Trading Day before the markets close, then that day is considered the first Trading Day. If public disclosure occurs
after the markets close on a Trading Day, then the following day is considered the first Trading Day.
●
Special Blackout Periods: In addition to the quarterly Blackout Periods described above, Fluent may announce “special” Blackout Periods from
time to time. Typically, this will occur when there are nonpublic developments that may be considered material for insider trading law purposes,
such as developments relating to regulatory proceedings or a major corporate transaction. Depending on the circumstances, a special Blackout
Period may apply to all Covered Individuals or only a specific group of officers, directors and employees. The Insider Trading Compliance Officer
will provide written notice to Designated Insiders subject to a special Blackout Period. Any person made aware of the existence of a special
Blackout Period should not disclose the existence of the special Blackout Period to any other person. The failure of Fluent to designate a person as
being subject to a special Blackout Period will not relieve that person of the obligation not to trade while aware of Material Nonpublic
Information.
The purpose behind the Blackout Period is to help establish a diligent effort to avoid any improper transactions. Trading in Fluent’s securities outside a
Blackout Period should not be considered a “safe harbor,” and all Covered Individuals should always use good judgment. Even outside a Blackout Period,
any person possessing Material Nonpublic Information concerning Fluent should not engage in any transactions in Fluent’s securities until such
information has been known publicly for at least two Trading Days after the date of announcement. Although Fluent may from time to time impose special
Blackout Periods, because of developments known to Fluent and not yet disclosed to the public, each person is always individually responsible for
compliance with the prohibitions against insider trading.
Pre-clearance of Trades. Fluent has determined that all executive officers and directors (“Designated Insiders”) and their Family Members must refrain
from trading in Fluent’s securities, without first complying with Fluent’s “pre-clearance” process. This pre-clearance requirement applies to any transaction
or transfer involving Fluent’s securities, including a stock plan transaction such as an option exercise, or a gift, transfer to a trust or any other transfer.
Each executive officer or director should contact Fluent’s Insider Trading Compliance Officer at least two (2) business days prior to commencing any trade
in Fluent’s securities. Although the Insider Trading Compliance Officer will endeavor to clear transactions as quickly as possible, under certain
circumstances the clearance procedure may take more than two (2) business days.
The Insider Trading Compliance Officer will complete a pre-clearance checklist in the form attached as Exhibit A to this Policy, and where appropriate will
give written permission for the transaction in the form attached as Exhibit B to this Policy. The written permission will expire at the end of the second
trading day following the date of written permission or the beginning of the next Blackout Period, whichever is earlier. Accordingly, Covered Individuals
should not request permission to trade unless there is an intention to execute the trade immediately following receipt of written permission.
The Insider Trading Compliance Officer has sole discretion to decide whether to approve any contemplated transaction. The Insider Trading Compliance
Officer should exercise this discretion mindful of the broad purposes of this Policy and with due regard for principles of conservatism (meaning that “close
calls” should be resolved in favor of declining approval). The Insider Trading Compliance Officer is under no obligation to approve a transaction submitted
for preclearance. None of Fluent, the Insider Trading Compliance Officer or Fluent’s other employees will have any liability for any delay in reviewing, or
refusal of, a request for preclearance in accordance with this Policy.
Preclearance hereunder is not a guarantee against investigation or prosecution by federal and state securities regulators, and preclearance hereunder is not
legal advice to any Covered Person. Fluent may also find it necessary, from time to time, to require compliance with the pre-clearance process from
employees who are not otherwise designated as Designated Insiders.
Rule 10b5-1 Exception. Rule 10b5-1 allows a person to trade while aware of Material Nonpublic Information if the trade was executed pursuant to a plan
satisfying the requirements of Rule 10b5-1 (a “trading plan”) that was established at a time when the person was not aware of Material Nonpublic
information.
Trades in Fluent securities that are executed under a pre-existing written plan, contract, instruction, or arrangement under Rule 10b5-1 (an “Approved
10b5-1 Plan”) that meet the following requirements are not subject to the trading restrictions set forth herein:
(i)
it has been reviewed and approved by the Insider Trading Compliance Officer at least five (5) days in advance of being entered into (or, if
revised or amended, such proposed revisions or amendments have been reviewed and approved by the Insider Trading Compliance Officer
at least five (5) days in advance of being entered into);
(ii)
it provides that no trades may occur thereunder until expiration of the applicable cooling-off period specified in Rule 10b5-1(c)(ii)(B), and
no trades occur until after that time. The appropriate cooling-off period will vary based on the status of the Covered Individual. For
directors and officers, the cooling-off period ends on the later of (x) 90 days after adoption or certain modifications of the 10b5-1 plan; or
(y) two (2) business days following disclosure of the Company's financial results in a Form 10-Q or Form 10-K for the quarter in which the
10b5-1 plan was adopted. For all other Covered Individuals, the cooling-off period ends 30 days after adoption or modification of the 10b5-
1 plan. This required cooling-off period will apply to the entry into a new 10b5-1 plan and any revision or modification of a 10b5-1 plan;
(iii)
it is entered into in good faith by the Covered Individual, and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1, at a
time when the Covered Individual is not in possession of Material Nonpublic Information about Fluent; and, if the Covered Individual is a
director or officer, the 10b5-1 plan must include representations by the Covered Individual certifying to that effect;
(iv)
it gives a third party the discretionary authority to execute such purchases and sales, outside the control of the Covered Individual, so long
as such third party does not possess any Material Nonpublic Information about Fluent; or explicitly specifies the security or securities to be
purchased or sold, the number of shares, the prices and/or dates of transactions, or other formula(s) describing such transactions; and
(v)
it is the only outstanding Approved 10b5-1 Plan entered into by the Covered Individual (subject to the exceptions set out in Rule 10b5-1(c)
(ii)(D)).
No Approved 10b5-1 Plan may be adopted during a Blackout Period.
A Covered Individual may not enter into any transaction in Fluent securities while that Covered Individual has a Rule 10b5-1 plan in effect. An exception
may be permitted, to the extent not unlawful, for an Approved Rule 10b5-1 Plan that (a) relates solely to Fluent securities acquired under Fluent’s equity
incentive plans and (b) is designed and actually operated in order to pay or otherwise discharge income or withholding tax obligations that accrue upon the
exercise, vesting or settlement of awards under Fluent’s equity incentive plans.
If you are considering entering into, modifying or terminating an Approved 10b5-1 Plan or have any questions regarding Approved Rule 10b5-1 Plans,
please contact the Insider Trading Compliance Officer. You should consult your own legal and tax advisors before entering into, or modifying or
terminating, an Approved 10b5-1 Plan. A trading plan, contract, instruction or arrangement will not qualify as an Approved 10b5-1 Plan without the prior
review and approval of the Insider Trading Compliance Officer as described above. Compliance of an Approved Rule 10b5-1 Plan with the terms of Rule
10b5-1 and the execution of transactions pursuant to the Approved Rule 10b5-1 Plan are the sole responsibility of the person initiating the Approved Rule
10b5-1 Plan, and none of Fluent, the Insider Trading Compliance Officer, or Fluent’s other employees assumes any liability for the legality or consequences
relating to a person entering into, informing Fluent of, or trading under, an Approved Rule 10b5-1 Plan. Preclearance of an Approved Rule 10b5-1 Plan is
not a guarantee against investigation and prosecution by federal and state securities regulators, and preclearance hereunder is not legal advice to any
Covered Person.
The Insider Trading Compliance Officer may circulate from time to time additional criteria for clearance of trading plans. Section 16 Insiders (defined
below) must provide prompt notice to the Insider Trading Compliance Officer of all transactions under trading plans to facilitate filings required under
Section 16(a) of the Exchange Act. Such filings are generally due within two (2) business days of a trade.
Fluent reserves the right to bar any transactions in Fluent securities, even those pursuant to trading plans previously approved, if the Insider Trading
Compliance Officer or Fluent’s Board of Directors, in consultation with the Insider Trading Compliance Officer, determines that such a bar is appropriate
under the circumstances.
Individual Responsibility. Every Covered Individual has the individual responsibility to comply with this Policy against insider trading, regardless of
whether a transaction is executed outside a Blackout Period or is pre-cleared by Fluent. The restrictions and procedures are intended to help avoid
inadvertent instances of improper insider trading, but appropriate judgment should always be exercised by each Covered Individual regarding any trade in
Fluent’s securities. Trading decisions should be informed by principles of conservatism - meaning that “close calls” should be resolved in favor of not
trading until the decision is no longer a “close call.”
Certain Other Exemptions and Exceptions
Vesting of Restricted Stock or Settlement of Performance Stock Units. This Policy does not apply to our automatic deduction of shares from your
restricted stock or performance stock unit account to satisfy the minimum statutory tax withholding liability when restricted stock vests or settlement of
performance stock units. The prohibition does apply, however, to any open market sale of vested shares.
Stock Options Exercises. For purposes of this Policy, Fluent considers that the exercise of stock options under Fluent’s stock option plans (but not the sale
of the underlying stock) to be exempt. This Policy does apply, however, to any sale of stock as part of a broker-assisted “cashless” exercise of an option or
any market sale for the purpose of generating the cash needed to pay the exercise price of an option.
Employee Stock Purchase Plan. This Policy does not apply to purchases of Fluent stock in Fluent’s employee stock purchase plan, if any, resulting from
periodic contributions of money to the plan pursuant to the elections made at the time of enrollment in the plan. This Policy also does not apply to
purchases of Fluent stock resulting from lump sum contributions to the plan, provided that the participant elected to participate by lump-sum payment at
the beginning of the applicable enrollment period. This Policy does apply to a participant’s election to participate in or increase his or her participation in
the plan, and to a participant’s sales of Fluent stock purchased pursuant to the plan.
Transactions Not Involving a Purchase or Sale. Bona fide gifts are not transactions subject to this Policy, unless (a) the person making the gift has reason
to believe that the recipient intends to sell the gifted securities while the officer, employee or director is aware of Material Nonpublic Information, or (b) the
person making the gift is subject to the trading restrictions specified above under the heading “Mandatory Guidelines” and the person making the gift has
reason to believe that the recipient intends to sell the gifted securities when the person making the gift is not permitted to sell such securities. Further,
transactions in mutual funds that are invested in Fluent securities are not transactions subject to this Policy.
Information Known to Both Parties of a Transaction. A transaction otherwise prohibited under this Policy may be permitted with the advance written
approval of the Insider Trading Compliance Officer if all material information concerning Fluent has been publicly disclosed or is known by both parties to
the proposed transaction. This type of approval is intended to be used only in unusual circumstances, and a Covered Individual should not assume that such
an approval will be granted even if the pre-conditions to such approval are satisfied.
Applicability of Policy to Inside Information Regarding Other Companies
This Policy and the guidelines described herein also apply to Material Nonpublic Information relating to other companies, including Fluent’s customers,
vendors or suppliers (“business partners”), when that information is obtained in the course of employment with, or other services performed on behalf of,
Fluent. Civil and criminal penalties, and termination of employment, may result from trading on inside information regarding Fluent’s business partners.
All Covered Individuals should treat Fluent’s business partners with the same care required with respect to information related directly to Fluent.
Section 16 Liability - Directors and Officers
Certain officers and all directors of Fluent (“Section 16 Insiders”) must also comply with the reporting obligations and limitations on short-swing profit
transactions set forth in Section 16 of the Exchange Act. The practical effect of these provisions is that any officer or director who purchases and sells
Fluent’s securities within a six-month period must disgorge all profits to Fluent whether or not he or she had knowledge of any Material Nonpublic
Information. Under these provisions, and so long as certain other criteria are met, neither the receipt of stock or stock options under Fluent’s stock plans,
nor the exercise of options nor the receipt of stock under Fluent’s employee stock purchase plan, dividend reinvestment plan or Fluent’s 401(k) retirement
plan is deemed a purchase that can be matched against a sale for Section 16(b) short-swing profit disgorgement purposes; however, the sale of any such
shares so obtained is a sale for these purposes. The rules on recovery of short-swing profits are absolute and do not depend on whether a person has
Material Nonpublic Information.
Other Prohibited Transactions
Short Sales. Short sales of Fluent securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller
that the securities will decline in value. These transactions therefore have the potential to signal to the market that the seller lacks confidence in Fluent’s
prospects and to reduce the seller's incentive to seek to improve Fluent’s performance. For these reasons, short sales of Fluent securities are prohibited
under this Policy. In addition, Section 16(c) of the Exchange Act prohibits officers and directors from engaging in short sales.
Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of Fluent’s stock and therefore creates the appearance
that the Covered Individuals is trading based on inside information. Transactions in options also may focus the trader’s attention on short-term performance
at the expense of Fluent’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities, on an exchange or in any other
organized market, are prohibited. Option positions arising from certain types of hedging transactions are governed by the section below captioned
“Hedging or Monetization Transactions.”
Hedging or Monetization Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow
a Covered Individual to lock in much of the value of his stock holdings, often in exchange for all or part of the potential for upside appreciation in the
stock. These transactions would allow a Covered Individual to continue to own the covered securities, but without the full risks and rewards of ownership.
When that occurs, their interests and the interests of Fluent and its shareholders may be misaligned and may signal a message to the trading market that
may not be in the best interests of Fluent and its shareholders at the time it is conveyed. Accordingly, hedging transactions and all other forms of
monetization transactions are prohibited.
Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet
a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. A
margin sale or foreclosure sale may occur at a time when the pledgor is aware of Material Nonpublic Information or otherwise is not permitted to trade in
Fluent securities pursuant to Blackout Period restrictions. Thus, Covered Individuals are prohibited from pledging Fluent securities as collateral for a loan
or holding shares of Fluent stock in a margin account.
Market Limit Orders. To prevent Covered Individuals from accidentally engaging in a transaction when trading is not allowed, Covered Individuals may
not enter into any market limit orders with their brokers for securities of Fluent other than orders that expire before the commencement of a Blackout
Period. Designated Insiders subject to pre-clearance requirements are subject to the additional restriction that they may not enter any market limit order for
Fluent securities except market limit orders that expire within the time allowed for trading after receiving written permission to trade from the Insider
Trading Compliance Officer. All other market limit orders by Covered Individuals for Fluent securities are prohibited. This paragraph does not, however,
apply to 10b5-1 trading plans. (See “Rule 10b5-1 Exemption” above.)
Post-Termination Transactions
Upon termination of service with Fluent, a Covered Individual continues to be subject to this Policy, as well as applicable securities laws, for so long as
such person is aware of Material Nonpublic Information. Covered Individuals also remain subject to Fluent’s policies regarding the safeguarding of
confidential information.
If a Covered Individual’s relationship with Fluent terminates during a Blackout Period, such Covered Individual will continue to be subject to this Policy,
and specifically to the ongoing prohibition against trading, until the end of the Blackout Period, or, if determined to be earlier by the Insider Trading
Compliance Officer, in its sole discretion, the commencement of trading on the second trading day following public announcement of the last Material
Nonpublic Information of which a Covered Person is aware. The Insider Trading Compliance Officer may use stop transfer instructions to Fluent’s transfer
agent in order to enforce this provision.
Communications with the Public
Fluent is subject to the SEC’s Regulation FD and must avoid selective disclosure of Material Nonpublic Information. Fluent has established procedures for
releasing material information in a manner that is designed to achieve broad public dissemination of the information immediately upon its release,
including limitations on who can make such disclosures. Employees who inadvertently disclose any Material Nonpublic Information should immediately
advise the Insider Trading Compliance Officer so Fluent can assess its obligations under Regulation FD and other applicable securities laws.
Inquiries
Please direct questions as to any of the matters discussed in this Policy to Fluent’s Insider Trading Compliance Officer at the following address:
Dan Barsky
Fluent, Inc.
300 Vesey Street, 9th Floor,
New York, NY 10282
Telephone: (646) 356-8455
E-mail: dbarsky@fluentco.com
Certifications
All Covered Individuals must certify their understanding of, and intent to comply with, this Policy. Please return the enclosed certification immediately to:
Dan Barsky
Fluent, Inc.
300 Vesey Street, 9th Floor,
New York, NY 10282
E-mail: dbarsky@fluentco.com
ACKNOWLEDGEMENT AND CERTIFICATION
The undersigned hereby acknowledges receipt of Fluent’s Insider Trading Policy. The undersigned has read and understands (or has had explained) such
Policy and agrees to be governed by such Policy at all times in connection with the purchase and sale of securities and the confidentiality of nonpublic
information.
(Signature)
(Please print name)
Date:
EXHIBIT A
INSIDER TRADING COMPLIANCE PROGRAM ‑ PRE‑CLEARANCE CHECKLIST
Individual Proposing to Trade:
Insider Trading Compliance Officer
Representative:
Proposed Trade:
Date:
Trading Window. Confirm that the trade will not be made during a Blackout Period. ☐
Section 16 Compliance. Confirm, if the individual is a Section 16 Insider, that the proposed trade will not give rise to any potential liability under Section
16 as a result of matched past (or intended future) transactions. Also, ensure that a Form 4 has been or will be completed and will be filed within two (2)
business days of the trade. ☐
Prohibited Trades. Confirm that the proposed transaction is not a short sale, put, call, hedge, market limit or other prohibited transaction. ☐
Rule 144 Compliance. To the extent applicable confirm that:
The current public information requirement has been met. ☐
Shares to be sold are not restricted or, if restricted, the holding period has been met. ☐
Volume limitations are not exceeded (confirm the individual is not part of an aggregated group). ☐
The manner of sale requirements have been met. ☐
The Notice on Form 144 has been completed and filed. ☐
Rule 10b‑5 Concerns. Confirm that:
The individual has been reminded that trading is prohibited while aware of Material Nonpublic Information regarding Fluent. ☐
The Insider Trading Compliance Officer has discussed with the individual any information known to the individual or the Insider Trading Compliance
Officer that might be considered material, so that the individual and the Insider Trading Compliance Officer can make an informed judgment as to the
individual’s awareness of Material Nonpublic Information. ☐
HSR Concerns: Confirm that transaction does not require purchaser to make or amend an HSR filing. ☐
Signature of Insider Trading Compliance Officer Representative
300 Vesey Street, 9th floor, New York, NY 10282 | 646-669-7272 | www.fluentco.com
EXHIBIT B
PERMISSION TO TRADE
______________is hereby permitted to buy/sell [circle one] shares of the common stock of Fluent, Inc.
[Include the following if sales to be made by affiliates pursuant to Rule 144. The securities must be sold in a broker’s transaction, and you may not solicit
or arrange for the solicitation of an order to buy the securities you are selling, or make any payment in connection with the offer and sale to any person
other than the broker who executes an order to sell the securities.]
The permission to sell will expire on the close of trading on _________ , 20__ .
Very truly yours,
Signature of Insider Trading Compliance Officer
Representative
300 Vesey Street, 9th floor, New York, NY 10282 | 646-669-7272 | www.fluentco.com
Exhibit 21.1
SUBSIDIARIES OF FLUENT, INC.
The following is a list of the significant subsidiaries of Fluent, Inc. showing the place of incorporation or organization and the names under which each
subsidiary does business. The names of certain subsidiaries are omitted as such subsidiaries, considered as a single subsidiary, would not constitute a
significant subsidiary.
Name
Jurisdiction of Organization
Fluent, LLC
Delaware
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated March 31, 2025, with respect to the consolidated financial statements included in the Annual Report of Fluent, Inc. on
Form 10-K for the year ended December 31, 2024. We consent to the incorporation by reference of said report in the Registration Statements of Fluent, Inc.
on Forms S-3 (File No. 333-205614, File No. 333-206402, File No. 333-212109, File No. 333-215125, File No. 333-233250, and File No. 333-281805) and
on Forms S-8 (File No. 333-177025, File No. 333-188739, File No. 333-194952, File No. 333-206403, File No. 333-211842, File No. 333-224187, File
No. 333-226170 and File No. 333-266743).
/s/ GRANT THORNTON LLP
New York, New York
March 31, 2025
Exhibit 31.1
CERTIFICATIONS
I, Donald Patrick, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Fluent, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
March 31, 2025
By:
/s/ Donald Patrick
Donald Patrick
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Ryan Perfit, certify that:
(1)
I have reviewed this Annual Report on Form 10-K of Fluent, Inc.;
(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
(5)
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
March 31, 2025
By:
/s/ Ryan Perfit
Ryan Perfit
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report on Form 10-K of Fluent, Inc. for the fiscal year ended December 31, 2024 (the “Report”), the
undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge
and belief, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Fluent, Inc.
March 31, 2025
By:
/s/ Donald Patrick
Donald Patrick
Chief Executive Officer
(Principal Executive Officer)
The certification set forth above is being furnished as an Exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being
filed as part of the Report or as a separate disclosure document of Fluent, Inc. or the certifying officers.
Exhibit 32.2
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report on Form 10-K of Fluent, Inc. for the fiscal year ended December 31, 2024 (the “Report”), the
undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge
and belief, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Fluent, Inc.
March 31, 2025
By:
/s/ Ryan Perfit
Ryan Perfit
Chief Financial Officer
(Principal Financial and Accounting
Officer)
The certification set forth above is being furnished as an Exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being
filed as part of the Report or as a separate disclosure document of Fluent, Inc. or the certifying officers.